CCI slaps ₹223 crore penalty on GO-MMT for abuse of dominance in hotel bookings sector; OYO fined ₹168 crore

The Competition Commission of India (CCI) on Wednesday imposed penalties of ₹223.48 crore and ₹168.88 crore on Goibibo-MakeMyTrip (Go-MMT) and OYO respectively for indulging in anti-competitive conduct in the hotel bookings market [Federation of Hotel & Restaurant Associations of India and Anr v. MakeMyTrip India Pvt Ltd and Ors]..While finding that MMT-Go had indulged in misrepresentation of information on its site, the order passed by Chairperson Ashok Kumar Gupta, and members Sangeeta Verma and Bhagwant Singh Bishnoi stated,"The Commission observes that MMT-Go is a dominant player in the relevant market. Consumers heavily rely on results being shown on MMT-Go’s website and any such misrepresentation of information on MMT-Go’s platform could affect the perspective of the consumer and may dissuade the consumer from searching on alternative channels for the same hotel, under the assumption that the hotel is sold out. This could result in lower number of room bookings of the hotel partner and also reduces the competition among the budget hotels registered on different OTAs, thereby leading to exclusion of such hotels. Moreover, MMT-Go being a dominant platform, the act of misrepresentation is also exploitative in nature as regards such hotels.".It thus issued the following directions to Go-MMT:a. MMT-Go is directed to suitably modify its agreements with hotels/chain hotels, to remove/abandon the price and room availability parity obligations imposed by it on its hotel/chain hotel partners with respect to other OTAs.b. MMT-Go is directed to modify its agreement with hotels/chain hotels, to remove/abandon the exclusivity conditions that exist inter-alia in the form of D minus clause.c. MMT-Go is directed to provide access to its platform on a fair, transparent and non discriminatory basis to the hotels/chain hotels, by formulating the platforms’ listing terms and conditions in an objective manner.d. MMT-Go will notify all its hotel/chain hotel partners, about the aforesaid modifications.e. MMT-Go is directed to provide transparent disclosures on its platform as regards the properties not available on its platform, either on account of termination of the contractual arrangement with any hotel/chain hotel or by virtue of exhaustion of quota allocated to MMT-Go by such hotel/chain hotel..The Commission was acting on information filed by the Federation of Hotel & Restaurant Associations of India (FHRAI) in 2019. Hotel aggregators Treebo and FabHotels were later impleaded as parties. The informants had claimed the following:MMT-Go has imposed price parity in its agreement/contract with hotel partners whereby the hotel partners are not allowed to sell their rooms at any other online travel agency (OTA) or on its own online portal at a price below which it is being offered on MMT-Go’s platform. However, MMT-Go in its own discretion can fluctuate the prices of such hotel rooms MMT-Go has been indulging in predatory pricing by offering the hotel rooms at less than the “average room rate”, which is the industry practice for calculating unit basis cost of rooms. MMT-Go has been offering deep discounts to the customers which has further led to expansion of their network and retention of customers. Due to such conduct, the smaller players in the OTA market are being forced to exit. Chain hotels/hotel aggregators like Treebo and FabHotels have been denied market access because of their removal from the platform of MMT-Go as they did not agree to pay the exorbitant commission brokerage charged by the latter. MMT-Go and OYO have entered into confidential commercial agreements wherein MMT-Go has agreed to give preferential treatment to OYO on its platform, leading to a denial of market access to Treebo and FabHotels..Based on the information, the Commission had asked the Director General (DG) to conduct an investigation into the matter. After its probe, the DG found that the agreement between MMT-Go and OYO resulted in an appreciable adverse effect on competition in terms of the factors provided under Section 19(3) of the Competition Act, 2002. Hence, the DG concluded that the commercial agreement/arrangement between OYO and MMT-Go was in contravention of Section 3(4)(d) read with Section 3(1) of the Act..In its arguments before the Commission, MMT-Go contended that FabHotels and Treebo approached the Commission for their own ulterior motives. It also argued that the DG investigation is devoid of any useful economic analysis and several concepts have been wrongly applied.Further, the company contended that it cannot be considered dominant in the online hotel booking market for the following reasons: the market position of MMT-Go and its competitors does not indicate dominance; barriers to entry are limited and there is potential for competition from other players; and hotels exercise significant countervailing buyer power..The CCI, however, found that MMT-Go was a dominant player in the market for online intermediation services for booking of hotels in India, noting that MMT-Go together held 63% of domestic hotel online market share in 2017. Further, on the entry barriers imposed by the entity, it was noted that the last entry in the market was in 2017 by HappyEasyGo. Thereafter, despite the market size growing manifold, there has not been a new entry, the Commission noted. It went on to state,"The Commission observes that the wide rate parity impositions, whereby the hotel partners are restrained from offering better prices to other OTAs or to offer any better prices on their own websites, are generally perceived as anti-competitive because of their ability to restrict price competition and, thus, making it difficult for an entrant or an existing player to establish a market presence, thereby creating entry/expansion barrier for new/other platforms due to the supplier’s price parity clause with an incumbent platform."Further, it found that the deep discounts, exclusivity condition and parity conditions, in conjunction, creates an ecosystem that reinforces MMT-Go’s dominant position in the relevant market.However, it held that the finding of predatory pricing, as given by the DG, was not substantiated by the data and evidence presented in the investigation report..It was also held that MMT-Go's delisting of FabHotels and Treebo, as well as the budget hotels, had adversely affected competition in the market"More than the harm to a competitor, the Commission is more concerned about the harm to the competitive process. Thus, more than the survival of FabHotels and Treebo, albeit through other means, the Commission cannot be oblivious of the adverse impact which their exclusion from the OTA channel has caused or is likely to cause to the competition in the market and the consequently on the consumers," the order stated.The Commission concluded,"In the facts and circumstances of the case, the Commission finds the conduct of MMT-Go in violation of the provisions of Section 4(2)(a)(i) as well as Section 4(2)(c) read with Section 4(1) of the Act as adumbrated in this order. Further, for the reasons recorded in this order, the arrangement between MMT-Go and OYO has also been found to be in contravention of Section 3(4)(d) read with Section 3(1) of the Act.".The Commission thus imposed a penalty on MMT-Go and OYO amounting to 5% of their respective annual turnovers.Advocates Rukhmini Bobde and Ishan Nagar appeared for FHRAI.Advocates Abir Roy and Vivek Pandey of Sarvada Legal appeared for Treebo.Advocates Karan Singh Chandhiok, Tushar Chawla, Lagna Panda, Vishnu Suresh and Aileen Aditi Sundardas of Chandhiok and Mahajan appeared for FabHotels.Senior Advocate Ramji Srinivasan, and advocates Megha Dugar, Shashank Gautam, Sreemoyee Deb, Rajat Moudgil, Anand Sree and Hitesh Mehra of P&A Law Offices appeared for GO-MMT.Senior Advocate Rajshekhar Rao, and advocates Harman S Sandhu, Rohan Arora, Ravi Gangal, Rakesh Prusti and Urvashi Pathak of Shardul Amarchand Mangaldas & Co. appeared for OYO..[Read Order]