MARKET STUDY ON COMPETITION AND REGULATORY ISSUES IN THE CAB AGGREGATOR INDUSTRY

Earlier in the year, the CCI released findings of its Market Study on “Competition and Regulatory Issues related to Taxi and Cab Aggregator Industry”. Shri Ram College of Commerce (SRCC), University of Delhi, was the study partner, with Prof. Simrit Kaur as the principal investigator. The Study was undertaken 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'.

The arrival of innovative app-based ride services (cab aggregators) brought about disruptive innovation in the taxi industry. By using digital technology platforms, these companies offer ride services to passengers on request through a smartphone app, providing greater convenience in their point-to-point transportation objective. Although this model marked a paradigm shift by bringing in benefits for drivers and riders, it also introduced nuanced issues such as surge pricing and personalised pricing, as noted in the study.

The study conducted a detailed survey of approximately 2,000 riders and 200 drivers across four cities to gather primary data and record the respondents' perceptions of various aspects, such as fare determination, ride bookings, personalised pricing, and surge pricing, which were then analysed using sophisticated statistical and econometric tools. A controlled real-time experiment was also conducted, whereby participants were directed to book a cab on alternate platforms (using the same starting location, time, and destination). This was 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.

The study revealed that the riders are not necessarily averse to paying surge, as they derive utility from the convenience and availability of technology-driven cabs; however, some riders stated that the surge had been higher than expected on occasion. Thus, to avoid exploitation, some regulatory check may be desirable. On the issue of personalised pricing, there seems to be a mismatch between riders' perceptions and cab aggregators' responses on factors impacting fare calculation. The study pointed towards non-transparency and information asymmetry from the perspective of drivers and riders in various aspects, such as cancellation charges, surge component shown to drivers and riders, and various heads constituting the total fare.

Advisory

Based on the recommendations of the study, which was concluded in September 2022, CCI issued an advisory to cab aggregators to adopt self-regulatory measures in order to address information asymmetry and transparency concerns.

These include providing a general description of various components/heads of total fare on websites and applications; reflecting the break-up of the total fare to show the surge component in the invoice; setting out and disseminating a clear and transparent cancellation policy; formulating a clear and transparent policy on surge pricing and disseminating this to both drivers and riders; and ensuring adequate transparency with respect to sharing revenue between drivers and cab aggregators on account of surge pricing. The advisory also advocated for setting out a clear and transparent policy on data stored on the cab aggregator platform, the use of such data by the platform, and the potential and actual sharing of such data with third parties or related entities.

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

The adoption of these self-regulatory measures by cab aggregators is expected to contribute significantly towards addressing several issues faced by riders and drivers and ensuring a well-functioning ride-hailing ecosystem.

ADVISORY ISSUED BY THE COMMISSION

? Transparency in fare calculation.

? Transparency in surge pricing.

? Clear policy on data collection, usage, and sharing.

? Non-discriminatory allocation of rides.