SUMMARY
FHRAI had filed a complaint against the online travel agency (OTA) platforms
In a previous judgment, CCI maintained that OYO is not a dominant player
CCI also said that the three companies can't hold dominance collectively
The Competition Commission of India (CCI) will continue to examine the hoteliers’ complaints against three big players in the hospitality sector — MakeMyTrip, Goibibo and OYO — for affecting their businesses, due to predatory practices, high commissions and non-uniform commissions. CCI has directed a government official to carry out a detailed investigation in the matter and submit a report to the commission within 150 days.
MakeMyTrip, which had acquired Goibibo, said, “We are confident of demonstrating compliance with the principles of competition law while providing our partners and consumers the best in class services.”
The hoteliers association Federation of Hotel & Restaurant Associations of India (FHRAI) had also alleged that the three players hold a collective dominance over the hospitality sector, which affects other hoteliers’ business even further.
Following the complaint, the CCI responded that there is no provision for “collective dominance”, therefore OYO, MakeMyTrip and Goibibo cannot be considered to hold a dominant position.
The government’s statutory body also maintained its previous judgement (RKG Hospitalities Pvt. Ltd. vs. Oravel Stays Pvt. Ltd) that OYO does not have any dominance over the hospitality sector, but is a significant player. CCI has also dismissed any predatory pricing and high commissions accusations against the company.
OYO, in a its statement, said, “CCI has dismissed 5 of 6 allegations against OYO by FHRAI.”
CCI also acknowledged that OYO, MakeMyTrip and Goibibo operate in different segments, however, they do maintain a vertical relationship. CCI stated that MakeMyTrip-Goibibo (MMT-Go) are an online travel agency (OTA) platform, where OYO is a hotel chain.
The government body also stated MMT-Go is more like a distribution portal for the hotels. Moreover, it added that booking through online travel agencies is not a substitute to direct booking, travel agents or offline booking services, but they go along with these portals.
Other Things The CCI Made Clear
- MakeMyTrip and Goibibo (MMT-Go) investors’ presentation claims that the companies possess 63% market share in the OTA segment
- As per the expected annual growth rate of MMT-Go, they are expected to grow at a compounded annual growth rate of 39% by the year 2021
- MMT-Go together accounted for less than 11% of the overall travel market in India, and an even smaller segment in the hotel bookings sub section
- The agreement between hotelier and MMT-Go are broad in nature as the hotel partners are obliged to maintain room as well as price parity between the platform and any other sale channel
- Budget hotel chain OYO is in a vertical relationship with MMT, which is essentially a distribution platform for hotels
- Since MMT-Go has been prima facie found to be in a dominant position in the relevant market and they have been in business since the year 2000, such practice by them does not appear to be introductory or aimed at building the network
In its complaint, FHRAI also accused the MMT-Go of charging performance-linked bonus (PLB) as commission, which is the payment of every 10th hotel booked through these online portals.
FHRAI asserted that such commission turns out to be around 22-40%, which is higher than what is charged by other OTAs like booking.com and yatra.com. The MMT-Go have objected to the allegations stating that they currently charge a commission of less than 25% from the majority of its hotel partners.
FHRAI also alleged that the MGT-GO gives preferential treatment to OYO. Moreover, the body also complained that all three parties offer hotel rooms at less than the average rate. The hoteliers had also alleged that the companies do not delist the hotel after they’ve logged out from the listing. Instead, the hotels are shown to be completely booked, which affects their business.
The three players OYO, MakeMyTrip and Goibibo have termed the issues raised by FHRAI as “contractual disputes,” which do not require any intervention by the CCI.
UPDATE: October 30, 2019 | 1:12 PM
The article has been updated to reflect the statement by MakeMyTrip and Goibibo.
