The radio taxi association has written to the finance and other government ministries highlighting that Uber and Ola are defying the marketplace guidelines issued by the government, earlier this year.
According to the letter dated May 25 to the ministry of finance, the governor of Reserve Bank of India and the enforcement directorate, Ola and Uber’s business model is in “gross violations of the foreign direct investment guidelines on marketplace model of ecommerce services.
The Association of Radio Taxis, which includes Mega Cabs, Easy Cabs and Meru Cabs, argues that both companies are violating the guideline which states that ecommerce entities will not directly or indirectly influence the sale price of goods and services and shall maintain a level playing field.
“Uber and Ola continue to blatantly violate the law by influencing the price paid by the consumer, both directly and indirectly, through cash discounts, financial inducements and disproportionate incentives to taxi owners and drivers,” the letter said.
ET spoke to drivers on both platforms who confirmed incentives and schemes were offered to them to keep them logged on to the platform and complete more rides. At the same time, both companies charge the consumer close to 40% lesser than traditional radio cabs, which work on government regulated fares and in some cases are even lesser than an auto rickshaw.
ET has a copy of the letter and proofs attached. The letter further states that the companies do not give drivers on the platform an option to accept or reject a fare and instead offer guaranteed businesses, which again violates the basic meaning of a marketplace as defined by law to be a mere facilitator between buyers and sellers.
Over the last two years, Ola and Uber have both aggressively built supply of cabs in the market by offering a host of schemes which includes incentives and affordable EMI options for drivers to buy or lease cars.
Experts say, good quality and consistent driver supply are two major pain points that Ola and Uber are trying to solve by offering these incentives. On the customer side too the companies are trying to change user behaviour which pushes them to incentivise the consumer with lower fares.
“The company with greater control of supply will be market leader,” said Jaspal Singh, founder of transpire consulting firm Valoriser Consultants, but declined to comment on the letter or its impact to Uber and Ola.
Interestingly, the same two companies Uber and Ola have also come under regulatory scrutiny for surge or peak time pricing, which authorities argue exploit the customer.
According to the association Ola and uber are incurring operating cash losses of close to Rs400-Rs500 crore every month. “Such huge losses are bing funded by the brute strength of billions of dollars raised from foreign investors with the clear intention of not merely distorting but destroying and semblance of a level playing field.”
Ola, which is backed by Matrix Partners, Softbank and Nexus and Uber which is valued at more than $60 billion globally, declined to comment.
Source – Economic times