AN INSIGHT INTO THE CCI’S ORDER AGAINST ONLINE TRAVEL AGENTS- A SIGNIFICANT CASE OF MAKEMYTRIP AND OYO PROBE

Senguttuvan K- Partner

Kshithija Prakashan- Associate

I. INTRODUCTION

A very significant and landmark case of online travel agents with MakeMyTrip and Oyo, as the prime parties of having contravened various provisions of the Competition Act, 2002, with their involvement against each other with respect to entering into a commercial vertical agreement, thereby causing an Appreciable Adverse Effect on Competition (AAEC). On October 28, 2019, the Competition Commission of India (CCI) issued a prima facie order to conduct detailed investigation against the online travel agents (‘OTA’s’)- MakeMyTrip India Pvt. Ltd. (‘MMT’) and Ibibo Group Private Limited (‘Ibibo’), and the hospitality service provider, Oravel Stays Private Limited (‘Oyo’), hereinafter collectively referred to as the ‘Opposite Parties.’, on a complaint filed by Rubtub Solutions Pvt. Ltd., (‘Treebo’) and Casa2 Stays Pvt. Ltd., (‘FabHotels’), hereinafter collectively referred to as the ‘Informants’ which operates under the brand name of ‘Treebo’ Hotels in India and is in the business of providing franchising services to budget hotels. The Informants have filed an application of complaint dated 23.11.2020 and 04.11.2020 respectively, for grant of interim relief under Section 33 of the Competition Act, 2002, praying for an order from the Commission directing MakeMyTrip and Ibibo, hereinafter collectively referred to as ‘MMT-Go,’ to relist properties of the Applicants on all of their portals.

[1]The Federation of Hotel and Restaurant Associations of India (‘FHRAI’) had alleged various practices of MMT-Go and OYO, to be contrary to the provisions of the Act. It was alleged the Opposite Parties cartelized by entering into anti-competitive agreements, as well as abused their respective dominant positions. Further, it was also alleged that they were charging excessive commission and providing deep discounts. MMT was alleged to have imposed “Price Parity Restriction” and “Exclusivity Condition”, in their agreements with the Informants. An allegation against the Opposite Parties for having been entered into with each other, a confidential vertical agreement, wherein MMT have agreed to give preferential treatment to OYO on its platform, leading to a denial of market access to Treebo and FabHoteld, in contravention of Section 3(4) as well as Section 4 of the Act. Pursuant to this allegation and consequently, a complaint been filed, the CCI has directed a probe against these Online Travel Agents-MMT-Go and OYO.

II. SUMMARY OF THE ALLEGATIONS

  1. FabHotels

At the outset, FabHotels has alleged that the conduct of MMT-Go in delisting its hotel partners from their portals has had significant adverse effect on FabHotel’s growth. As for an order under Section 33 of the Act, there are essentially three requirements that must be in compliance with the Hon’ble Supreme Court’s judgment in Competition Commission of India vs. Steel Authority of India,[2](hereinafter referred as ‘SAIL’ Judgment). (i) existence of a prima facie case; (ii) balance of convenience in favour of the claimant; (iii) that irreparable damage would be caused to the claimant if the interim relief is not provided. FabHotels has alleged that MMT-Go is a dominant entity and has abused its dominance/ market power to (i) discriminate between similarly placed players in the market for franchising budget hotels in India; (ii) deny market access to FabHotels and cause market foreclosure; and (iii) enter into arrangements with OYO that contravenes Section 3(4) of the Act. This particular arrangement with OYO, has resulted in widening the gap between its projected revenue growth and actual revenue growth. It was also submitted by FabHotels that access to MMT-Go’s portals is very essential and necessary for survival and sustenance and that listing on MMT-Go Portals will allow FabHotels to cater to the large online B2C hotel booking market. With regards to the second requirement, t was submitted by FabHotels that the balance of convenience lies in its favour as listing of its properties on MMT-Go Portals would not prejudice the rights or interests of MMT-Go in any manner. And finally, with regards to third requirement of having caused an irreparable harm and adverse effect on competition, FabHotels has alleged that they have suffered significant loss of revenue on account of delisting from MMT-Go Portals and that they, would not be in a position to raise funds for running operations in the market, if re-listing has not been done.

