Competition is essential for every market to develop and prosper. In the most economic way, competition is “a situation in which the firms or sellers strive independently for the buyers’ patronage in order to achieve a particular business objective for example, profits, sales or market.” In simple terms, competition may be defined as the existence of multiple buyers and sellers in a market. The obvious problem of a competitive market comes in when multiple sellers offer similar products. In such situations then they need to come up with innovative ways to lure in customers. The raison d’etre which causes competition is the consumer and their interests.

Competition creates dynamic efficiency in the market by bringing innovation, technological development, lower price, and better quality of service for the consumer. While these are obvious benefits of competition, there are cons too. Too much competition may be detrimental to smaller businesses and newer firms. To ensure there is an optimal level of competition maintained in the economy there is a need for a “competition watchdog.” This position is held by the Competition Commission of India (CCI). In 2017, an interesting complaint affronted the CCI.

Case of Meru v/s Ola and Uber:

The Competition Act of 2002, which establishes the Competition Commission of India and regulates the competition and punishes the anti-competitive practices in the market. As the competition watchdog, the CCI looks into the complaints and redress the grievances. In this light, Meru Cabs approached the CCI claiming that Ola and Uber are utilizing their dominant position in the market and adversely impacting the smaller competitors in four major cities. 

Meru slapped four lawsuits on the companies claiming that they are promoting anti-competitive practices by entering into anti-competitive agreements and mandating predatory prices. These allegations were based on the fact there exist common investors and shareholders between the two companies. SoftBank, a Japanese based bank being one of such investors and the cause for contention herein. While these claims were later rejected by the CCI, the case still raised some concern with regards to the markets in India.

The CCI observed that merely having one or two investors common between the companies was not enough to raise suspicion of antitrust and anti-competitiveness in the market. But there are few other concerning factors which may be brought to light via the case of Meru, Uber, and Ola.

What If?

In a scenario where Uber and Ola were able to have an anti-competitive agreement, the consequence for the smaller cab companies. In simple Uber and Ola which already enjoy a position of advantage in the market would instead of competing with each other, compete with the small/local cab companies. Due to a smaller market share and lack of consumer loyalty these companies would be unable to compete with the “giants” and be wiped off. The resultant scenario is very similar to that of a monopoly of the two companies. It is no secret, however that a monopoly is a bad idea-not just legally but economically for the consumers.

The CCI while dismissing the case, mentioned that softening of competition by these companies might be detrimental to the working of smaller firms and thus the two companies would be under the keen observation of the CCI to ensure such moves do not happen. The fears of Meru Cabs in the present instance are not completely unfounded, just insufficient. If the workings of the companies in the past few months is to be scrutinized, one may find a pattern to show that the trend manipulation of prices and provision of various incentives to drivers might also serve as indicators against the claim.

CCI’s Stance:

The stance taken by CCI in this issue is particularly interesting. Although the questions concerning common ownership has been around for a while, this is one of its kind for the Indian regulator. Elements of it could be traced to when the CCI speaks of minority non-controlling investments in competing firms. The position on said issue states that if an investor seeks to invest in a competing firm and the investment is above a certain percentage, then CCI will stop treating them as a “passive investment.” Though this was the position in case of non-controlling minority investments from a merger standpoint, will there be similar opinions on the common shareholders in competing companies and their impact on the markets?

Interestingly, the CCI is taking a slightly aggressive stance in the Meru, Uber and Ola issue. It has visibly showcased that henceforth, the CCI would not shy away from indulging into matters pertaining to common ownership via shareholding and its impact on the market. This then requires all companies, especially start-ups, to clean up and get their acts in order to prevent scrutinization. The decision might go a long way in ensuring that practices such as these which hamper competition in the markets are reduced and common ownership in the guise of shareholding subsides.  

While Meru’s claims may seem frivolous on face value, a deeper analysis shows some truth behind the matter. Being a relatively smaller company, one must worry about the health of the market and the impact of such behind the door workings of the giants. Thus one cannot completely do away with claims portrayed by Meru Cabs.