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Uber / Ola – Cap on convenience fee – Surge / dynamic pricing / peak pricing

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By the notification dated 25.11.2022, the Government of Karnataka has imposed cap on the service charge / commission for mobile app – based transport aggregators at 5% plus GST on the bas fare for autorickshaws.  Motor Vehicle Aggregator Guidelines, 2020.

Uber and Ola challenged the Notification dated 25.11.2022 issued under Section 67 of the Motor Vehicles Act, 1988.  

In the exhaustive judgment of 294 pages, the High Court negatived the contentions of Uber / Ola on all 15 issues formulated in para 12 of the judgment.  Issue No.5 was whether the State can fix the service fees for the aggregator or can it be left to the discretion of the aggregator.

HELD that peak, dynamic or surge pricing is apparently charged due to non or low availability of vehicles on the app of the aggregator.  If the aggregator is not able to provide requisite number of vehicles it cannot charge such pricing charges.   It would amount to taking advantage of the aggregator not being able to provide the requisite number of vehicles no premium can be collected for its own defaults.

If such peak, dynamic or surge pricing is permitted, there is possibility of the aggregator falsely claiming these amounts when there is a surge or peak, since all the acts of aggregators are secret as to the basis of such charge and in what manner same would be considered or calculated.   The details of the total number of vehicles onboarded, in operation at a given tie and in operation in a given area is not made available to ascertain if there are indeed lesser vehicles.

Service fees are charged since Uber provides various value added services to the passengers as described in paras 4.36 and 4.80 of the judgment.   Uber incurs expenditure of Rs.24.19 ps per trip and this was not considered while fixing cap of 5% on the service charges.

Judgment dated 27.5.2024 of the Karnataka High Court  of Writ Petition No.24501 of 2022 of Uber India Systems Pvt Ltd  Vs. The State of Karnataka and others with connected matter.

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