OYO and MakeMyTrip’s Clash with CCI
Last week, both entities, MakeMyTrip Pvt. Ltd. and Oravel Stays Pvt. Ltd. (OYO) were fined two hundred and twenty-three crores and one hundred and sixty-nine crores respectively.
The narrative began in 2019 when MMT-Go (the combined company of MakeMyTrip-GoIbibo) and OYO were brought before the Competition Commission of India (CCI) by FHRAI (Federation of Hotel & Restaurant Associations of India), Treebo, and FabHotels. They charged MakeMyTrip with conspiring with OYO, abusing their market power, and setting prices.
The allegations that were of main concern are:
- Price parity was mandated by MMT-Go in its contract with lodging partners. Therefore, it was prohibited for companies like Treebo and FabHotels to list one of their properties for less on their own website or with another aggregator.
- In an effort to dominate the online travel agency (OTA) sector, MMT-Go engaged in “predatory pricing,” or giving incredibly steep discounts on accommodation rates.
- Additionally, MMT-Go gave OYO special treatment and forbade FabHotels and Treebo from using India’s largest OTA platform.
Let us begin to highlight at least the most interesting parts of the 131-page order:
Is MMT a dominant force?
First off, keep in mind that if the complainants can’t prove that MMT-Go is the market leader, then none of these accusations will count very much. After all, if you aren’t the dominant player in the market, you can’t really misuse your position of power.
Here is MMT’s perspective, though. They thought both online and physical channels should be included in the overall market. Additionally, they thought it ought to incorporate Search, Discover, and Book (SCB) tools like Google as well as direct hotel websites. They wanted the CCI to take everything into account when determining this market’s relevance overall.
Screenshots from a study written by MMT-Go were used by CCI to demonstrate that the tech behemoth was not dangerous. Although Google’s search engine allowed comparisons, users couldn’t really make hotel reservations there. It usually sent you to the OTA itself instead. Additionally, OTAs could run advertisements to appear above search results. It wasn’t necessarily a distribution platform; it was more of a marketing platform. However, when someone made a hotel reservation through the site, MMT made the majority of its revenue. They, therefore, distributed the inventory in a sense. Furthermore, according to their own data, Google accounted for 42% of all website traffic.
The CCI concluded by noting that the only relevant market participants are “internet intermediaries for booking hotels in India.
What is MMT-Go’s Market share?
As of 2017, the business held a 63% market share in the internet space. After it purchased GoIbibo in 2017, it added that there were no new players in the online travel agency (OTA) market.
In conclusion, at least according to the CCI, MMT had a dominant presence in the pertinent market.
Concern with OYO
MMT and OYO acknowledged that they had contracts in place that gave them the only authority to delist other franchisee hotels. However, they countered that this was merely an economic venture.
For example, MMT studied growth indicators from Treebo, FabHotels, and OYO between 2016 and 2018. OYO wasn’t listed on MMT at this time, but the others were. And while OYO was able to expand enormously, the competition was still finding it difficult to make a mark. Because OYO insisted on it, MMT decided to delist Treebo and FabHotels after realising the necessity of having OYO on its platform.
However, did that make the competition obsolete?
OYO, however, notes that there was no effect on FabHotels’ revenue. Additionally, Treebo’s revenue increased from 4.6 crores in April 2018, when it delisted, to 6.1 crores in December 2019. Where was the impact?
Case resolved?
Not exactly. Because let’s face it. According to the CCI, “The Commission is more worried about the harm to the competitive process than the injury to a rival.”
Budget and independent hotels, according to the CCI, struggle to build a solid reputation. That is the primary reason they initially partnered with franchised service providers like OYO, Treebo, and FabHotels. This helps businesses become included on websites like MakeMyTrip while also giving them some exposure and publicity.
However, every independent hotel owner who initially trusted the franchise will suffer if Treebo and FabHotels are barred from the site. They would have to cut their ties to Treebo and FabHotels in order to align themselves with OYO.
And only OYO hotels would be displayed to customers. They would have few options in all of this.
The issue is that. The competitive procedure CCI is alluding to is that.
Conclusion
This, therefore, explains why CCI imposed a severe fine and harsh punishment on both MakeMyTrip and OYO. CCI wants MakeMyTrip to do away with these contracts. Consequently, it is unable to “set” the prices it desires. Therefore, a hotel has the option to give Booking.com a room at a discounted price. It will no longer be constrained by MakeMyTrip’s policies.
