The Competition Commission of India (CCI) recently held the e-hospitality platform giants MakeMyTrip-GoIbibo and Oyo guilty of unfair trade practices.

It imposed a combined pecuniary sanction of $47 million along with behavioural sanctions.

On a complaint from the Federation of Hotel & Restaurant Associations of India (FHRAI) against these firms, CCI first investigated whether MMT-Go abused its dominant position and second, if Oyo and MMT-Go entered into anti-competitive arrangement to de-list competitors of Oyofrom the online portals of MMT-Goibibo.

CCI observed that MMT-Go had, along with Oyo, abused their dominant market position. It imposed a penalty of 5 per cent of the respective average turnover of MMT-Go and Oyo.

Further, MMT-Go was ordered to modify their agreements with chain hotels to strike off the exclusivity conditions, provide access to their platform on a non-discriminatory basis, and provide transparent disclosures of availability.

CCI’s evolving position on data-driven digital markets needs further analysis.

First, it terms the relevant market for the MMT-Go as “market for online intermediation services for booking hotels in India” and that for Oyo as “market for franchising services for budget hotels in India”.

It sets a precedent in delineating a new market segment to decide whether the MMT-Go was capable of restricting market access to the smaller players by indulging in anti-competitive practices.

Online vs offline

CCI made a functional distinction between online travel agencies and other distribution channels while segregating online and offline channels as well.

CCI’s view that online market and its consumers are not substitutable by other channels of booking but are complementary has divided opinion.

The evidence presented by MMT-Go clearly demonstrates that users tend to obtain the same services across multiple channels including offline travel agents, walk-ins, direct website bookings, meta-search channels (TripAdvisor, Trivago), search and price comparison channels (Google), franchisee websites (FabHotels) etc.

Therefore, the decision could be challenged on whether customers and hotels differentiate between search portals and online intermediaries.

Second, the CCI seems to have differentiated the computation of penalty. It has imposed a penalty of 5 per cent of average turnover i.e. ₹223 crore on MMT and ₹169 crore on Oyo.

In the Excel Corp Care vs CCI case, the Supreme Court had held that the penalty under competition laws be stipulated on the basis of the ‘relevant turnover’ — turnover from the business engaged in violating conduct in the case of multiproduct companies.

Moreover, CCI itself in the case of Delhi Vyapar Mahasangh vs Flipkart & Ors., and Lifestyle Equities C.V. vs Amazon noted that different segments of e-commerce platforms offer different dynamics and cannot be equated.

But in this case, the CCI has considered MMT-Go and Oyo’s turnover from all segments, despite the contraventions being restricted to the hotel segment.

It opined that while revenue segmentation is more appropriate in brick-and-mortar businesses, the integrated nature of multiple products and services offered over online platforms makes the relevant turnover rule ill-suited for digital platforms, exempting them from Supreme Court’s rule.

The relevant turnover rule for computation of penalty is also proposed as a statutory amendment in the Competition Amendment Bill.

It would thus be interesting to see how the appellate forums deal with this issue, given that the regulator’s decision contradicts the apex court.

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