IPO-bound Oravel Stays Ltd (OYO) has filed an appeal before National Company Law Appellate Tribunal (NCLAT) against Competition Commission of India’s (CCI) order of October 19 levying a penalty of ₹168.88 crore on the hospitality and travel-tech firm for indulging in anti-competitive practices.
The appeal before NCLAT—filed on Tuesday—comes even as OYO is awaiting a nod from SEBI for its initial public offering (IPO) for which draft papers have already been filed with market regulator. This also comes in the backdrop of Federation of Hotel & Restaurant Associations of India (FHRAI) writing to SEBI to stop OYO from launching its IPO in the wake of penalty imposed by CCI.
It maybe recalled that CCI had on October 19 imposed a separate penalty of ₹223.48 crore on MakeMyTrip-Goibibo (MMT-Go). This was besides the penalty of ₹ 168.88 crore imposed on OYO.
One of the allegations was that MMT and OYO had entered into confidential commercial agreements wherein the former has agreed to give preferential treatment to OYO on its platform, thereby foreclosing competitors from distribution of hotel rooms to consumers.
CCI had also in its order directed MMT-Go to change its market behaviour and, in particular, modify its agreements with hotels so as to remove the price and room availability parity obligations imposed by it on its hotel partners with respect to other online travel agencies (OTA).
Appeal before NCLAT
In its appeal before NCLAT, OYO has contended that apart from MMT-Go, there are strong and well-backed online travel agencies such as Yatra.com, Booking.com, Expedia & Cleartrip besides direct websites and apps of hotel owners, offline channels which offer competitive options to FabHotels and Treebo–the other two Informants in the case before CCI.
It also contended that MMT-Go is not a significant channel of booking for OYO as out of its total revenue in 2020, the revenue generated from bookings on MMT-Go was minimal. Thus, it was contended that any arrangement between OYO and MMT-Go cannot be said to have the effect of foreclosing any competitor from distribution of hotel rooms to customers.
The appeal also argued that the penalty imposed by CCI was in complete derogation of directions of Supreme Court which has specifically held that a penalty must be proportionate to the alleged violation and limited to the relevant turnover and as such only the turnover/ profit attributable to sales of the relevant product of OYO should have been considered, and not the total turnover.
Interim stay sought
OYO, along with its appeal, has also moved an application seeking immediate interim stay on the order of CCI, contending that if it is directed to pay the penalty, it would be forced to forego business returns that the same would generate when employed in its business.
No loss will be caused in the event the levy of penalty is stayed by the Tribunal till the disposal of appeal, argued OYO. It also submitted that balance of convenience lies in its favour and staying the operation of the impugned order.
Complaint before CCI
The fair trade watchdog opened an investigation against MMT-Go and OYO in 2019, after FHRAI lodged a complaint with it, alleging that MMT-Go imposed a price parity in their agreement with hotel partners, whereby hotel partners are not allowed to sell their rooms from any other platform or on its own online portal at a price below the price at which it is being offered on MMT-Go’s platform.
Also, hotel partners are mandated to observe room parity, whereby they cannot refuse to provide rooms on MMT-Go at any given point of time if the rooms are being provided on any other platform. Further, it was alleged that MMT and OYO entered into confidential commercial agreements wherein MMT has agreed to give preferential treatment to OYO on its platform.
Request to SEBI
FHRAI has written to SEBI to stop OYO from launching its IPO in light of unfair business practices, as found by CCI in its order. The hospitality industry body alleged that “OYO is responsible for the systemic depredation of the budget segment hotel business and its market, as a means to achieve a notional billion-dollar valuation, which is a serious cause of concern for the hospitality ecosystem of the country”.