Rounding off Railway fares by Indian Railways and IRCTC prima facie abuse of dominance

The Competition Commission of India has made a prima facie finding that the practice of Railways to round off the base price to the next higher multiple of 5 for tickets booked online through IRCTC portal amounts to abuse of dominant position under the Competition Act. The Commission has ordered the Director General to investigate into the matter and submit a report within 60 days.

The said order was made in the matter of Mr. Meet Shah & Anr. Vs. Union of India & Ors. [Case No. 30 of 2018], decided on 12.11.2018.

Challenge

The CCI was acting on an information supplied by two persons, Meet Shah & Anand Ranpara, who alleged that tickets booked online through the website of Indian Railways Catering and Tourism Corporation Ltd. (IRCTC) are rounded off to the higher multiple of 5. For example, if the fare is Rs.473, it is rounded off to Rs. 475. They further pointed out that if multiple tickets are booked for the same journey from the same account, rounding off is applied separately for each ticket, resulting in cascading effect of rounding off. For example, if four tickets of Rs. 7 are booked, rounding off is not applied to the final sum or Rs. 28 so as to make the base fare Rs. 30. Instead, rounding off is applied to each ticket of Rs. 7 to make the final sum Rs. 40.

They stated that there was no need to round off in online transactions, as e-payments can be made even for the fractional component of paisa. Railways and IRCTC enjoy absolute dominance in the market, and by following the arbitrary pricing policy, which the customers are forced to accept, they have abused dominance in violation of Section 4 of the Competition Act. It was alleged that Railways earned an unfair income of Rs.18 crores through this process.

The Railways and IRCTC defended the practice stating that pricing policy has statutory backing under Section 30 of the Railways Act 1989. They also stated that passenger fares do not cover the running costs as they are heavily subsidized. It was also stated that rounding off reduces transaction time and expedite the process. They also conceded that no separate account was maintained with regard to amount collected through rounding off.

Held

The Commission found that Railways and IRCTC enjoyed dominant position in the relevant market, as they were the sole players empowered by statutory framework to fix prices in the relevant market and that the customers have no choice but to agree to the pricing determined by them.

For considering the merits of the matter, the CCI treated the relevant market as ‘market for sale of tickets by railways in India’.

The CCI found it difficult to accept the justification that rounding off is done to reduce transaction time when it is possible for the Indian Railways to transfer even one paisa online electronically.

The CCI also found it inexplicable that rounding off is done separately for each passenger even when more than one tickets are booked through one account of the same time for a journey.

Finally, the CCI held that the practice of rounding off prima-facie amount to an imposition of unfair condition in the market for sale of rail tickets in India, particularly for online booking of rail tickets, in contravention of provisions of Section 4 (2)(a)(i) of the Act”.