Anti-competitive conduct . CCI slaps ₹400-crore penalty on MakeMyTrip-Goibibo, OYO

The Competition Commission of India (CCI) on Wednesday imposed monetary penalties of ₹223.48 crore on MakeMyTrip-Goibibo (MMT-Go) and ₹168.88 crore on OYO (Oravel Stays Limited) for indulging in anti-competitive conduct in the hotel segment of their business and thereby contravened the Competition law.

As part of its non-monetary sanctions, the fair trade regulator has also directed MMT-Go to amend its market behaviour and, in particular, modify its agreements with hotels/chain hotels so as to remove/ abandon the price and room availability parity obligations imposed by it on its hotel/chain hotel partners with respect to other Online Travel Agency (OTA). 

Both the parties have been given 60 days to deposit the monetary penalty. In both the cases, the CCI has decided to use the “entire turnover” of these entities as the “relevant turnover” on which the 5 per cent penalty rate has been applied for the financial years 2017-18, 2018-19 and 2019-20.

MakeMyTrip, OYO response

Meanwhile, a spokesperson for the Nasdaq-listed MakeMyTrip said the company’s business operation is compliant with all applicable laws.

“We are a pureplay marketplace with no supply side leaning. Infact, more than 35,000 SME hotel partners are associated with us. We are currently reviewing the CCI order.  We anticipate that the order will have a negative impact on the level of competition and growth of the ecommerce market in India,” the spokesperson said, adding that the CCI’s order is appealable before the National Company Law Appellate Tribunal within 60 days.

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“We will determine the future course of action as per advice of our legal counsels,” he said.

An OYO spokesperson said: “We have received a copy of the CCI order and are reviewing it in detail”. According to the spokesperson, most OYO customers book directly through its app, website and other channels in India. It continues to work with all OTAs as distribution partners. 

“OYO believes that its business practices and conduct comply with all applicable laws and will take all necessary steps to explain our position in the appropriate forums,” the spokesperson added.

“Based on the complaints filed by us back in 2019, Oyo and Go-MMT were under investigation by the Competition Commission of India (CCI) for indulging in anti-competitive conduct. The CCI had then identified a case for investigations into both the entities’ business practices under Section 26(1) of the Competition Act, 2002. Today, the CCI has imposed penalties of ₹223 crore and ₹168 crore on Go-MMT and Oyo for anti-competition practices. This is by far one of the biggest wins for the hospitality industry against the dominance of the aggregators. We also see this as a major verdict that will go a long way in disciplining the OTAs and saving the Industry. The actions of Go-MMT and Oyo have individually as well as collectively caused immense damage to hotels across all segments. These entities indulge in deep discounting, unfair business practices, dominant positioning and unilateral agreements, among other unethical business practices. Oyo especially 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. This is a serious cause of concern for the hospitality ecosystem of our country. We hope that this will also serve as an eye opener for investors and the regulatory bodies about Oyo which is proposed to go public,” says Pradeep Shetty, Executive Committee Member, Federation of Hotel & Restaurant Associations of India (FHRAI) & President, Hotel and Restaurant Association of Western India (HRAWI)

What is the case?

CCI had on October 28, 2019 opened an investigation against MMT-GO and OYO and directed the Office of the Director General to investigate the matter. There were three main issues — price parity, room parity agreements and preferential treatment by MMT to OYO.

The competition watchdog also ordered investigation on other allegations including predatory pricing, misrepresentation due to delayed delisting and manipulation of market dynamics and charging of service fee by MMT-GO respectively. 

CCI prima facie found a case for investigation against MMT-Go for contravention of Section 4 (abuse of dominance) as well as Section 3(4) (appreciable adverse effect on competition) of the Competition Act. As regards OYO, investigation under Section 3(4) of the Competition Act has been ordered.

The Federation of Hotel & Restaurant Associations of India (FHRAI) had filed information against MMT/ GoIbibo/ OYO alleging that MMT & Goibibo (MMT-Go) indulged in certain anti-competitive practices including predatory pricing, charging of exorbitant commissions from hotels, registering and providing on its platform illegal and unlicensed bed & breakfast.

Further, MMT-Go allegedly imposed a price parity in their agreement/contract with hotel partners whereby the hotel partners 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, the FHRAI had said.

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, further leading to a denial of market access to Treebo and Fab Hotels in contravention of Section 3 as well as Section 4 of the Competition Act. 

Based on the investigation report, the CCI has now concluded that both MMT-Go and OYO had indulged in anti-competitive practices on various counts including the major ones of “price parity”, “room parity” (by MMT-Go) and preferential treatment by MMT-Go to OYO, thereby denying market access to competitors of OYO.

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