Relevant markets for OYO, MMT

The CCI is now investigating five major allegations against MMT, India’s largest OTA:

Price parity—disallowing hotels from listing rooms below the price they sell it to OTAs.
Exorbitant commissions—OTAs allegedly have take rates as high as 40%.
Predatory pricing—Pricing rooms below the average room rate through deep discounting.
Service fees—Charged in the name of hotels but kept by MMT

The last, and most damning, charge, however, is the denial of market access to all players by MMT due to an exclusive agreement with OYO. Ken has written about OYO and MMT’s agreement in the past. A senior hospitality industry source, who has connections both in MMT and Treebo, says that there was indeed such an arrangement.

What was the instance?

Aditya Ghosh, OYO’s Southeast Asia CEO, said in a CNBC-TV18 interview that the company was not in any exclusive arrangement with MMT. An MMT spokesperson told The Ken that it was “confident of demonstrating compliance with principles of competition law and shall extend full cooperation to the Competition Commission of India.” In its statement, OYO, too said it would cooperate with the CCI’s probe while reiterating that the CCI had dismissed FHRAI’s allegations against OYO on price parity, predatory pricing, charging of commissions, misrepresentation of information & hotel service fee levies.

Regardless, this last charge is what the CCI has used to open its probe into the OTA and the hotel aggregator. In its preliminary assessment, the antitrust watchdog stated that “any restrictive agreement which may lead to refusal to deal with some players or exclusive arrangement with some players, may potentially have an adverse effect on competition.”

“In relation to OYO, this case is a rare instance of CCI directing an investigation in relation to an anticompetitive vertical agreement. Based on search results on the MMT-Goibibo platform and media reports, the CCI’s concern is whether the arrangement between OYO and MMT-Go entails preferential treatment to OYO and denial of market access to its closest competitors,” says Nisha Kaur Uberoi of Trilegal, a Delhi-based law firm. Kaur is the national head of Trilegal’s competition law division.

No to price parity

A senior competition lawyer who has dealt with technology companies in the past said that price parity restrictions will most likely be done away with. In Germany, Booking.com was prohibited by the antitrust regulator from applying narrow price parity on its platform.

Usually, to determine dominance in competition cases, one must first decide the relevant market that a particular company or entity operates in. In the past, while CCI has taken a broader view of the market in such cases, it has narrowed this down to just the online market here.

CCI’s comments in this regard are worth noting:

“In view of the increased popularity and use of OTAs by a large segment of consumers in India, hotel operators now perceive them as a distinct mode of distribution which cannot be simply replaced or substituted by other offline modes or direct sale without losing out significantly on consumer reach.’

To put this in perspective, MMT-Goibibo’s gross bookings stood at $5.4 billion for the year ended March 2019, a 28% increase over the previous year. “This case marks a shift in CCI’s jurisprudence to consider OTAs a separate and distinct distribution market, which cannot be substituted by offline modes or direct sales,” says Uberoi

This is a departure from CCI’s 2017 merger control approval in relation to Goibibo and MMT, where it considered (offline) travel agencies, direct suppliers, and online travel agents to be alternate channels of distribution in the travel services market,” Uberoi adds. Other competition lawyers echo this statement, agreeing that the way CCI has defined the relevant market for Goibibo-MMT is what makes this order unique.

With rapt attention

At a recent CCI workshop on e-commerce, Chairman Ashok Gupta along with members Sangeeta Verma and Bhagwant Singh Bishnoi were present for the entire day during the workshop, listening keenly to each and every panel. Experts say this shows CCI’s willingness to understand the sector
Fighting platform power

The dominance OTAs are being accused of is borne out by the experiences of multiple hoteliers The Ken spoke to. According to one West Delhi hotelier, OTAs have become so powerful that it’s difficult for independent hotels like him to fight them.