Ola, India's largest ride-hailing service, is being probed by the Competition Commission of India for 'predatory pricing,' including for allegedly spending more than its revenue per trip by offering incentives to customers and drivers.
The probe reflects the fierce competition in the Indian ride-hailing market, with a number of well-funded companies investing large sums to get a quick lead in the market.
The CCI has initiated the investigation following a complaint by rival Fast Track Call Cab that ANI Technologies, which runs Ola, is using funds raised, including from Japan's SoftBank, to wipe out equally efficient competitors who cannot indulge in such predatory pricing in the radio taxi services market. Fast Track has also charged Ola with creating barriers for new entrants.
The CCI has clubbed together taxi services that offer booking by phone or computer or through an app as "radio taxi services," which it considers different from traditional yellow-black colored taxis that have been in operation in the country for years. It has also arrived at the preliminary conclusion that Ola holds a dominant position in the radio taxi services market of Bangalore, which was the city named in the complaint.
Fast Track has also alleged that Ola restricts its driver fleet operators from using any other competing platform for providing their services. Ola is also said to have "incentivized" its drivers unrealistically by using the money raised from foreign investors, which cannot be matched by existing radio cab operators or local enterprises planning to start similar operations in the country.
Based on the material placed on record, the CCI observed that Ola spends per trip around 574 rupees (US$9), while earning an average revenue of 344 rupees, leading to a direct loss of 230 rupees per trip.
"While the propriety of these figures is a subject matter of investigation, prima facie, the Commission is of the view that, they indicate predatory pricing aimed to oust other players from the relevant market," the agency said.
ANI acquired in March a smaller rival TaxiForSure, run by Serendipity Infolabs, for $200 million.
The potential of the Indian market has become evident with Uber Technologies making a pitch for it. But the U.S. company ran into a controversy in December with local authorities after its driver in Delhi allegedly raped a woman passenger. Uber was banned in the city after the incident. Other app-based taxi companies have also come under scrutiny following the rape. Delhi's transport department framed new rules, called the Radio Taxi Scheme, which puts tighter controls on taxi operators.
ANI did not immediately comment on the CCI probe.