Trouble checks in for Oyo, MakeMyTrip

NEW DELHI: In its order based on the complaint filed by apex industry body Federation of Hotel and Restaurant Associations of India (FHRAI) against Oyo and Go-MMT, the Competition Commmission of India (CCI) has ruled that there exists a prima facie case for investigation against Go-MMT and Oyo. CCI has directed the DG to carry out a detailed investigation in the matter and submit a report to the commission within 150 days. Industry body FHRAI had complained to CCI against Oyo and Go-MMT alleging predatory pricing, anti competitive agreements, deep discounting and excessive commissions. In its complaint, FHRAI had alleged that the companies were in violation of section 3 and 4 of the Competition Act 2002 and have abused their dominant positions as they charge excessive commissions from hotel partners and provide deep discounts which has led to destruction of competitive pricing in the market. “The commission is of the view that there exists a prima facie case for investigation against Go-MMT and Oyo for alleged violations of the provisions of section 3(4) of the Act….The DG is thus directed to carry out a detailed investigation into the matter in terms of section 26 (1) of the Act and submit a report to the commission within 150 days,” CCI stated.With regards to the companies, FHRAI 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 in contravention of section 3 and 4 of the Act. Referring to MMT, FHRAI alleged that the commission charged by the company at times turns out to be around 22-40% (from standalone hotels) which is grossly disproportionate to the commission charged by other OTAs like Booking.com and Yatra.com which charge a standard 15% commission which is in violation of section 4 of the Act. FHRAI also alleged that the companies have been offering hotel rooms at less than the average room rate and that hotel partners once registered with the companies have no option to exit the relationship. With regards to Oyo, FHRAI alleged that it resorts to predatory pricing wherein budget hotels in micro small markets are targetted. Both MMT and GoIbibo filed written submissions and have contested the allegations made by FHRAI and described them as contractual disputes. The further submitted that Oyo 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. Oyo submitted that all the allegations are contractual disputes which do not require any intervention by the commission. 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% (not more than 25% unless large amount of capital expenditure is invested). On the contrary, Oyo alleged 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.In its order, CCI said that the Competition Act currently envisages prohibiting only unilateral abusive conduct by a dominant player and that the Act does not provide for the concept of collective dominance so the companies cannot be considered to be holding a dominant position collectively.“With respect to alleged unilateral abusive conduct of Go-MMT and Oyo, relevant market needs to be delineated before assessing their respective dominance and eventually the abuse of such dominance,” CCI said.

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