NLUO - 10th INTRA UNIVERSITY
MOOT COURT COMPETITION, 2019 – PHASE II
MOOT PROPOSITION1
1The Moot Problem has been drafted by Mr. Kamal Sharma, Alumni of NLUO (Batch of 2016), a
practising Advocate in Competition Law at New Delhi, who was assisted by Mr. Basu Chandola,
Alumni of NLUO (Batch of 2018), Research Associate, School of Competition Law & Market
Regulation, Indian Institute of Corporate Affairs.
Disclaimer: The instant moot proposition is a work of fiction, artificial and created only for academic purposes.
Names, characters, businesses, places, events, locales, and incidents are either the products of the author’s
imagination or used in a fictitious manner. Any resemblance to actual persons, living or dead, or actual events
is purely coincidental.
1. Union of Industan (hereinafter ‘Industan’) is a Republic in South Asia and one of the
fastest developing countries in the world. The Government of Industan initiated the
process of economic liberalization in 1991 and the markets have gradually been
opened up since then. To provide institutional support to healthy and fair competition,
the Government enacted the Competition Act 2002 (hereinafter ‘the Act’).
2. All Statutes in Industan are in pari materia with the laws prevailing in India. The
market conditions of Industan are also similar to the market conditions in India. The
precedents decided by the Courts/Tribunals/Authorities of India will have high
persuasive value in deciding the instant case. Precedents of other Jurisdictions shall
also be given the due regard.
3. Perumi Pvt. Ltd. (hereinafter ‘Perumi’), a domestic company incorporated under the
Companies Act, 2013, is engaged in the business of intra-city car taxi services in
metropolitan cities of Industan since July 2014. The business model followed by
Perumi is to allow fleet-operators or drivers with taxis to attach their fleet/cars on
Perumi’s network. The drivers have to accept the trips on the fares decided by Perumi
for which they have to share 20% of the revenue earned with the company. Perumi
charge its customers on the basis of fares prescribed by the States in Industan and the
amount so charged is sufficient to cover the costs incurred by the the taxi owners
drivers and provide reasonable profit to the taxi owners/drivers and Perumi.
4. Till July 2018, the customers/riders could book the cabs on Perumi’s website or
through offline customer call service of Perumi. In August 2018, in addition to the
website and offline customer call-based booking, Perumi also introduced its own
mobile app which is available for download on all major operating systems such as
Android, IoS etc. The customers could download the app for free from the AppStores
of their respective operating systems. On introduction of mobile app, Perumi released
a statement that the introduction of app would help it to gain more customers as
booking cabs by mobile app is more convenient for the customers.
5. In July 2018, Libra Pvt. Ltd. (hereinafter ‘Libra’), a company incorporated under the
Companies Act, 2013, also started operating intra city car taxi services in
metropolitan cities of Industan. Libra secured huge foreign funding for running its
business in Industan. Libra’s business model of allowing fleet-operators or drivers
with its taxis to attach their fleet/cars on its Network is same as Perumi’s business
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model. However, Libra provided the booking facility exclusively by way of its mobile
app which is available on all the operating systems for free on their respective
AppStores.
6. To book a cab on Perumi and Libra, the customers have to provide a pick up and a
drop location after which they are provided approximate fare range on the basis of
distance to be covered. Once the customers accept the same, the booking gets
confirmed.
7. With the aid of this funding, Libra was able to provide huge discounts to the
customers and incentives to drivers. Due to these incentives and discounts, Libra
became very popular among the drivers and customers in a very short period of time.
On an average, Libra is spending INR 2/- for each kilometer of every ride booked on
its Platform, hence it is running in the huge losses. On the growth of Libra, an expert
body of the Industry in one of the National Newspapers commented as below: -
“Libra has brought in a kind of revolution in car taxi services in
metropolitan States of Industan. In fact, number of customers of
car taxis and number of car taxis have increased significantly
after Libra entered into the market. We at the same time note that
the same may also be on account of the fact that Libra is
providing huge discounts to the customers and incentives to the
drivers attached to its platform and only time would unravel
whether the same number of customers and drivers would avail
the car taxi services if Libra stops giving the same level of
discounts to customers and incentives to drivers”.
8. In absence of the foreign funding, Perumi is unable to provide similar discounts and
incentives. Within a brief period of time, Perumi’s market share reduced while Libra’s
market share increased significantly across all the metropolitans. In Zubri, a
metropolitan city in Industan, the market share of Perumi reduced from 70% to 35%
and Libra’s market share increased from 0% to 45% in the period of six months i.e.
from July 2018 to December 2018, in the market of intra city car taxi services. The
rest of the market share was divided among other few companies which provide the
services through website/mobileapp/offline call-based booking. In the market of
mobile app based intra city car taxi services, the market share of Libra reached from
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0% to 60% and the market share of Perumi was 30% in December, 2018. Rest of the
market share i.e. 10% was shared by few companies.
