CCI to probe MakeMyTrip, Oyo for unfair business practices, deep discounts

The Competition Commission of India (CCI) has launched an investigation against Oyo Hotel & Homes and MakeMyTrip (MMT-Go) on charges of predatory pricing, creating a monopoly and deep discounting.

A CCI order says there is enough substance to warrant a probe, on evidence that the two are charging excessive commissions from hotel partners and demanding deep discounts which have led to the destruction of competitive pricing in the market.

The complaint in this regard came from the Federation of Hotel and Restaurant Associations of India (FHRAI). And, CCI has directed its director-general, investigations, to do a detailed investigation in the matter and give a report within 150 days. 

“The there exists a prima facie case for investigation for alleged violation of the provisions of Section 3(4) of the Act. Further, a prima facie case for investigation under Section 4 is made out against MMT-Go, as elucidated in the earlier parts of this order. The DG is, thus, directed to carry out a detailed investigation,” goes the CCI order.

Oyo Hotels & Homes claim an earlier CCI investigation has cleared it of all allegations on market dominance and predatory pricing. The company, recently in the news for its billion dollar fund raise rounds and expansion abroad, has lately been facing a tough time. Over the past few months, it has faced protests from hotel and asset owners at various places in the country — Bengaluru, Pune, Jaipur, Shimla, Manali, Ahmedabad, Bhopal, Bareilly, Vizag, Gangtok, Delhi.

The Ritesh Aggarwal-led entity says CCI had acknowledged that OYO and MakeMyTrip-GoIbibo (MMT-Go) operate in different segments. And, that OYO as a budget hotel chain is in a vertical relationship with MMT, which is essentially a distribution platform for hotels. 

“CCI has directed to investigate the complaint filed by FHRAI against MMT, Go-Ibibo and OYO as it pertains to alleged violation of the provisions of Section 3(4) of the Act only. The concern expressed is around whether OYO’s contractual relationship with MMT, as part of an arrangement, may have an adverse effect on competition. OYO stands ready to extend full support to the investigation and as a law-abiding corporate citizen, has full faith in the administrative and the judicial process,” the company said.

 MakeMyTrip spoke similarly, that it would cooperate with CCI and demonstrate that the allegations are unfounded.

FHRAI has alleged that chain hotels and hotel aggregators such as Treebo and Fab Hotels have been denied market access. 

“They have been allegedly removed from the platform of MMT-Go as they did not agree to pay the exorbitant commission brokerage charged by the latter. Further, it has also been alleged that MMT and OYO have entered into confidential commercial agreements, wherein MMT has agreed to give preferential treatment to OYO on its platform, further leading to a denial of market access to Treebo and Fab Hotels in contravention of Section 3, as well as Section 4, of the Act,” goes the CCI order.

FHRAI said it would be helping the CCI investigation with supporting material from across the country. “E-commerce companies are managing to disrupt traditional businesses, which are suffering. The online travel agents (OTAs) have managed to disrupt the market in the last two years. Illegal activity is going on in the garb of deep discounts. OTAs have been armtwisting local businesses, charging high commissions and offering big discounts. Whether a hotel owner likes it or not, they have to take part in the business of OTAs because these have a dominant position. Small players are in the stronghold of these guys,” said Pradeep Shetty, joint secretary at FHRAI and vice-president of FHRAI's western region arm.