Bengaluru, NFAPost: Founded in 2013, OYO Hotels & Homes is the world’s third-largest chain of hotels, homes, managed living and workspaces. MakeMyTrip is an online travel company founded in 2000 by Deepak Kalra. Growth of these companies are under question as they are facing the Competition Commission of India’s investigation.
The Federation of Hotel and Restaurant Associations of India (FHRAI) took the business model of these companies to the CCI, which found that there is ‘prima-facie’ there were violations of competition law and ordered detailed investigation into the matter.
In an order dated October 28, the CCI said it assessed the allegations on the basis of the relevant markets. The CCI looked at the ‘market for online intermediation services for booking of hotels in India’, for OYO it reviewed the ‘market for franchising services for budget hotels in India’.
While MMT-Go ‘prima-facie’ appeared to be a dominant player in the relevant market, OYO it noted “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’”.
In a 26-page order, the CCI said the provisions of Section 3(4) of the Competition Act — pertaining to anti-competitive pacts — as also grounds to probe MMT-Go under Section 4 of the Act (relating to abuse of dominant position). CCI has set 50-day time frame for its director general to submit a report.
“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. 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,” CCI stated.
Oyo has been on an acquisition spree globally recently to expand its presence. It acquired Innov8, a co-working spaces provider, Amsterdam-based @Leisure Group and Mumbai-based online marketplace for wedding venues Weddingz.in. The company is facing multiple hurdles in its journey at a time when it is going for a global expansion. Also, the company faced protests from hotel and property owners in India, especially from Bengaluru, Pune, Jaipur, Shimla, Manali, Ahmedabad, Bhopal, Bareilly, Vizag, Gangtok, Delhi.
FHRAI, which is fighting the case, made it clear that the organisation will provide necessary materials to further speed up the investigation stating that ecommerce 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.