Sakina Tashrifwala
Published on: October 21, 2022 at 23:12 IST
The Competition Commission of India (CCI) fined Goibibo-MakeMyTrip (Go-MMT) and OYO, respectively, Rs. 223.48 crore and Rs. 168.88 crore for anti-competitive behaviour in the hotel booking sector on Wednesday.
The order issued by Chairperson Ashok Kumar Gupta and members Sangeeta Verma and Bhagwant Singh Bishnoi noted that MMT-Go had engaged in distortion of information on its website.
“MMT-Go is a dominating participant in the relevant market, according to the Commission. Consumers rely heavily on the results displayed on MMT-website, Go’s and any misrepresentation of information on MMT-platform Go’s may damage the consumer’s perspective and discourage the consumer from searching on alternate channels for the same hotel, assuming that the hotel is sold out.”
“This may result in fewer room bookings for the hotel partner and less competition among the budget hotels listed on various OTAs, leading to the exclusion of such properties. Furthermore, because MMT-Go is a dominant platform, the conduct of misrepresentation is predatory in nature when it comes to such hotels.”
As a result, it gave Go-MMT the following instructions:
a. MMT-Go is directed to suitably modify its agreements with hotels/chain hotels, to remove/abandon the price and room availability parity obligations imposed by it on its hotel/chain hotel partners with respect to other OTAs.
b. MMT-Go is directed to modify its agreement with hotels/chain hotels, to remove/abandon the exclusivity conditions that exist inter-alia in the form of D minus clause.
c. MMT-Go is directed to provide access to its platform on a fair, transparent and non-discriminatory basis to the hotels/chain hotels, by formulating the platforms’ listing terms and conditions in an objective manner.
d. MMT-Go will notify all its hotel/chain hotel partners, about the aforesaid modifications.
e. MMT-Go is directed to provide transparent disclosures on its platform as regards the properties not available on its platform, either on account of termination of the contractual arrangement with any hotel/chain hotel or by virtue of exhaustion of quota allocated to MMT-Go by such hotel/chain hotel.
In 2019, the Commission was working on material filed by the Federation of Hotel and Restaurant Associations of India (FHRAI). Hotel aggregators Treebo and FabHotels were later named as defendants. The following claims were made by the informants:
- MMT-Go has implemented price parity in its agreement/contract with hotel partners, which means that hotel partners are not permitted to sell their rooms at any other online travel agency (OTA) or on its own web portal at a lower price than what is offered on MMT-platform. Go’s However, MMT-Go reserves the right to change the cost of such hotel rooms at any time.
- MMT-Go has engaged in predatory pricing by offering hotel rooms at less than the industry standard for calculating unit basis cost of rooms, the “average room rate.”
- MMT-Go has been providing considerable discounts to clients, which has resulted in the increase of their network and customer retention. Smaller participants in the OTA market are being driven to quit as a result of such behaviour.
- Chain hotels/hotel aggregators such as Treebo and FabHotels have been denied market access as a result of their removal from MMT-platform Go’s because they refused to pay the high commission brokerage levied by the latter.
- MMT-Go and OYO have entered into confidential business agreements in which MMT-Go has committed to offer OYO preferred treatment on its platform, denying Treebo and FabHotels market access.
Based on the information, the Commission requested that the Director General (DG) conduct an investigation. Following its investigation, the DG concluded that the arrangement between MMT-Go and OYO had a significant adverse effect on competition in terms of the considerations specified in Section 19(3) of the Competition Act, 2002.
As a result, the DG found that the commercial agreement/arrangement between OYO and MMT-Go violated Section 3(4)(d) read in conjunction with Section 3(1) of the Act.
MMT-Go maintained in its arguments before the Commission that FabHotels and Treebo approached the Commission for their own reasons.
It further claimed that the DG inquiry lacked any helpful economic analysis and that several ideas were incorrectly applied.
Furthermore, the company contended that it cannot be considered dominant in the online hotel booking market for the following reasons:
- MMT-and Go’s its competitors’ market positions do not indicate dominance;
- Entry barriers are low and there is potential for competition from other players; and
- Hotels have significant countervailing buyer power.
The CCI, on the other hand, discovered that MMT-Go was a dominating participant in the market for online intermediation services for hotel booking in India, noting that MMT-Go had 63% of the domestic hotel internet market share in 2017.
In terms of the entity’s entrance obstacles, HappyEasyGo was the most recent entrant in the market in 2017.
The Commission emphasised that, despite the market’s massive growth, no new entrants had appeared since. It continued by saying,
“The Commission observes that wide rate parity impositions, whereby hotel partners are restricted from offering better prices to other OTAs or from offering any better prices on their own websites, are generally perceived as anti-competitive because of their ability to restrict price competition and, thus, making it difficult for an entrant or an existing player to establish a market presence, thereby creating entry/expansion barriers for new/other platforms due to the imposition.”
Furthermore, research discovered that the combination of deep discounts, exclusivity conditions, and parity conditions produces an ecosystem that strengthens MMT-strong Go’s position in the relevant market.
However, it determined that the DG’s finding of predatory pricing was not supported by the data and evidence supplied in the investigation report.
It was also claimed that MMT-delisting Go’s of FabHotels and Treebo, as well as inexpensive hotels, had harmed market competitiveness.
“The Commission is more concerned with the harm to the competitive process than with the injury to a rival. Thus, more than FabHotels and Treebo’s survival, although by other methods, the Commission cannot be unaware of the negative impact that their exclusion from the OTA channel has had or is projected to have on market competition and, as a result, on consumers,” the specified order said.
According to the Commission,
“In light of the facts and circumstances of the matter, the Commission deems MMT-conduct Go’s to be in breach of Sections 4(2)(a)(i) and 4(2)(c) of the Act, as adumbrated in this order. Furthermore, the agreement between MMT-Go and OYO has been deemed to be in violation of Section 3(4)(d) read with Section 3(1) of the Act for the reasons stated in this judgment.”
As a result, the Commission fined MMT-Go and OYO 5% of their respective yearly turnovers.