New Delhi: The Competition Commission of Indias (CCIs) Wednesday to order Imposing a fine on MakeMyTrip, Goibibo and OYO may only be a knock on the knuckle for the companies, but it also makes booking a hotel a better and cheaper experience for travelers.
The Federation of Hotel & Restaurant Associations of India (FHRAI) and Casa2 Stays Pvt. Ltd. had filed a case in 2019 against the merged entity MakeMyTrip-Goibibo (MMT-Go) and Oravel Stays Private Limited (OYO) for abuse of dominance and agreements that harm competition. Based on the allegations, the CCI has asked its Director General (DG) to investigate the matter. On Wednesday, the competition watchdog issued its ruling based on the DG’s findings.
Overall, the DG found that MMT-Go was indeed the dominant player in the market for online intermediation services for booking hotels in India and that it used this dominant position to force hotels to offer preferential terms. Furthermore, the DG found that a confidential deal between MMT-Go and OYO had driven other competitors from the market, leaving consumers with less choice.
The order from the CCI fined MMT-Go and OYO of 5 percent of their annual turnover, which amounted to Rs 223.48 crore and Rs 168.88 crore respectively. Of domestic tourism is growing strongly and will grow even more in the coming months, such a small fine will probably only serve as a pat on the knuckle.
However, the non-monetary aspects of the order will improve consumers’ booking experiences as they not only get access to more hotels but also at lower prices.
Artificial barriers to entry
The main charge against MMT-Go was that it had imposed terms in its agreements with hotel partners that the hotels could not sell rooms on another Online Travel Aggregator (OTA) or on their own websites at a price lower than they were. offered on MakeMyTrip. However, MMT-Go can fluctuate the prices of the hotel rooms on its platform “at its own discretion”.
“Further, the hotel partners are required to observe room parity, where they cannot refuse to provide rooms on the MMT-Go platform at any given time if the rooms are offered on another OTA,” the order added. Such charges, she added, not only created artificial barriers to market entry, but also drove out existing competitors.
“Competition between OTAs will lower the commission rate for hotels,” the order said. “The DG further noted that MMT-Go demands price parity on the one hand, and on the other they sell rooms at lower prices and win loyalty from the hotel’s original customers. In the long run, such behavior can lead to an erosion of the hotel’s customer base. Rate parity was also found to have the impact of limiting the choices available to customers.”
In this regard, the DG argued that, after the merger from MakeMyTrip and Goibibo in early 2017 and the subsequent dominance of the merged entity, no new player has entered the market.
“In addition, the imposition of rate parity and far-reaching discount practices of MMT-Go was found to affect global players such as Expedia and Booking.com, as evidenced by their declining market shares,” the order added. “Furthermore, such practices did not appear to lead to improvements in the production or distribution of goods or the provision of services… In view of the above, the DG found the tariff parity and room parity clause to be contrary to Article 4(2)(a)(i ) read with Article 4(1) of the Act.”
Section 4 of the Competition Act 2002 deals with abuse of a dominant position by companies.
Notably, the CCI has instructed MMT-Go to modify its agreements with hotels appropriately to remove the various restrictions it had put in place, meaning consumers can now find cheaper rooms from the same hotels as they would on other platforms. would watch.
MMT-Go & OYO Agreement Anticompetitive
It was also alleged that MMT-Go and OYO entered into a confidential agreement that resulted in OYO’s competitors being removed from the MMT-Go platform. While details of the agreement were removed from the CCI’s order, the order made it clear that “neither MMT-Go nor OYO denied the existence of the commercial agreement to the DG”.
The DG noted that, following the deal, OYO’s competitors, FabHotels and Treebo, were removed from the MMT-Go platform. The deletion deprived competitors of a large enough platform for consumers to view their services, and thus they could no longer compete with OYO. Thus, the DG noted that both FabHotels and Treebo were driven out of the budget hotel franchise business due to their delisting from the MMT-Go platform.
“For example, the commercial agreement/agreement between MMT-Go and OYO restricted access to the MMT-Go portals, preventing OYO’s competitors FabHotels and Treebo from competing effectively with OYO,” the CCI injunction said. “Therefore, the said agreement resulted in a foreclosure of competition by impeding access to the market.”
The CCI also noted that this agreement between OYO and MMT-Go also directly affects consumers, as it limits their inventory choice to only what OYO can provide. If such an agreement had not been reached, the order stated, FabHotels and Treebo could have listed their properties on MMT-Go and offered consumers a wider choice
“In addition, MMT-Go’s involvement with other market players would improve their ability to compete with OYO on a level playing field and the competition between these market players to get more consumer attention would also have led to a better quality of service and better prices,” the order stated.
In other words, the deal between MMT-Go and OYO not only meant consumers had less choice in rooms, but they could have gotten them cheaper.
The CCI instructed MMT-Go to provide access to its platform “on a fair, transparent and non-discriminatory basis” by formulating the terms and conditions for the offer in an objective manner, meaning MMT-Go’s competitors OYO, such as FabHotels and Treebo more fair.
This also benefits consumers as they are now likely to have a wider choice of hotels and rooms.
Wrong representation on the platform
Yet another allegation against MMT-Go was that the platform showed certain hotels and properties as “sold out”, when those properties may have only been taken off MMT and may have rooms available on other platforms.
“The Commission noted that MMT-Go is a dominant player in the relevant market and that consumers rely heavily on the results displayed on MMT-Go’s website,” the order said. “Such misrepresentation of information on MMT-Go’s platform can affect the consumer’s perspective and dissuade consumers from searching for the same hotel on alternative channels, assuming the hotel is sold out.”
This, CCI said, could lead to the hotels seeing fewer room bookings and also weaken the competitiveness of the budget hotels registered with various OTAs, not to mention that such misrepresentation exploits such hotels.
To address this behavior, the CCI has instructed MMT-Go to provide transparent information on its platform about the properties that are not available on its platform, either due to the termination of the contractual agreement with a hotel or hotel chain, or due to the exhaustion of the quota allocated to MMT-Go by such hotels.
What this means is that MMT-Go now needs to be candid about rooms that are not available on its platform, which should encourage users to search for those same rooms on other platforms.
MMT-Go and OYO must deposit their respective fines within 60 days of receipt of the order and MMT-Go must also provide a compliance report to the CCI within that time.
(Edited by Anumeha Saxena)