Competition Regulator Orders Probe Against Oyo, MakeMyTrip And Ibibo

MakeMyTrip India, Ibibo Group and Oravel Stays, part of the Oyo group, face an investigation by the competition regulator for alleged misuse of dominance and cartelisation.

The Competition Commission of India ordered a probe on a complaint by the Federation of Hotel & Restaurant Association of India. The CCI directed its investigation arm to submit its report within 150 days.

The hospitality industry lobby has alleged that MakeMyTrip’s merger with GoIbibo gave it dominance. And the website prevented hotels from selling below its price or on any other portal, it said, alleging that MakeMyTrip and Oyo has struck confidential agreements.

“Online portals charge excessive commission from hotels and provide deep discounts to consumers,” the federation alleged. “This has led to destruction of competitive pricing in the market.”

The travel portals, however, denied allegations of cartelisation.

While the regulator rejected the allegation of collective abuse of dominance, it found a prima facie case for a probe. The pact between MakeMyTrip and hotels needs investigation given the portal’s dominant market share, the CCI said. And an agreement between MakeMyTrip-Go and Oyo and exclusion of Treebo, Fab Hotel also needs to be investigated, it said.

Here’s a snapshot of allegation, travel portals’ defence and the regulator’s reasoning for a probe:

Allegations Against MakeMyTrip-Go And OYO

In its complaint, the hotel federation had alleged:

• MakeMyTrip’s merger with GoIbibo has led to their dominance in the market of online travel agency. Equally, OYO’s 67 percent market share in certain category of hotel rooms in India has secured it a dominant position. This has enabled MakeMyTrip-Go and Oyo to operate independently from the prevailing competition.
• Online portals charge excessive commission from hotels and provide deep discounts to consumers. This has led to destruction of competitive pricing in the market. MakeMyTrip charges a commission ranging between 22-40 percent from standalone hotels compared to other similar portals which charge around 15 percent.
• MakeMyTrip has put price parity clauses in its agreement with hotels. This restricts partner hotels from selling rooms on any other portal or their own at a price which is below MakeMyTrip’s price. This while MakeMyTrip retains the power to fluctuate prices at will.
• Online portals have engaged in predatory pricing by offering rooms at a price lesser than the industry practice of charging the ‘average room rate’. Further, the discounts offered by MakeMyTrip, along with its acquisition of other online travel agencies, has resulted in elimination of competition.
• OYO, too, indulges in predatory pricing by offering rooms at 30 percent discount compared to prevailing rates in the micro-markets category. This ensures higher occupancy of OYO hotels, but hotels that are not part of the OYO-network are unable to withstand such anti-competitive practices.
• Hotel chains like Treebo and Fab Hotels were denied market access by MakeMyTrip because of their unwillingness to pay exorbitant fees to the online portal. Also, MakeMyTrip and OYO have entered into confidential commercial agreements wherein MakeMyTrip has agreed to give preferential treatment to OYO on its platform, further leading to a denial of market access to Treebo and Fab Hotels.
• Hotel partners, who are once registered with MakeMyTrip-Go and OYO, have no option to exit the relationship. Even when a hotel makes a request to be removed from their platform, the hotel, instead of being removed from the platform, is shown as “no rooms available” or “sold out”, which severely affects the business of the hotels.

Online Portal’s Defence

The online portals made following submissions in their defense:

• Disputes with hotel partners are contractual in nature.
• OYO contended that it operates with a limited number of rooms. Further, it’s not a travel agency but a provider of hospitality services and hence directly competed with hotels. The commission charged by it from hotels is commensurate with the value of services.
• There cannot be any cartel, as MakeMyTrip-Go and OYO operate at different levels in the market and are not competitors, OYO said.
• In the relevant market of travel and travel related services, its market share is miniscule, MakeMyTrip-Go contended. Further, the allegations on amount of commission are false since MakeMyTrip-Go charges less than 25 percent from majority of its hotel partners
• Discount given to customer has no bearing on the amount paid to hotel, MakeMyTrip-Go said.
• It did not intend to remove hotels and eliminate competition. There is no cartelisation

CCI’s Primary Findings

The CCI has ordered further investigation based on the following grounds and primary findings:

• The federation has alleged abuse of dominance by MakeMyTrip-Go and OYO collectively as well as individually. But competition law only envisages unilateral abusive conduct by a dominant player. And so, the regulator rejected the federation’s submission of collective abuse of dominance.
• For OYO, the CCI delineated ‘market for franchising services for budget hotels’ as the relevant market. For MakeMyTrip-Go, the regulator concluded it to be ‘market for online intermediation services for booking of hotels’.
• With a 63 percent market share, MakeMyTrip-Go is prima facie dominant in the domestic online hotel booking market. But OYO is a significant and not a dominant player in the relevant market, the CCI said.
• The effect of Across Platform Parity Agreement entered into by MakeMyTrip with hotels needs further investigation in light of the online portal’s dominant market share.
• Existence of any commercial agreement between MakeMyTrip-Go and OYO, and consequent exclusion of Treebo, Fab Hotel needs to be investigated.