The Competition Commission of India on February 24, 2020 issued directions under Section 26(1) of the Competition Act, 2002 to the Director General to carry out detailed investigation against MakeMyTrip India Pvt. Ltd., and Oravel Stays Private Limited against contravention of Section 3 and Section 4 of the Competition Act, 2002.

Brief Facts:

An information under Section 19(1)(a) of the Competition Act, 2002 (“Act”) was filed by Rubtub Solutions Pvt. Ltd. (“Informant”) before the Competition Commission of India (“CCI”) against MakeMyTrip India Pvt. Ltd. (“MMT”), and Oravel Stays Private Limited (“OYO”) alleging contravention of the provisions of Sections 3 and 4 of the Act.

The Informant has been operating under the brand name of 'Treebo Hotels’ and is in the business of providing franchising services to budget hotels in India. In addition to this, Treebo also provides service to numerous independent budget hotels who partner with it under its newly launched ‘Hotel Superhero’ scheme. MMT is an Online Travel Agency (OTA) engaged in the business of providing travel and tourism related services in India. OYO provides budget accommodation to customers and is in the market for providing franchising services to budget hotels under the brand name ‘OYO’.

The Informant was listing its budget hotels on MMT’s platform in addition to the intermediation services provided by MMT since July 2015. With its acquisition of Go-Ibibo (hereinafter, referred to as ‘MMT-Go’) in the year 2016, MMT proposed to make a significant investment in Treebo, in exchange for Treebo listing its hotels exclusively on MMT’s platform. Since the deal did not work out, Treebo could not accede to MMT’s proposal pursuant to which all Treebo properties were allegedly removed from MMT’s platform in March 2017.  After nearly 6 months, MMT again decided to list Treebo back on MMT platform subject to Treebo entering into ‘Exclusivity Agreement’ and ‘Chain Agreement’ with MMT. Treebo entered into the said agreements with MMT. As per Treebo’s allegation, the agreements were terminated by MMT as a result of OYO’s agreement with MMT wherein MMT agreed to remove OYO’s competitors like Treebo from its platform. Treebo claims that in March, 2019, MMT-Go and OYO have renewed their commercial agreement for a further period of five years, with specific provision to exclude Treebo and Fab Hotels from listing on MMT.

Issue:

Treebo alleged that MMT has contravened the provisions of Section 4(2)(c) read with Section 4(1) of the Act by unilaterally terminating agreement with Treebo and denying Treebo market access to large share of online customers who prefer to make their hotel bookings on MMT. This, as per Treebo, is a direct fallout of the exclusivity agreement entered into between OYO and MMT. Treebo has also alleged that MMT has imposed arbitrary exclusivity condition on Treebo through the ‘Exclusivity Agreement’ entered into between MMT and Treebo, in contravention of the provisions of Section 4(2)(a)(i) of the Act. Treebo has also alleged contravention of Section 4(2)(a)(ii) by MMT vide imposition of price parity clauses on Treebo through the ‘Chain Agreement’ entered into between MMT and Treebo. Treebo has also brought the aforesaid allegations under Section 3(4) read with Section 3(1) of the Act as Treebo and MMT share a vertical relation.

Analysis by CCI:

The CCI observed that the Informant is primarily aggrieved on account of three issues: firstly, that Treebo and its partner hotels are being excluded from listing on MMT’s platform through abrupt termination - pursuant to the commercial arrangement between MMT and OYO; secondly, that MMT, as a dominant player, imposed ‘price parity restriction’ on Treebo partner hotels through the Chain Agreement, which restricted it from providing its properties to Booking.com and Paytm (MMT’s competitors) at a better rate/price; and thirdly, MMT imposed an ‘exclusivity condition’ on Treebo through ‘Exclusivity Agreement’ which restricted it from listing its properties on Booking.com and Paytm (MMT’s competitors) for a period of 72 hours and 30 days prior to check-in for hotels situated in Category A and Category B cities, respectively.

The CCI had examined some of these allegations against MMT and OYO Case No. 14 of 2019 (hereinafter, ‘Case No. 14 of 2019’).  The Commission prima facie found MMT to be dominant in the said case in the relevant market of ‘market for online intermediation services for booking of hotels in India’ and OYO was found to be a significant player (though not dominant) in the market of ‘market for franchising services for budget hotels in India’. Since the first two allegations were same, the CCI observed that separate assessment with regard to relevant market delineation, assessment of dominance and abuse is not necessary. In addition to the allegation in Case No. 14 of 2019, which was only with regard to preferential treatment being accorded to OYO vis-à-vis its competitors (Treebo and Fab Hotels), the present Informant i.e. Treebo has alleged absolute exclusion pursuant to the OYO-MMT arrangement.

The CCI observed that Clause 2.3 of the ‘Chain Agreement’ provides that neither Treebo can provide a better rate to the competing OTAs nor can they provide the rooms to OTAs unless those rooms are first made available on the platform of MMT. The Commission, in its prima facie order in Case No. 14 of 2019, observed that across-platforms parity agreements (APPA) may result in removal of the incentive for platforms to compete on the commission they charge to hoteliers, may inflate the commissions and the final prices paid by consumers and may also prevent entry of new low cost platforms. On the basis of this, such parity restrictions were prima facie held to be anti-competitive and were directed to be investigated under Section 3(4) as well as Section 4 of the Act. Considering that this issue is identical to the allegation already under investigation in Case No. 14 of 2019, no further assessment is required to hold that prima facie case for investigation of this allegation is made out.

With respect to the third allegation, the CCI analysed Clause 2.1 of the ‘Exclusivity Agreement’ and observed that in terms of the said clause, Treebo was not permitted to list its hotels situated in cities classified under Category A on MMT’s two competitors, i.e. Booking.com and Paytm, 72 hours (i.e. 3 days) prior to the check-in day. Similar restriction was imposed for a much longer period, i.e. 30 days, in case of hotels situated in Category B cities. Category A included hotels in 29 Indian cities while Category B included hotels situated in 25 Indian cities as mentioned earlier.

The CCI held that the restriction was prima facie unfair and hence exploitative under Section 4(2)(a)(i) of the Act.

Decision of CCI:

The Commission was of the view that prima facie a case of contravention against MMT for abuse of dominant position under Section 4(2)(a)(i) and 4(2)(c) is made out on account of all the three allegations analysed supra. Further, a case against MMT and OYO for entering into a vertical arrangement having an AAEC in the market is also prima facie made out under Section 3(4) read with Section 3(1) of the Act.

The DG is directed to investigate the present matter along with Case No. 14 of 2019 and submit a consolidated Investigation Report covering all the aforesaid issues prima facie found to be in contravention, as per the timelines applicable to that matter. During the course of investigation, if the involvement of any other party is found, the DG shall investigate the conduct of such other party as well who may have indulged in the said contravention.

Contributed by R. Sudhinder (Senior Partner) and Prerana Amitabh (Managing Associate).