A recent judgement by the National Company Law Tribunal in the case of Samir Agarwal vs Competition Commission of India took a narrow approach in interpreting the locus standi of the whistle-blower informants under section 19(a) of the of the Competition Act 2002 (Act).
If you haven’t suffered personal monetary or legal losses, you cannot approach the Competition Commission of India (CCI), as held by the bench. This makes the door for potential whistle blower informants rather slender and restricted to walk in. This judgement was given in the case of hub-and-spoke cartels between the cab aggregators Ola and Uber and its drivers. This appeal arose against a suit filed in 2018 in Samir Agarwal vs ANI Technologies Pvt. Ltd. In this case, the CCI held that there is no prima facie proof to hold cab aggregators Ola and Uber responsible for conducting cartel activity through their platforms and being cab aggregators.
What happened in the 2018 case?
The Informant i.e. Samir Agarwal had submitted that due to algorithmic pricing, riders are not able to negotiate fares with individual drivers for rides matched through App nor drivers are able to offer any discounts. Thus, the algorithm takes away the freedom of the riders and drivers to choose the other side on the basis of price competition and both have to accept the price set by the algorithm. It is further alleged that the algorithm calculates the fare based on a base amount, ride distance, and time spent in transit, which is multiplied by a ‘surge’ factor during periods of high demand. The drivers who use the Ola/Uber App, instead of competing on price, accept the fare which is the outcome of Ola/Uber pricing algorithm.
Further, the drivers who are attached to Ola and Uber’s networks do not function as their employees, but as independent third-party service providers. It has been alleged that the Ola and Uber, act as ‘Hub’ where ‘spokes’ (competing drivers) collude on prices.
What did NCLAT order in that case?
NCLAT held that algorithmically controlling prices cannot count as colluding. The impugned order by CCI read, “In the conventional sense, hub and spoke arrangement refers to exchange of sensitive 4 Competition Appeal (AT) No. 11 of 2019 information between competitors through a third party that facilitates the cartelistic behaviour of such competitors. The same does not seem to apply to the facts of the present case. the algorithmically determined pricing for each rider and each trip tends to be different owing to the interplay of large data sets. Such pricing does not appear to be similar to the ‘hub and spoke’ arrangement as understood in the traditional competition parlance.”
Appeal by Agarwal:
Dissatisfied by the order of NCLAT, Agarwal filed an appeal condemning the order on several grounds. However, the NCLAT sided with the CCI and dismissed the appeal. According to section 19 (a), the commission can inquire the conduct of any association based on a complaint initiated by themselves or by any person. Ideally, “any person” includes consumer or their associations or trade associations. However, with this judgement, the NCLAT restricted the reach and scope of any person by only permitting people who have suffered legal or monetary injury to approach the CCI.
Precedent holding otherwise:
A similar case of locus standi (Shri Surendra Prasad vs Competition Commission of India and Others) was decided by the Competition Appellant Tribunal (COMPAT). The NCLAT is the successor of COMPAT after the latter ceased to exist in 2017. The COMPAT held that there is no specific eligibility criteria which needs to be fulfilled by any person before filing a suit u/s 19 (a) of the Act.
The NCLAT has turned the wide scope of section 19 into a shaft. This may be a threat to the stakeholders, as the whistle blower have a history of providing concrete and stable information that has helped the NCLAT in the past. Restricting the interpretation of locus standi is not in the best interest of the stakeholders and should be dismissed by an appeal in the higher courts.