The Competition Commission of India (CCI) has held e-hospitality platforms MakeMyTrip-GoIbibo and Oyo guilty of unfair trade practices. It has imposed a fine of $47 million, besides dos and don’ts.

The order is intriguing on two broad aspects.

First, the order carves out a separate segment of the market among the digital platforms. It describes the market for MMT-Go as “online intermediation services for booking hotels in India” and for Oyo as “franchising services for budget hotels in India”. It sets a precedent in delineating a new market segment in the antitrust regime to decide whether MMT-Go was liable to restrict market access for smaller players through anti-competitive practices.

The CCI has held that online and offline channels are not part of the same market. Further, online travel agencies constitute a distinct product market even among online distribution channels. The commission made a functional and characteristic distinction between OTAs and other distribution channels since they provide consumers with a seamless search, compare and booking function.

Some concur with the commission that the online market cannot be substituted by other booking channels, but are complementary. Others feel that the delineation of the market is a narrow approach taken by the CCI.

Evidence presented by MMT-Go shows that users tend to obtain the same services across multiple channels, including online travel agents, offline travel agents, offline walk-ins, and bookings on websites. These channels include meta-search channels (TripAdvisor, Trivago), search and price comparison channels (Google), and direct bookings on hotel websites and franchisee websites (FabHotels). The CCI seems to have overlooked such competitive constraints and excluded them from the relevant market.

Therefore, the decision can be challenged from an antitrust jurisprudence perspective over whether customers and hotels differentiate between search portals and online intermediaries.

Secondly, the CCI has imposed a penalty amounting to 5 per cent of average turnover — ₹223 crore on MMT and ₹169 crore on Oyo.

Legal precedent

The Supreme Court had previously laid down the law on the computation of penalty in the case of Excel Corp Care vs CCI. It stipulated that the penalty under competition laws must be calculated on the basis of the ‘relevant turnover’ — that is, turnover from the business engaged in violating conduct in the case of multi-product companies. Moreover, the commission itself — in the case of Delhi Vyapar Mahasangh vs Flipkart, and Lifestyle Equities vs Amazon — had noted that different segments of e-commerce platforms offer different dynamics and cannot be equated in terms of effect on competition.

Yet, the commission has taken cognisance of the entire turnover of MMT-Go and Oyo from all segments, despite the contraventions being related to the hotel segment. It opined that while revenue segmentation is appropriate in brick-and-mortar businesses, the integrated nature of multiple products and services offered online makes the ‘relevant turnover’ rule ill-suited for digital platforms.

Consequently, this order exempts digital platforms and digital markets from the ‘relevant turnover’ rule recognised by the Supreme Court. It is pertinent to note that the ‘relevant turnover’ rule for computation of penalty is being proposed as a statutory amendment by way of the Competition Amendment Bill.

It would be interesting to see how appellate forums respond.

(Shreyashi is an independent legal professional; Pardeshi is a law officer at a SEBI-registered debenture trustee)