After the Federation of Hotel and Restaurant Associations of India (FHRAI) filed a complaint with the Competition Commission of India (CCI) against Oyo and Go-MMT, CCI has ruled that there exists a prima facie case for investigation against MMT-Go and OYO for alleged violation of provisions of Section 3(4) of the Competition Act 2002.
In its order, CCI has directed the Director General (DG) to carry out a detailed investigation into the matter and submit a report to CCI within 150 days.
In August, FHRAI filed a complaint against OYO and Go-MMT (Go Ibibo and MakeMyTrip) that they indulged in predatory pricing, charging of exorbitant commissions and entered anti-competitive agreements, by which they violated section 3 and 4 of the Competition Act.
Section 3 of the Act states that no enterprise or association of enterprises shall enter into any agreement, which causes or is likely to cause an appreciable adverse effect on competition within India. It also states that no agreement entered into between enterprises or associations should determine sale prices, limit provision of services, result in collusive bidding, thus having an adverse effect on competition.
FHRAI, in its complaint, had alleged that MMT and OYO entered into a confidential commercial agreement to give OYO preferential treatment and denying market access to Treebo and Fab hotels, which violates section 3 and 4 of the Act.
In response to this, CCI observed that MMT holds a dominant position in what it calls the ‘market for intermediation services for booking of hotels in India’. And that the effect of the commercial agreement between OYO and MMT on competition merits investigation.
“Thus, whether the commercial agreement between OYO and MMT entails preferential treatment to OYO and consequent exclusion of Treebo, Fab hotel and any other hotel chain and if so, the effect of the same on competition merits investigation,” the order read.
FHRAI also alleged that MMT-Go has imposed a term in the contract with hotels that they cannot sell its room on any other platform or on its own online portal at a price below which it is being offered on MMT-Go’s platforms.
Based on this, CCI has observed that such a practice could lead to consumers paying higher prices and could also prevent entry of new low-cost platforms. It directed that such a parity restriction needs to be investigated to gauge its impact under Section 3(4) and Section 4 of the Act.
However, the CCI also ruled that it found no evidence of OYO being a dominant player.
“Based on the information provided by the Informant in Case No. 03 of 2019 (supra) and information available in public domain, the Commission was of the view that though OYO ‘is a significant player in the relevant market, presently it cannot be unambiguously concluded that it holds a dominant position in the relevant market’. As stated earlier, the market dynamics does not seem to have changed since the passing of that order to warrant a different outcome in the present case. Accordingly, prima facie OYO is not found to hold a dominant position, despite being a significant player in the ‘market for franchising services for budget hotels in India’,” the order read.
Here, CCI refers to a complaint filed by New Delhi-based RKG Hospitalities Pvt Ltd, which alleged that the agreement between it and OYO contained clauses which were unfair and discriminatory and OYO was able to impose because of its dominant position.
In July, CCI dismissed these allegations saying it cannot be ‘unambiguously concluded’ that the company is in a dominant position.
Responding to the CCI order, an OYO spokesperson said, ‘We are a fully compliant organization and have utmost faith in our administrative and judicial processes. We will continue to cooperate with Hon’ble CCI’s investigation process as we review the complete order. We will actively engage with the Hon’ble Commission in this process. We are also thankful for the Hon’ble CCI’s recognition of the fact that OYO is a hotel chain and for dismissing certain prima facie allegations regarding price parity, predatory pricing, exorbitant commissions, etc. Given that the matter is sub-judice, we have nothing more to share at the moment.’