Amazon and Flipkart found violating Competition law in India-DG investigation report out
The Supreme Court of India vide its judgement dated 15.12. 2020 has upheld the concurrent findings on merits of Competition Commission of India (“CCI/ Commission”) dated 06.11.2018 and the National Company Law Appellate Tribunal (“NCLAT”) order dated 29.05.2020, wherein allegation of use of algorithmic pricing to facilitate price fixing cartel made against taxi aggregators, Ola and Uber, was rejected.
However, what makes this judgment noteworthy is the Apex Court’s rejecting the narrow interpretation on the right of any “person” to approach the Commission against an anti-competitive conduct being linked to the evidence of legal injury suffered by such person, as was held surprisingly by the NCLAT, which, incidentally, was criticized by me too in my blog dated 29.6.2020. (Please see my comments on the issue of locus standi in NCLAT order dated 29.05.2020 here. )
Background
The serious allegation against both taxi aggregators, Ola and Ober, was made by Mr Samir Agrawal, a Delhi based independent legal practitioner (Informant) before the CCI that OLA and UBER entered into price-fixing agreements in contravention of Section 3(1) read with Section 3(3)(a) of the Act and also engaged in resale price maintenance in contravention of Section 3(1) read with Section 3(4)(e) of the Act. It was further alleged that due to algorithmic pricing, neither are riders able to negotiate fares with individual drivers for rides that are booked through the apps, nor are the drivers able to offer any discounts. Thus, the pricing algorithm takes away the freedom of riders and drivers to choose the best price based on competition, as both must accept the price set by the pricing algorithm. As per the informant, algorithmic pricing adopted by Ola & Uber takes away the liberty of individual drivers to compete and amounts to price fixing through a “hub and spoke” cartel like arrangement.
The Commission , however, dismissed the allegation and closed the case under Section 26(2) of the Competition Act, 2002 (“the Act”) without calling for any response from either Uber and Ola, holding that there was neither any instance of any agreement/understanding between the cab aggregators and their respective drivers nor between the drivers inter se qua price fixing. The Commission had also noticed that Ola and Uber being Cab Aggregators operating through their respective apps were not an association of drivers and they acted as separate entities from their respective drivers. A rider books his ride at any given time which is accepted by an anonymous driver available in the area and such driver has no opportunity to co-ordinate its action with other drivers thereby ruling out such activity being termed as a cartel activity. The Commission ruled out any hub and spoke cartel like arrangement between Ola/Uber and their respective drivers.
Aggrieved by the CCI decision, the Informant filed appeal against the decision before NCLAT in the first appeal but the NCLAT vide its order dated 29.5.2020 upheld not only the CCI order but also observed that the since there was nothing on record to show that the informant suffered a legal injury at the hands of Ola and Uber as a consumer or as a member of any consumer or trade association and therefore, the informant has no locus standi to maintain an action qua the alleged contravention of Act by Ola and/or Uber.
Arguments before Supreme Court
Before the Apex Court, the Informant, who appeared in person, reiterated the submissions made before the CCI and the NCLAT. In particular, he attacked the finding of the NCLAT on lack to locus standi due to absence of evidence of suffering any legal injury. The Informant, referring to Sections 19 and 35 of the Act, argued that the amendments made in the sections would show that any person can be an informant who can approach the CCI, as one does not have to be a “consumer” or a “complainant”. Interestingly, whereas the Ld. Counsel for OLA vehemently supported the NCLAT decision on grounds of lack of locus standi by the Informant /Appellant and even pressed for imposition of heavy costs for indulging in , what he described as frivolous litigation , the Ld. Additional Solicitor General (ASG), representing the Commission before the Apex Court , supported the appellant/Informant on the issue of locus .