It was further alleged that if prominent players like FabHotels are ousted from the market, this would essentially increase market concentration in the market for franchising budget hotels in India and the market would end up with only one market participant, i.e., OYO.

  1. Treebo

It was vehemently alleged that MMT-Go and OYO had entered into with each other, a confidential vertical agreement on 21.02.2018, which involved a clause that required MMT-Go to delist all Treebo properties, whether branded or otherwise on MMT-Go platforms, thus making out an ex facie case of denial of market access by a dominant Online Travel Agent (OTA) platform. With regards to the first requirement as per the SAIL Judgement, it is very much evident that a prima facie case has been made out, by a mere notice of not having Treebo and FabHotels properties being listed on the MMT-Go platform, which very much implies as a consequence of the agreement between OYO and MMT-Go, contravening the provision of Section 3(4) of the Act. The Balance of Convenience also lies in its favour and that it has been greatly affected both in terms of revenue and reputation because of the delisting, thereby causing an irreparable harm to Treebo.

  1. MMT-Go

On the allegations put forth against MMT-Go by FabHotels and Treebo, it was submitted that MMT-Go had entered into a partnership with OYO for benefitting the consumers through the availability of competitively priced, larger selection of rooms as well as the hotels which were associated with OYO through access to the MMT-Go platforms. MMT-Go submitted that the Agreement with OYO did not cause an AAEC in India, neither had it created entry barriers for new players nor it weakened the performance of Treebo and FabHotels. On the request of Treebo’s and FabHotels’ for grant of interim relief to the Commission, it was submitted by MMT-Go that it would cause irreparable injury to MMT-Go, as it would lead to suspension of MMT’s commercial and contractual freedom. Further, it was also submitted that Treebo and FabHotels have primarily suffered because of Covid-19 and not because of delisting per se.

Further to this, MMT-Go also submitted that the growth of Treebo and OYO is neither dependent nor connected with listings on the Online Travel Agent’s (OTA’s), as between October 2015 and February 2018 when OYO was not listed on MMT-Go, it witnessed phenomenal growth in terms of its revenues, valuation and room inventories. This was adduced with the MMT-Go’s findings that Treebo’s 60-70% bookings are secured through direct channel and through corporate tie-ups and while delisting Treebo from MMT-Go in April 2017, Treebo’s founder had also admitted that MMT-Go was neither a significant nor an economically viable distribution channel for them.

III. OBSERVATION AND ANALYSIS OF THE COMMISSION’S ORDER

The Commission observed that FabHotels and Treebo are not present on MMT-Go platform, while they earlier used to be. It was further opined that “if this is a consequence of an agreement between OYO and MMT, which is also reported by media, to not list the closest competitors of OYO on the platform, it may potentially contravene the provisions of Section 3(4) of the Act.” This is now an admitted position that MMT-Go delisted FabHotels and Treebo from its online portals in June and April 2018 respectively, pursuant to its Agreement with OYO. Such agreement allegedly conditioned delisting of these players from MMT-Go portals, for them being competitors of OYO during that relevant time.

The Commission was of the view that the first element envisaged under the SAIL Judgement, that a strong prima facie case that an act in contravention of the stated provisions has been committed and continuous to be committed is being met. The Commission observes that the second requirement being the ‘Balance of Convenience’ is also met, as the Commission is convinced from the contentions made by Treebo and FabHotels that the balance of convenience lies in its favor and that as such MMT-Go will not be put to much inconvenience even if they have to provide access to these players on its online portals. And finally, the third requirement of having caused an irreparable harm or injury, on account of delisting its properties on MMT-Go, seems also to have been met and satisfied.

The Commission was thus, convinced that the conduct of MMT-Go in delisting and continuing to delist franchisee service providers, specifically FabHotels and Treebo, as well as the budget hotels which were availing some logistic support from them, has affected competition in the market by denying access to an important channel of distribution through foreclosure. It was also noted that FabHotels and Treebo have primarily prayed for a relisting on the MMT-Go portals for attaining visibility. Accordingly, MMT-Go is directed to allow FabHotels and Treebo to be listed on its online portals.

[1] http://cci.gov.in/sites/default/files/Interim_Order_14-of-2019and01-of-2020.pdf

[2] (2010) 10 SCC 744

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