NCLAT Stays CCI’s INR 169 Cr Penalty On OYO

The National Company Law Appellate Tribunal (NCLAT) on Tuesday (November 22) effectively stayed the INR 168.88 Cr penalty imposed by the Competition Commission of India (CCI) on hospitality major OYO.

While taking up OYO’s interim application for immediate stay on the penalty, the NCLAT also directed the hospitality major to pay 10% of the penalty as deposit before it hears the appeal.

“The appeal is admitted subject to deposit of 10% of the penalty amount which must be deposited within a period of six weeks. Deposit should be in the form of FDR in favour of (the) Registrar, NCLAT,” an order issued by the Tribunal said. 

The order was passed by an NCLAT bench comprising Justice Rakesh Kumar, Member (Judicial) and Ashok Kumar Mishra, Member (Technical). The bench also listed the matter next for hearing on April 11, 2023. 

OYO refused to comment on the story, saying the matter is subjudice.

On the other hand, the Federation of Hotel & Restaurant Associations of India (FHRAI) hailed the decision and called the move a ‘yet another positive step’.

“The latest development of Hon’ble NCLAT ordering OYO to deposit 10% of the total fine of INR 168 Cr imposed by the CCI is yet another positive step in the interest of the hospitality sector in the country. As a result, OYO is now required to pay close to INR 17 Cr as the initial monetary fine to ensure hearing of their appeal in the Hon’ble NCLAT,” said FHRAI secretary general Jaison Chacko. 

“FHRAI will continue to pursue the matter further for the benefit of thousands of small and budget hotels in the country and to discipline the OTAs in the new digital era so as to ensure a fair market, healthy competition and a level playing field for all stakeholders,” he added.

This comes nearly a week after OYO, on November 15, filed an appeal before the NCLAT against the October 19 order of the CCI that imposed a penalty of INR 168.88 Cr on OYO for anti-competitive practices.

The penalty was part of a nearly three-year long detailed investigation into the matter, launched way back in 2019.

The Case

The crackdown on OYO came as part of the CCI’s overarching crackdown on online travel aggregators MakeMyTrip and Goibibo as well as OYO for unfair business practices.

Besides the penalty on OYO, a separate penalty of INR 223.48 Cr was also imposed on MMT-Goibibo.

At the centre of the drama was the contention that the consolidated entity of MMT-Goibibo imposed price parity on hotel partners which barred partner hotels from offering their rooms at lower prices on their own websites or on other platforms.

The CCI ruling also noted that MMT-Goibibo allowed preferential treatment to OYO, thereby causing denial of market access to other players. Citing the ‘anti-competitive arrangement’, the competition watchdog also stated that the OTA had delisted OYO’s two competitors -Treebo and FabHotels – from its two online portals in 2018. 

The CCI order was passed on a plea filed by FHRAI. Since then, the industry body has launched a multi-pronged tactic to corner the hospitality giant. Last week, FHRAI wrote to the Securities and Exchange Board of India (SEBI) to halt OYO’s initial public offering (IPO) on the grounds of the recently imposed CCI penalty. 

OYO also continues to be bogged down by its performance. While the IPO-bound hospitality giant reported an EBITDA-positive first quarter during the current financial year (Q1 FY23), it reported a loss of INR 1,939.8 Cr in FY22.

The startup has also been in the line of fire owing to SoftBank’s markdown of the valuation of its stake in OYO by nearly 30%. 

Amidst the current market volatility, the hospitality major has also deferred its IPO. However, it is pertinent to note that the startup is not the only one that has delayed plans to go public. New-age tech startups such as MobiKwik, boAt, Snapdeal and Droom have also deferred their IPOs.