9. Concerned by the changing market pattern, Perumi obtained an opinion from its legal
team and it filed an Information under Section 19 of the Act before the Competition
Commission of Industan (hereinafter ‘CCI/Commission’) alleging that Libra has
violated Section 3 and Section 4 of the Act. Perumi limited its allegations in the
Information to the territory of Zubri only.
10. Perumi alleged that the incentive scheme floated by Libra is in violation of Section
3(4) read with Section 3(1) of the Act. In its Information, Perumi relied on the
following table: -
Incentive Scheme of Libra in Zubri for its Drivers
Rider fares (in INR) MBG (i.e. minimum business guarantee),
a form of incentive (in INR)
650 1000
840 1400
1250 2400
1500 3000
1900 4200
2000 4800
2700 6200
Monday & Sunday Special: 3200 7000
* The above incentive scheme is contingent on the driver completing trips for at least
Rs.300 in Fares between 6pm - 11 pm (‘evening peak hours’).
Perumi alleged that due to the incentive scheme, the drivers in an indirect way
are locked-in on the network of Libra and they are not free to move to other car taxi
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service providers, thereby causing an appreciable adverse effect on competition
(hereinafter ‘AAEC’) in the market.
11. Perumi also alleged in its Information that Libra is a dominant player in the relevant
market as per the parameters laid down under Section 19(4) of the Act. It further
alleged that Libra is abusing its dominant position by imposition of the incentive
scheme and by offering huge discounts to the riders.
12. Having considered the Information in its Ordinary meeting, the CCI supplied a copy
of the Information to Libra and directed Libra and Perumi to appear before it for an
oral hearing. On the day of the hearing, the parties presented their arguments before
the Commission. Perumi submitted that the relevant product market should be
‘Mobile APP based intra city Car Taxi Services’ and the relevant geographic market
should be ‘territory of Zubri’. Perumi further argued that there has not been a
significant entry of an intra city car taxi service provider in the relevant market after
Libra started its business in Zubri. On the other hand, Libra submitted that the
relevant product market should be ‘Website, Mobile APP, and offline customer call
based intra city Car Taxi Services’. Libra agreed with the definition of relevant
geographical market provided by Perumi.
13. After the preliminary hearing, CCI pronounced an order under Section 26(2) of the
Act stating that there exists no prima facie case against Libra and closed the matter
therewith. The Commission held that the incentive scheme floated by Libra for its
drivers does not amount to an agreement under the Act. The Commission also opined
that even if the incentive scheme is considered as an agreement, the drivers are free to
move to other platforms as Libra does not directly stop them from doing so. Hence,
the scheme did not cause an AAEC in the market.
14. In relation to the allegation of violation of Section 4 of the Act, the Commission
recorded that Libra was operating below its average variable cost and the relevant
market is ‘Mobile APP based intra city Car Taxi Services in territory of Zubri’.
However, the Commission opined that the relevant market is a dynamic market and it
is going through a phase of disruptive innovation and because the market is still at a
nascent stage, it would be difficult to hold any party dominant in the market.
Therefore, the Commission closed the case by holding that there was no prima facie
case of abuse of dominance against Libra. On the CCI’s order, Libra’s press release
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stated that it welcomes the order of the CCI, however, the definition of relevant
product market decided by the CCI is narrow.
15. Aggrieved by the order passed by the CCI, Perumi filed an appeal under Section 53B
of the Act before the Hon’ble National Company Law Appellate Tribunal (hereinafter
‘NCLAT’). On the first date of hearing, the NCLAT issued notice to the CCI as
Respondent No. 1 (R-1) and Libra as Respondent No. 2 (R-2). On subsequent hearing,
R-1 and R-2 appeared before the NCLAT and R-2 sought time to file its reply. R-1
submitted that it does not wish to file a reply to the Appeal and it will adopt both the
written and oral arguments of Perumi on Relevant Product Market and for the rest of
the Issues, it will adopt both written and oral arguments of Libra. The NCLAT
allowed the requests of R-1 and R-2 and recorded that it will hear only the Counsel
for Appellant and Counsel for R-2. Subsequently, R-2 filed its reply. The matter is
now listed for final hearing.
16. The Hon’ble NCLAT is pleased to adjudicate the following issues arising from the
appeal:
A. Whether CCI is correct in holding that Libra has not violated Section 3 of the
Act?
a. Whether the incentive scheme of Libra amounts to an agreement under
the Act?
b. Assuming that the incentive scheme amounts to an Agreement under
the Act, does the incentive scheme violate the provisions of Section
3(4) read with Section 3(1) of the Act?
B. Whether CCI is correct in holding that Libra has not violated Section 4 of the
Act?
a. Whether the relevant product market delineated by the CCI is correct?
b. Whether Libra is a dominant player in the relevant market?
c. Whether Libra has abused its dominant position under Section 4 of the
Act?
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Note:-
1. In addition to the arguments mentioned in the moot-proposition above, the Counsel
for the Appellant and the Counsel for the R-2 are free to make any other submissions
that they deem fit.
2. The Counsel for the Appellant and the Counsel for the R-2 are required to submit an
Appeal and a Reply, respectively, in Memorial form.
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