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Prima facie case for investigation against Oyo, Go-MMT: CCI

FHRAI had alleged that the cos have abused their positions, charging excessive commissions from partners.

, ET Bureau|
Updated: Oct 30, 2019, 09.44 AM IST
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oyohotel
With regards to Oyo, FHRAI alleged that it resorts to predatory pricing wherein budget hotels in micro small markets are targetted.
NEW DELHI: The Competition Commission of India (CCI) has ordered an investigation on a complaint that accused hospitality company Oyo and online travel agency Go-MMT of destroying competitive pricing in the market by abusing their dominant positions.

Acting on the complaint filed by industry body Federation of Hotel and Restaurant Associations of India (FHRAI), the competition watchdog in its order on Monday said there was a prima facie case for investigation against Oyo and Go-MMT (GoIbibo and MakeMyTrip, which have now merged). It ordered the CCI director-general to probe this and submit its report within 150 days.

In its complaint, FHRAI alleged that the companies had violated provisions of the Competition Act 2002, as they abused their dominant positions by charging excessive commissions from hotel partners and providing deep discounts, which led to destruction of competitive pricing in the market.

It also alleged that MMT and Oyo had entered into confidential commercial agreements with each other wherein the online travel agency agreed to give preferential treatment to Oyo on its platform, leading to a denial of market access to Treebo and FabHotels.

The CCI said if FabHotels and Treebo were excluded following an agreement between Oyo and MMT to not list the closest competitors of Oyo on the platform, then it might potentially contravene the provisions of the Act.

A spokesperson for MakeMyTrip said the company would cooperate with the CCI and demonstrate that the allegations were unfounded.

Oyo said the CCI dismissed five of the six allegations made against it by FHRAI on price parity, predatory pricing and charging of commissions. “We will actively engage with the commission in this process. We will continue to cooperate with CCI’s investigation process as we review the complete order,” an Oyo spokesperson said.

“I think the CCI has seen merit in our complaint which is why they have accepted it,” FHRAI vice-president Gurbaxish Singh Kohli said. “The director-general will do the preliminary inquiry now. At the time of the inquiry, if they need any clarifications, we will be glad to provide them as we have a lot of information to back our complaints.”

FabHotels founder Vaibhav Aggarwal said his company remained hopeful that things will soon become ideal.

“We have been working day and night to build the FabHotels brand, for our hotel partners and for Indian budget travellers. We could never understand the reasoning of such a move by GoMMT in an open market environment,” he added.

Referring to MMT, FHRAI alleged that the commissions charged by the company at times were 22-40% (from standalone hotels), which was grossly disproportionate to the commission levied by others like Booking.com and Yatra.com. FHRAI also alleged that the companies artificially created a demand-supply gap by resorting to tactics like fake bookings, besides offering hotel rooms at less-than-average room rates. Hotel partners once registered with the companies have no option to exit the relationship, FHRAI alleged and with regards to Oyo, the association said the company resorted to predatory pricing wherein budget hotels in micro and small markets were targeted.

MMT, GoIbibo and Oyo, in their submissions to the CCI, had contested the allegations. According to MMT and GoIbibo, Oyo deals with a limited number of hotels and follows a standardised mode of operation, while MMT and GoIbibo operate as travel agents which offer listing services. As they have been following different business models, they cannot be alleged to be entering into any horizontal arrangement, MMT and GoIbibo had stated in submissions filed separately. MMT and GoIbibo also told the antitrust body that they were currently charging less than 25% commission to a majority of their hotel partners.

Oyo submitted that all the allegations were contractual disputes which did not require any intervention by the commission. Oyo said the commission charged by it was commensurate with the economic value of its services and that its net take rate — amount received after costs — was about 15-20% (except in cases where it might have made capital expenditure in hotels).

In its order, the CCI said the Competition Act currently prohibited only unilateral abusive conduct by a dominant player and did not provide for the concept of collective dominance, so the companies could not 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,” the watchdog said.

Pradeep Shetty, joint honorary secretary at FHRAI, said it is a landmark order whereby the CCI has recognised the existence of anti competition practices in e-commerce.

"FHRAI stands firmly with the Indian hotel and restaurant industry and will continue to ensure that the fraternity is certainly not bullied or pressured into submission by its vendors and service providers ....Mere digitization doesn't give any supporting vendor the right to pretend or claim to become that industry, decide and drive it to the ground the way they please for their own selfish and narrow gain," he said.

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