Indian Mobility Platform Ola Comes Under Regulatory Spotlight: Lessons for Foreign Investors

India’s Central Consumer Protection Authority (CCPA) has issued a notice to Ola Electric, accusing the company of violating consumer rights through poor after-sales service, misleading claims, and unfair trade practices.

Additionally, the CCPA has taken action against Ola Cabs for refund violations, instructing the platform to offer consumers their preferred method of refund rather than forcing them to rebook rides using vouchers.

India’s Central Consumer Protection Authority (CCPA) has issued a notice to Ola Electric, accusing the company of violating consumer rights, offering substandard services, making false claims, and engaging in unfair trade practices. As per media reports, the notice was issued on October 3, 2024, and Ola Electric has been given 15 days to respond to the notice.

In a statement to stock exchanges, the company confirmed receiving the show cause notice and assured it would respond within the specified timeframe.

Ola’s expansion plans amid rising consumer complaints

Ola Electric, which currently offers three models of electric scooters, has recently announced plans to enter the electric motorcycle market. However, the company has faced a surge in consumer complaints regarding its after-sales service.

Between September 2023 and August 2024, India’s National Consumer Helpline received 10,644 complaints against Ola Electric. These grievances primarily involved delays in scooter servicing (3,389 cases), late deliveries of new scooters (1,899 cases), and unmet service commitments (1,459 cases). Furthermore, Ola has faced allegations of selling used scooters as new, recurring defects despite servicing, overcharging, and issues with battery packs and other components. Some customers also reported receiving partial or no refunds for booking cancellations.

CCPA pulls up Ola cabs for refund violation

After addressing concerns with Ola Electric, the CCPA has also turned its attention to Ola Cabs. It directed the ride-hailing platform to allow consumers to choose their preferred refund method, as the current system of issuing vouchers compels customers to rebook rides. 

On October 13, 2024, the CCPA issued a public notice, saying that the company’s refund approach violates consumer rights, and the no-question-asked refund policy cannot mean that the company incentivizes people to simply use this facility for taking another ride.

The directive was issued after CCPA chief commissioner Nidhi Khare found Ola Cabs in violation of the Consumer Protection Act, 2019. Additionally, Ola Cabs was instructed to provide invoices for all auto rides, following complaints of unethical practices.

Further, CCPA observed that if a consumer attempts to access invoice for Auto rides booked on Ola, the app shows the message ‘Customer invoice for Auto rides will not be provided due to changes in Ola’s auto service T&Cs.’ It was observed that not issuing bill or invoice or receipt for the goods sold or services rendered constitutes an ‘unfair trade practice’ under the Consumer Protection Act, 2019.  

Action taken by CCPA upon receiving complaints against Ola

According to the information provided by the National Consumer Helpline, a total of 2,061 complaints have been registered against Ola Cabs from January 1, 2024, to October 9, 2024. The top categories of complaints include: 

1. Higher fare charged from consumer than what was shown at the time of booking the ride
2. Non-refund of amount to the consumer
3. Driver asking for extra cash
4. Driver did not reach the correct location or dropped at incorrect location

India’s ride-hailing market: Growth prospects and challenges

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According to data intelligence platform Statista, India’s ride-hailing market is expected to reach US$7.53 billion by 2024. By 2029, the market volume is expected to expand to US$11.64 billion, reflecting an annual growth rate of 9.10 percent between 2024 and 2029. The number of users is predicted to rise to 380.6 million by 2029, with user penetration increasing from 18.6 percent in 2024 to 25.3 percent by 2029. While China is anticipated to lead globally with US$59.56 billion in revenue in 2024, India’s ride-hailing sector remains highly competitive, with local company Ola maintaining a strong presence against the global giant Uber.

Despite the projected growth of India’s ride-hailing market, consumer complaints regarding leading market players such as Ola—particularly concerning cancellation fees, overcharging, and drivers not adhering to proper routes—have prompted intervention from the CCPA. This has resulted in consumer-centric changes within the Ola app, including clearer displays of cancellation fees and improved grievance handling. Legal experts have emphasized the need to safeguard consumer rights in India’s digital economy, highlighting the gaps in accountability when companies shift responsibility to intermediaries like drivers, thereby leaving consumers to resolve issues independently.

Role of the Central Consumer Protection Authority in India

The Central Consumer Protection Authority or CCPA is a regulatory body in India established under the Consumer Protection Act, 2019. Its primary role is to safeguard the rights of consumers by addressing issues related to unfair trade practices, misleading advertisements, and violation of consumer rights. The CCPA has the authority to take actions such as ordering the recall of unsafe goods or services, issuing refunds, imposing penalties on violators, and discontinuing deceptive advertisements.

Key functions of the CCPA include:

• Protecting consumer rights: Ensuring that consumers are not subject to unfair practices or misinformation.
• Monitoring advertisements: It can take action against misleading advertisements and order the discontinuation of such advertisements.
• Enforcement: The CCPA can initiate class action suits, conduct investigations into consumer complaints, and prosecute violations.
• Recalls and penalties: It can order the recall of hazardous products and impose penalties or direct refunds for defective goods or services.

Lessons for foreign companies operating in India and best practices

To avoid regulatory intervention from consumer protection authorities like the Central Consumer Protection Authority in India, foreign companies operating in the market should adhere to several best practices. First and foremost, it is essential to understand local regulations by thoroughly familiarizing oneself with the Consumer Protection Act, 2019, and staying updated on any amendments or new rules to ensure compliance. Engaging with legal experts specializing in Indian consumer law can help navigate these complexities effectively.

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Transparent communication is critical; companies should ensure that all marketing and advertising materials are truthful and not misleading, avoiding exaggerated claims about products or services. Additionally, clear pricing should be displayed, including all charges and cancellation policies, to prevent consumer complaints regarding unfair practices. Implementing robust customer service is vital, as companies should establish a responsive system to handle queries and complaints promptly, offering multiple channels for customer support, such as phone, email, and chat. Timely service delivery is also essential, with realistic timelines for product delivery and proactive communication regarding any potential delays.

Furthermore, establishing a clear grievance redressal mechanism will allow consumers to lodge complaints easily and receive timely responses. Companies should regularly analyze customer complaints to identify patterns and areas for improvement, using feedback to enhance service quality. Documentation and invoicing practices must be adhered to, including providing proper bills, receipts, or invoices for all sales and services rendered. Maintaining thorough documentation of transactions, customer communications, and complaints is crucial for accountability.

Ensuring product quality standards and conducting regular quality checks can help maintain consistency and reliability. Training staff on consumer rights and company policies will ensure they handle customer interactions professionally and ethically. Proactive engagement with regulators is also advisable; building relationships with consumer protection authorities by participating in discussions and workshops related to consumer rights can be beneficial. Companies should address any compliance or operational issues promptly and communicate openly with regulators.

Ethical business practices must be upheld, including avoiding unfair trade practices, such as coercive sales tactics or misleading product information. Understanding and respecting local cultural nuances and consumer expectations will foster trust and goodwill. Additionally, companies should educate consumers by providing clear information about products and services, including how to use them, warranty details, and customer rights. Encouraging customers to provide feedback and suggestions for improvement demonstrates a commitment to their satisfaction.

Lastly, conducting regular compliance audits will help assess adherence to consumer protection laws and company policies, allowing for the identification of areas needing improvement. Companies should be willing to adapt their business practices based on audit findings and changes in consumer expectations or regulatory requirements. By implementing these best practices, foreign companies can significantly reduce the risk of regulatory interventions, build consumer trust, and foster a positive business environment in India.

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