The Competition Commission of India (CCI) has ordered an investigation on a complaint that accused SoftBank backed hospitality company Oyo and online travel agency Go-MMT of destroying competitive pricing in the market by abusing their dominant positions.The Federation of Hotel and Restaurant Associations of India (FHRAI) had filed a complaint with the competition watchdog alleging that...
The Competition Commission of India (CCI) has ordered an investigation on a complaint that accused SoftBank backed hospitality company Oyo and online travel agency Go-MMT of destroying competitive pricing in the market by abusing their dominant positions.
The Federation of Hotel and Restaurant Associations of India (FHRAI) had filed a complaint with the competition watchdog alleging that the companies – Oyo and Go-MMT (GoIbibo and MakeMyTrip which have now merged) had violated the provisions of Competition Act, 2002. The companies have been accused of abusing their dominant positions by charging excessive commissions from hotel partners and providing deep discounts, which led to destruction of competitive pricing in the market.
The CCI Director-General has been ordered to probe into this matter and submit its report within 150 days.
Apparently, MMT and Oyo had entered into confidential commercial agreements with each other wherein the MMT has agreed to give preferential treatment to Oyo on its platform, leading to a denial of market access to Treebo and FabHotels. Both Treebo and FabHotels, along with Oyo, take over existing unbranded budget hotels and standardize the offering across the country.
The CCI order added that in the “online intermediation market for booking of hotels, MakeMyTrip-Goibibo, as a group, held 63% of domestic hotel online market share in 2017, according its own investor presentation”. This has lead to more parameters of the investigation into MakeMyTrip-Goibibo, which is listed on Nasdaq with a market capitalization of $2.3 billion.
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 standardized mode of operation, while MMT and GoIbibo operate as travel agents which offer listing services. According to submissions made by MMT and GoIbibo, since their business models are different, they cannot be alleged to be entering into any horizontal arrangement. MMT and GoIbibo also informed the anti-trust 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 CCI. Oyo said that 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).