CCI Slaps INR 392 Cr Fine On MakeMyTrip-Goibibo, OYO For Unfair Business Practices

The Competition Commission of India (CCI) has slapped a total fine of INR 392 Cr on online travel aggregators (OTAs) MakeMyTrip (MMT), Goibibo, and OYO for their alleged unfair business practices.

“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,” the CCI said in an order.

While a fine of INR 223.48 Cr was slapped on Make My Trip-Goibibo (both companies completed their merger in 2017, but operate individually), the competition watchdog imposed a fine of INR 168.88 Cr on OYO. 

In its 131-page order, the CCI said that the consolidated entity of MMT-Goibibo imposed price parity on hotel partners. Price parity clauses bar hotels from offering their rooms at lower prices or on better terms on their own websites or on other platforms. 

Apart from the fine, the competition watchdog directed MMT-Goibibo to ‘suitably modify’ its agreements with partner hotels. It also directed the OTA to remove all allied price parity obligations on hotels with respect to other aggregators. 

Additionally, the Gurugram-based travel aggregator was also directed to nullify all  exclusivity-based contracts with its partner hotels. 

The CCI ruling also noted that MMT accorded preferential treatment to OYO on its platform, causing denial of market access to other players. 

The findings were part of a nearly three-year long detailed investigation into the matter, which  was launched in 2019.

Reacting to the development, an OYO spokesperson said, “We have received a copy of the CCI order and are reviewing it in detail. Most OYO customers book directly through our app, website and other channels in India. We continue to work with all OTAs as distribution partners. OYO believes that our business practices and conduct comply with all applicable laws and will take all necessary steps to explain our position in the appropriate forums.”

Inc42 has also reached out to MakeMyTrip for a comment. This story will be updated on receiving a response from the company.

FHRAI executive committee member,  Pradeep Shetty, told Inc42, “…This is by far one of the biggest wins for the hospitality industry against the dominance of the aggregators. We also see this as a major verdict that will go a long way in disciplining the OTAs and saving the Industry. The actions of Go-MMT and Oyo have individually as well as collectively caused immense damage to hotels across all segments….Oyo especially is responsible for the systemic depredation of the budget segment hotel business and its market as a means to achieve a notional billion-dollar valuation….We hope that this will also serve as an eye opener for investors and the regulatory bodies about Oyo which is proposed to go public.”

The Fine Print

OYO was fined for its ‘anti-competitive arrangement’ with MMT-Go under which the OTA delisted the hospitality major’s competitors from its two online portals in 2018. The CCI was essentially referring to the major fiasco involving Treebo and FabHotels wherein MMT had delisted the two hotel chains.

An in-depth assessment by the CCI found that deep discounts, coupled with parity conditions offered by the consolidated entity, reinforced MMT-Go’s dominant position in the relevant market. The CCI concluded that:

• Firstly, the discounts and parity conditions helped MMT-Go in retaining and further increasing its network of users and travelers, who would increasingly use the platform for availing the best deals.
• Secondly, it impeded the competitive process between OTAs by limiting the competitive instruments at the disposal of other portals who, for instance, could not get better prices from hotels by offering lower commission rates.
• Thirdly, the consequent adverse effect on sale of rooms through other platforms and their user bases, further accentuated the dependence of hotels on MMT-Go as well as the bargaining power imbalance that already existed between MMT-Go and its hotel partners.
• Fourthly, the increased sales through MMT-Go could lead to unilaterally determined higher commissions charged by it, giving it the ability to also pass on discounts which were admittedly funded through these commissions and could adversely impact the prices at which the hotels rooms were being offered to end-consumers.

The CCI concluded that the conduct of MMT-Go was in contravention of multiple sections of the Competition Act.

On the matter involving delisting of Treebo and FabHotels by MMT-Go, the competition watchdog ruled that there indeed was an understanding between OYO and MMT-Go which adversely affected competition in the market by denial of access to other players.

MMT Under Lens

In October 2019, the competition watchdog issued a prima-facie order to launch a probe into MakeMyTrip, Goibibo and hospitality giant OYO. 

The directives were issued on a plea filed by industry body Federation of Hotel & Restaurant Associations of India (FHRAI). The petition alleged that the trio had abused their market dominance in the travel space by entering into anti-competitive agreements with hotel partners.

At the core of the matter were key issues including allegations of excessive commission charged by OTA players and deep discounts employed by these startups. Besides, there were also allegations of imposition of room parity clauses in the respective OTAs’ contracts. 

This also came amidst a flurry of delisting orders issued by MMT-Go against hotel chains – Treebo and FabHotels. While the CCI initially sided with the hotel chains, the OTA was eventually able to get a court stay on the CCI order. Eventually, the two chains were listed on the platform amidst heightening legal tussle. 

The OTA space in India is largely crowded by homegrown startups, including MakeMyTrip, Yatra, Cleartrip and EaseMyTrip. 

These players compete for the highly competitive Indian travel and tourism segment, which has seen a major spurt amidst waning Covid restrictions. According to a report, the sector in the country is expected to cross $125 Bn in revenue by 2026-27.