Site icon SCC Times

“Fair market opportunity is the hallmark of competition”; CCI imposes hefty monetary penalty on MakeMyTrip, Goibibo and OYO for their anti-competitive practices and abuse of dominant position

   

Competition Commission of India: In a significant development, the Commission while deliberating upon the alleged contravention of Sections 3 and 4 of the Competition Act by MakeMyTrip, Goibibo and OYO, was of the view that the commercial arrangement between OYO and MakeMyTrip and Goibibo which led to the delisting of FabHotels, Treebo and the independent hotels, which were availing the services of these franchisors, was anti-competitive and abuse of dominant position within the meaning of Section 3(4)(d) read with Section 3(1) of the Competition Act.

The Bench comprising of Ashok Kumar Gupta (Chairperson), Sangeeta Verma and Bhagwant Singh Bishnoi (Members) found it fit to impose a monetary penalty for MMT-Go at 5% of its relevant turnover, during the financial years 2017-18, 2018-19 and 2019-20 – Rs. 223 crores and 48 Lakhs. Meanwhile OYO’s penalty was fixed at 5% of its relevant turnover, as submitted by it, during the financial years 2017-18, 2018-19 and 2019-20 – Rs 168 Crores and 88 Lakhs.

The Allegations: some of the important allegations levied on MMT-GO and OYO are as follows—

  • Federation of Hotel & Restaurant Associations of India [FHRAI] – representative body of the hospitality industry in India, alleged that MakeMyTrip-Goibibo [hereinafter MMT-Go] imposed price parity in its agreement/contract with hotel partners whereby the hotel partners are not allowed to sell their rooms at any other Online Travel Agency [OTA] or on its own online portal at a price below which it is being offered on MMT-Go’s platform. However, MMT-Go in their own discretion can fluctuate the prices of such hotel rooms. Further, the hotel partners were mandated to observe room parity whereby they cannot refuse to provide rooms on MMT-Go platform at any given point of time if the rooms are being provided on any other OTA.

  • It was further alleged that chain hotels/ hotel aggregators, namely Treebo and FabHotels were denied market access because of their removal from the platform of MMT-Go as they did not agree to pay the exorbitant commission brokerage charged by the latter.

  • Further, it was alleged that MMT-Go and OYO have entered into confidential commercial agreements wherein MMT-Go has agreed to give preferential treatment to OYO on its platform, leading to a denial of market access to Treebo and FabHotels.

Investigations by the Director General

  • The Commission, prima facie, delineated the relevant market with regard to OYO as the ‘market for franchising services for budget hotels in India’ and found OYO to be holding a significant position in the said market, though not dominant. MMT-GO, on the other hand, was found to be dominant in the ‘market for online intermediation services for booking of hotels in India’.

  • The Commission having formed prima facie view ordered an investigation against MMT-Go for contravention of Section 4 as well as Section 3(4) of the Act. As regards OYO, investigation under Section 3(4) of the Act was ordered.

  • The DG reported that MMT-Go is the dominant player in their relevant market. As per the DG’s report, after the merger of MMT with GoIbibo in 2017, the market share of MMT-Go had increased. It was further reported that reliance of FabHotels on MMT-Go increased during 2016-17 and 2017-18. In 2018-19, after the termination of contract with MMT-Go, the proportion of bookings through MMT-Go declined substantially. DG reported that MMT is a dominant player in the relevant market for “online intermediation services of hotel bookings in India.

  • The DG also concluded that as a consequence of the delisting from the MMT-Go platform due to the OYO and MMT-Go agreement, FabHotels and Treebo were driven out of the business of franchising budget category hotels in India.

  • From the consumers’ perspective, the DG observed that the choice of inventory was narrowed down to the properties offered by OYO.

Contentions

  • FHRAI submitted that both MMT-Go and OYO are strong players and their inter-se exclusive arrangement is furthering their strength to the exclusion of other players in the markets in other segments.

  • It was further submitted that MMT-Go’s agreement with OYO discriminates in terms of the access granted to other competitors in the respective market segments of MMT-Go and OYO.

  • MMT-Go submitted that FabHotels and Treebo approached the Commission for their own ulterior motives. As regards Treebo, it was alleged that it is purely driven by commercial business interest and that the statements of its founder during cross-examination contradict the submissions made in the Treebo’s Information and its subsequent filings. As regards FabHotels, it was alleged that though its entire claim is based on the huge losses it has suffered in terms of growth post the delisting from MMT-Go platforms, response filed by it pursuant to the questions asked during the cross examination reveal that its revenue from operations doubled in FY 2019-2020 from the FY 2018-2019.

  • MMT- Go further contended that the DG’s ‘Theory of Gatekeeper’, as mentioned in the Investigation Report, is devoid of any legal basis. The “digital gatekeeper” construct does not have any legal basis in India or in other jurisdictions.

