The Competition Commission of India (CCI) has issued an advisory to cab aggregators to adopt self-regulatory measures to address information asymmetry and transparency concerns of customers.

A basic level of transparency must be practised through the adoption of self-regulatory measures by the cab aggregators, the competition watchdog has said.

This could be done by providing a general description of various components/heads of total fare on websites and applications; setting out and dissemination of a clear and transparent cancellation policy; formulation of clear and transparent policy on surge pricing, and disseminating thereof to both drivers and riders, including adequate transparency with respect to sharing of revenue on account of surge between drivers and cab aggregators, the CCI said in its advisory. 

Market study

The advisory— based on a market study  on “Competition and Regulatory Issues related to Taxi and Cab Aggregator Industry” — also advocated setting out a clear and transparent policy on data that is collected on the cab aggregator platform, the use of such data by the platform and also the potential and actual sharing of such data with third parties or related entities. 

Pertinently, the advisory advocated that algorithms while allocating rides amongst various available cabs, should not give preference to the vehicle owned, directly or indirectly, by the said cab aggregator.

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The market study was initiated in 2019 to understand the new age issues posed by the cab aggregation business model. The objective of the study was to analyse competition and regulatory issues pertaining to online Cab Aggregators, with special reference to their policy of ‘surge pricing’.

During the study, a Controlled Real-Time Experiment was also conducted, whereby participants were directed to book a cab on alternate platforms (with the same original location, time and destination) followed by stakeholder consultations, including with traditional taxi operators, transport department officials, industry experts and cab aggregators, to understand regulatory gaps and provide policy recommendations.

Study findings

The findings pointed toward non-transparency in various aspects, such as riders booking cabs at the same time receiving different fares for an identical entry and destination point i.e. the existence of personalized pricing. The study also revealed that though the riders get to know the up-front fare or estimated fare before booking the ride on cab aggregators’ platforms, there is ambiguity as regards what all components or heads form the basis of such fare calculation.

The study noted that the arrival of innovative app-based ride services (Cab Aggregators) brought disruptive innovation in the taxi industry. By using digital technology platforms, these companies offer ride services to passengers on request by a tap on a smartphone app and providing greater convenience in their point-to-point transportation objective. 

Although this model marked a paradigm shift by bringing in benefits for drivers/riders, it also introduced nuanced issues such as ‘surge pricing’, ‘predatory pricing’ etc., it noted.

CCI has also received various cases related to the radio taxi industry, apart from certain complaints regarding surge pricing by these aggregators. The study highlighted that while regulatory intervention may provide relief in the short term to consumers, there is also a risk of chilling innovation and thereby harming consumers in the long run. At the same time, it cautioned that leaving technology companies unregulated can induce market distortions and anti-competitive practices, which may affect the consumers.

World over, market studies are increasingly becoming an important constituent of the competition toolkit. Prior to the cab aggregators market study, CCI had issued three market study reports in the last two years, viz. Market Study on E-commerce Sector, Telecom Sector and Pharmaceutical Sector.

CCI’s Advisory for Cab Aggregators

  • Transparency in fare calculation
  • Transparency in Surge Pricing
  • Clear policy on data collection, usage and sharing
  • Non discriminatory allocation of rides 
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