Competition law exemption for Webtaxi pricing algorithm

Webtaxi S.à.r.l. (previously ProCab) operates a taxi booking platform in Luxembourg, to which Webtaxi affiliates and taxis of competing undertakings (generally through payment of a monthly fee) are linked. When a client makes a booking, an algorithm allocates the taxi closest to the client and calculates the taxi fare, based on predetermined criteria (price per kilometre, length of journey, traffic conditions, pick-up charge, etc.). The fare is non-negotiable and binding on both clients and taxi drivers.

Upon a complaint against the platform received in January 2016 alleging illegal price fixing, the Competition Council (“Council”) opened an investigation.

In decision n°2018-FO-01 of 7 June 2018, the Council analysed Webtaxi’s activity as that of a platform in a two-sided market for advance booking of taxis which is national in scope. It confirmed the existence of a horizontal price-fixing agreement between competitors on that market in violation of Article 3 of the Law on Competition of 23 October 2011 (“Law”).

However, after indicating that there are no agreements between undertakings which may not be exempt per se, the Council verified whether the exemption conditions of Article 4 of the Law were fulfilled, i.e. whether the agreement contributed to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, without imposing restrictions which were not indispensable, or affording the undertakings concerned the possibility to eliminate competition in respect of a substantial part of the services in question.

Referring to the submissions of the parties, the Council took into account the efficiency gains generated by the platform (fewer empty journeys and shorter waiting times) and the benefit for the clients (lower prices and quality gains). It concluded that the price setting by the platform’s algorithm was necessary to achieve those efficiency gains and that no viable alternative with the same pro-competitive effects existed. Finally, the Council noted that the platform accounted for 26% of Luxembourg taxis and therefore did not eliminate all relevant competition.

It must be noted that it is unusual to have an individual exemption for a price-fixing agreement between competitors but the pragmatic approach of the Council based on the impact on the market of the contested practice allowed it to clearly focus on consumer benefit.