The Apex Court after going through the various provisions of the Act and Competition Commission of India (General) Regulations, 2009 held that “it is difficult to agree with the impugned judgment of the NCLAT in its narrow construction of section 19 of the Act, which therefore stands set aside.” The Supreme Court held, A reading of the provisions of the Act and the 2009 Regulations would show that “any person” may provide information to the CCI, which may then act upon it in accordance with the provisions of the Act. In this regard, the definition of “person” in section 2(l) of the Act, set out hereinabove, is an inclusive one and is extremely wide, including individuals of all kinds and every artificial juridical person. This may be contrasted with the definition of “consumer” in section 2(f) of the Act, which makes it clear that only persons who buy goods for consideration, or hire or avail of services for a consideration, are recognised as consumers.[1]
The Apex Court further held that the substitution of the word “receipt of any information in such manner and” by the 2007 Amendment is significant. Substantiating it the Supreme Court held that Whereas, a complaint could be filed only from a person who was aggrieved by a particular action, information may be received from any person, obviously whether such person is or is not personally affected. This is for the reason that the proceedings under the Act are proceedings in rem which affect the public interest. That the CCI may inquire into any alleged contravention of the provisions of the Act on its own motion, is also laid down in section 19(1) of the Act. Further, even while exercising suo motu powers, the CCI may receive information from any person and not merely from a person who is aggrieved by the conduct that is alleged to have occurred. This also follows from a reading of section 35 of the Act, in which the earlier expression “complainant or defendant” has been substituted by the expression, “person or an enterprise,” setting out that the informant may appear either in person, or through one or more agents, before the CCI to present the information that he has gathered.
Apex Court further stated that CCI and NCLAT deals with practice which have the adverse effect on the competition and protect the interest of the consumers and the Act vests powers in the CCI which enables it to act in rem, in public interest, therefore “person aggrieved” must, in the context of the Act, be understood widely and not be constructed narrowly. The Court further stated it is not without significance that the expressions used in sections 53B and 53T of the Act are “any person”, thereby signifying that all persons who bring to the CCI information of practices that are contrary to the provisions of the Act, could be said to be aggrieved by an adverse order of the CCI in case it refuses to act upon the information supplied. By way of contrast, section 53N(3) speaks of making payment to an applicant as compensation for the loss or damage caused to the applicant as a result of any contravention of the provisions of Chapter II of the Act, having been committed by an enterprise. By this sub-section, clearly, therefore, “any person” who makes an application for compensation, under sub-section (1) of section 53N of the Act, would refer only to persons who have suffered loss or damage, thereby, qualifying the expression “any person” as being a person who has suffered loss or damage.[2]
The Apex Court clinching observation “Obviously, when the CCI performs inquisitorial, as opposed to adjudicatory functions, the doors of approaching the CCI and the appellate authority, i.e., the NCLAT, must be kept wide open in public interest, so as to subserve the high public purpose of the Act” are truly remarkable and finally settle the issue of locus standi in antitrust cases .
However, on the merits of the case, Apex Court decided not to interfere with the concurrent finds of the CCI and NCLAT.
Comments: The judgement of the Apex Court is remarkable in so far as it clears the web around the issue of locus standi for filing information against market behaviors perceived to be anti-competitive by any person irrespective of having suffered any legal injury or otherwise is concerned. The judgment is in sync with the legislative intent behind the 2007 amendments in the Competition Act, 2002 and being a part of the Commission at the time of passing the said 2007 amendments , I had also commented on these lines in my earlier blog .
However, on merits, I still maintain that the Hon’ble Apex Court has missed an opportunity to direct investigation into the complex issue of possibility of harm to competition or whether the algorithms were programmed with a pre-determined manner to produce surged pricing and whether such discriminatory pricing harmed consumers, as compared with the standard meter taxis prices etc. The decision in my humble view, still corroborates my earlier view that the competition regime in India is still far away from assessing algorithms-based collusions by e-platforms.
Key Words – #Uber #OLA #Algorithmicpricing
#Antitrust #Competition #locusstandi
[1] Para 13, https://main.sci.gov.in/supremecourt/2020/16963/16963_2020_33_1502_25089_Judgement_15-Dec-2020.pdf
[2] Para 20, https://main.sci.gov.in/supremecourt/2020/16963/16963_2020_33_1502_25089_Judgement_15-Dec-2020.pdf
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