Oyo, MakeMyTrip, GoIbibo Under Investigation For Abusing Competition Law & Unfair Business Practices
These days we get to hear so many news encompassing organisations alleging market leaders, especially in the e-commerce and hospitality sectors of predatory pricing and using unfair measures to gain market share.
Right from e-comm giants like Amazon and Flipkart to food aggregators like Zomato and Swiggy, the Government as well as the concerning regulatory bodies have spilled allegations and news all over the market. Now comes the hospitality wing.
It has been found out that the apex industry body Federation of Hotel and Restaurant Associations of India (FHRAI) has filed complaints against the online travel agents MakeMyTrip-Goibibo and hospitality services provider Oyo to the Competition Commission, alleging them to meddle into unfair business practices.
Responding to this, the Competition Commission has ordered a thorough investigation against these two bodies in the suspected matter and has directed the watchdog to matter and submit a report to the commission within 150 days.
The Allegations on MMT and Oyo
The industry body FHRAI complained the CCI against Oyo and Go-MMT alleging predatory pricing, anti competitive agreements, deep discounting and excessive commissions. The CCI assessed the allegations on the basis of two relevant markets:
- As per Make My Trip-GoIbibo, it is the ‘market for online intermediation services for booking of hotels in India’
- For Oyo, it is the ‘market for franchising services for budget hotels in India’.
In a 26-page order, the fair trade regulator said there exists a prima-facie case for investigation against MMT-Go and OYO for alleged violation of the provisions of Section 3(4) of the Competition Act. This section pertains to anti-competitive agreements.
Further, a prima-facie case for investigation under Section 4 of the Act is made out against MMT-Go, which relates to abuse of dominant position.
FHRAI has also alleged that MMT and Oyo have entered into confidential commercial agreements wherein MMT has agreed to give preferential treatment to Oyo on its platform leading to a denial of market access to Treebo and Fab Hotels. This has created a demand-supply gap on its platform and accordingly fluctuates prices, the Commission said that it finds such issues to be potentially abusive.
What Does MMT and OYO Have to Say?
Both MMT and GoIbibo filed written submissions and have contested the allegations made by FHRAI and described them as contractual disputes. OYO continued by saying that it deals with a limited number of hotels and follows a standardised mode of operation while MMT and Go-Ibibo operate as travel agents which offer listing services.
As they have been following different business models, they cannot be alleged to have entered into any horizontal arrangement. MMT and GoIbibo have also said they are currently charging less than 25% commission to majority of its hotel partners.
With regards to charging commission, Oyo stated that the commission charged by it from hotel partners is commensurate with the economic value of its services and that its net take rate, amount received after costs is approximately 15-20%. Oyo also added that the demand for fixed commission by FHRAI is an attempt to use its bargaining position to ensure hotels do not compete with each other.