  • OYO denying all the allegations, stated that the main allegation with regard to the commercial agreements which OYO had with MMT-Go is not essential for hotels in any market in India and thus the contention of FabHotels and Treebo that MMT-Go is essential for their survival is not made out.

Observations of the Commission

  • Vis-a vis the Relevant Market the Commission observed that a hotel can also list itself on Google ‘without paying any cost’; however, presence and visibility are two different things. When a hotel partner opts for a channel of distribution like an OTA, it is more for visibility (and discoverability) and not just for mere online presence.

  • Thus the Commission was of the view that online and offline are not part of the same market and secondly, even within the online segment, OTAs constitute a separate relevant product market. Viewed from the competition lens, the Commission does not find that the various distribution channels argued by MMT-Go (e.g. direct bookings made through the hotel’s own website; corporate sales; offline travel agents; unorganised intermediaries such as coolies, taxi drivers, etc.; metasearch services such as Trivago, Trip Advisor etc.) to be constraining MMT-Go. The relevant market in the present case, thus, is “market for online intermediation services for booking of hotels in India”.

  • Concerning dominance, the Commission agreed with the assertion made by the Informants that the commercial arrangement between MMT and OYO has further fortified the position of MMT-Go in the market. Such commercial arrangement resulted in the fact that a large number of consumers also book hotels on the said website which then leads to a great influx of hotel owners who are willing to list their hotels on MMT-Go.

  • The Commission observed that the deep discounts, exclusivity condition and parity conditions, in conjunction, created an ecosystem reinforcing MMT-Go’s dominant position in the relevant market- like helping MMT-Go to retain and further increase its network of users/travellers, who would increasingly use the platform for availing the best deals; impeding the competitive process between OTAs by limiting the competitive levers/instruments at the disposal of other portals who etc. “Hotels and OTA are in a contractual relationship and therefore, free riding of hotels on the investment made by OTAs in advertisement and promotion can be detrimental to the business of OTAs. However, wide price parity obligation is not justifiable as it reduces the competition between the OTAs and may have an adverse impact on prices charged to end-consumers”. The Commission thus observed that the wide parity obligations imposed by MMT-Go, along with exclusivity conditions, are in contravention of the provisions of Section 4(2)(a)(i) and 4(2)(c) read with Section 4(1) of the Competition Act.

    “The explosion of online commerce has changed the dynamics of consumer preferences and transactions. As a market regulator, it is thus imperative that the competition regulator ensures that all stakeholders get an opportunity to compete on merits and get a fair chance to be part of digital commerce”.

  • The Commission stated that it is not inclined to intervene with the contractual freedom of the parties to decide their commercial terms of dealing. However it was reiterated that such terms shall not be employed as tools to distort fair competition in the market. MMT-Go, as a dominant channel of distribution, shall endeavour to provide fair and non-discriminatory access of its platform to users.

[Federation of Hotel & Restaurant Associations of India v. MakeMyTrip India Pvt. Ltd., 2022 SCC OnLine CCI 58, decided on 19-10-2022]


Advocates who appeared in this case :

For (FHRAI):

Ms. Rukhmini Bobde, Advocate

Mr. Ishan Nagar, Advocate

For Ruptub Solutions Pvt. Ltd.:

Mr. Abir Roy, Advocate

Mr. Vivek Pandey, Advocate

For Casa2 Stays Pvt. Ltd. (FabHotels):

Mr. Karan Singh Chandhiok, Advocate

Mr. Tushar Chawla, Advocate

Ms. Lagna Panda, Advocate

Mr. Vishnu Suresh, Advocate

Mr. Vaibhav Aggarwal, FabHotels

For MakeMyTrip India Pvt. Ltd. and GoIbibo (MMT-Go):

Mr. Ramji Srinivasan, Senior Advocate

Ms. Megha Dugar, Advocate

Mr. Shashank Gautam, External Counsel

Ms. Sreemoyee Deb, Advocate

Mr. Rajat Moudgil, Advocate

Mr. Anand Sree, Advocate

Mr. Hitesh Mehra, General Counsel (MMT-Go)

Mr. Justin Coombs, Economist

Dr. Kadambari Prasad, Economist

Mr. Avinash Mehrotra, Director, Economist

For Oravel Stays Pvt. Ltd. (OYO):

Mr. Rajshekhar Rao, Senior Advocate

Mr. Harman S Sandhu, Advocate

Mr. Rohan Arora, Advocate

Mr. Ravi Gangal, Advocate

Mr. Rakesh Prusti, General Counsel (OYO)

Ms. Urvashi Pathak, Assistant General Counsel (OYO)


*Sucheta Sarkar, Editorial Assistant has prepared this brief

Exit mobile version