The Competition Commission has ordered an investigation against online travel agents MakeMyTrip-GoIbibo and hospitality services provider OYO for alleged unfair business practices.
Following a complaint from the Federation of Hotel & Restaurant Associations of India (FHRAI), the watchdog looked into various aspects of their businesses and concluded that "prima-facie" there are violations of competition law.
For the case, the Competition Commission of India (CCI) assessed the allegations on the basis of two relevant markets. In the case of MakeMyTrip-GoIbibo (MMT-Go), it is the 'market for online intermediation services for booking of hotels in India' and for OYO, it is the 'market for franchising services for budget hotels in India'.
MakeMyTrip has acquired GoIbibo.
The Commission said that MMT-Go prima-facie appears to be a dominant player in the relevant market.
"... prima-facie OYO is not found to hold a dominant position, despite being a significant player in the ‘market for franchising services for budget hotels in India'," it noted.
According to the watchdog, delineation of relevant market is based on market realities as they exist at the time of assessment and that in rapidly changing markets in particular, market assessment cannot have a static approach.
In a 26-page order, the fair trade regulator said there exists a prima-facie case for investigation against MMT-Go and OYO for alleged violation of the provisions of Section 3(4) of the Competition Act. This section pertains to anti-competitive agreements.
"Further, a prima-facie case for investigation under Section 4 of the Act is made out against MMT-Go," it added.
Section 4 relates to abuse of dominant position.
"Thus, whether the commercial agreement between OYO and MMT entails preferential treatment to OYO and consequent exclusion of Treebo, Fab hotel and any other hotel chain and if so, the effect of the same on competition merits investigation," the order, dated October 28, said.
An OYO spokesperson it would continue to cooperate with the CCI's investigation process "as we review the complete order".
"We will actively engage with the Commission in this process. We are also thankful for the CCI's recognition of the fact that OYO is a hotel chain and for dismissing certain prima facie allegations regarding price parity, predatory pricing, exorbitant commissions, etc," the spokesperson said in a statement.
Regarding allegations that MMT-Go artificially create demand-supply gap on its platform and accordingly fluctuates prices, the Commission said that it finds such issues to be potentially abusive.
"... since MMT-Go has been found to be dominant, they need to be investigated. Though the Commission has taken note of the justifications offered by MMT-Go, given its market power owing to the dominant position, the Commission finds it appropriate to test the veracity of the justifications offered by them," it said.
As per the regulator, it has been pointed out that MMT charges a service fee from the consumer at the time of booking the rooms in the name of the hotels, which is pocketed by MMT.
"Further, the charging of service fee by MMT is alleged to be discriminatory as such fee is levied on certain hotels and allegedly not levied on high-end of chain hotels. Since MMT is prima facie found to be dominant, this conduct of MMT merits investigation," the order said.