The National Company Law Appellate Tribunal (NCLAT) on Tuesday stayed the ₹169 crore penalty imposed by the CompetitionCommission of India (CCI) upon IPO-bound Oravel Stays Limited (OYO). A NCLAT Division Bench, comprising Justice Rakesh Kumar, Member (Judicial) and Ashok Kumar Mishra, Member (Technical), however, directed OYO to deposit 10 per cent of the penalty amount.
CCI Penalty: NCLAT agrees to hear IPO-bound OYO’s plea on TuesdayIn its appeal before NCLAT, OYO contended that apart from MMT-Go, there are other online travel agencies, direct websites and apps of hotel owners, offline channels that offer competitive options
It maybe recalled that OYO had on November 15 filed an appeal before NCLAT against the 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.
A separate penalty of ₹223.48 crore was also imposed on MakeMyTrip-Goibibo (MMT-Go). The CCI also 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.
OYO alongwith its appeal has also moved an application seeking an 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.
Appeal before NCLAT
In its appeal, OYO had contended that apart from MMT-Go, there are strong and well-backed online travel agencies such as Yatra.com, Booking.com, Expedia & Cleartrip apart from 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.
Why online hospitality platforms are divided over competition panel verdictThe Competition Commission of India has held that online and offline hospitality channels are not part of the same market
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 the sales of the relevant product of OYO should have been considered, and not the total turnover.
Complaint before CCI
The fair trade watchdog opened an investigation against MMT-Go and OYO in 2019, after Federation of Hotel & Restaurant Associations of India (FHRAI) lodged a complaint with it alleging MMT-Go imposed a price parity in their agreement with hotel partners whereby they are not allowed to sell their rooms at 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.
CCI’s penalty on MakeMyTrip-GoIbibo and Oyo raises many questionsThe MMT-Go-Oyo ruling has queered the pitch
Also, the 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.
IPO nod awaited
IPO-bound OYO files appeal against CCI’s ₹169 cr penalty orderSeeks interim stay of CCI order; rejects contention that its arrangement with MMT-Go was anti-competitive
In a related development, FHRAI had written to SEBI to stop OYO from launching its IPO in light of unfair business practices, as found by the 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”.
Jaison Chacko, Secretary General, Federation of Hotel & Restaurant Associations of India (FHRAI), said that the latest development of NCLAT ordering Oyo to deposit 10 per cent of the total penalty of ₹168 crore imposed by CCI is yet another positive step in the interest of the hospitality sector in the country. As a result, OYO is now required to pay close to ₹17 crore as initial monetary penalty to ensure hearing of their appeal in NCLAT.
“FHRAI will continue to pursue the matter further for the benefit of thousands of small and budget hotels in the country and to discipline the OTAs in the new digital era so as to ensure a fair market, healthy competition and a level playing field for all stakeholders,” Chacko said.