CCI | “Treebo” alleges “MakeMy Trip” & “OYO” for abuse of dominant position & entering into a vertical agreement – DG directed for investigation

Competition Commission of India (CCI): The Coram comprising of Ashok Kumar Gupta (Chairperson) and Sangeeta Verma and Bhagwant Singh Bishnoi, Members, while dealing with a case filed by Treebo Hotels against Make My Trip & OYO held that,

“A prima facie case of contravention against MMT for abuse of dominant position under Section 4(2)(a)(i) and 4(2)(c) is made out and a case against MMT & OYO for entering into a vertical arrangement having an AAEC in the market is also made out.”

Informant alleged contravention of provisions of Sections 3 and 4 of the Competition Act, 2002 against MakeMyTrip India Pvt. Ltd. (MMT) and Oravel Stays Private Limited (OYO).

Background

“Treebo” alleged “MMT” of abusing its dominant position in the relevant market for online intermediation services for booking of hotels in India.

It has been stated that, Treebo was previously listing its budget hotels on MMT’s platform in addition to the intermediation services provided by MMT, further with its acquisition of GO-Ibibo, MMT proposed to make a significant investment in Treebo, in exchange for Treebo listing its hotels exclusively on MMT’s platform.

Further proposal from MMT for investment in Treebo was turned into a threat, that if Treebo doesn’t accept MMT’s proposal, it would be removed from MMT’s platform. Treebo claimed to have finally declined MMT’s proposals for investment and exclusive listings. Thus all Treebo properties were allegedly removed from MMT’s platform.

Nearly after 6 months, MMT again decided to list Treebo back on MMT platform subject to Treebo entering into the ‘Exclusivity Agreement’ and ‘Chain Agreement’ with MMT and the said agreements were alleged to have been unfair/anti-competitive.

Through a notice of termination, the above-stated agreements were unilaterally terminated by 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.

OYO’s arrangement with MMT, dominant downstream intermediary, OYO considered being vertically integrated enterprise. Due to existence of network effects in such a market, there exist huge barriers to entry for any new player in the market.

Treebo also claimed that MMT-GO and OYO renewed their commercial agreement with a specific provision to exclude Treebo and Fab Hotels from listing on MMT.

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. MMT imposed arbitrary exclusivity condition on Treebo through the ‘Exclusivity Agreement’ entered into between MMT and Treebo, in contravention of provisions of Section 4(2)(a)(i) of Competition Act, 2002.

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. ‘Exclusivity Clause’ introduced by MMT caused Appreciable Adverse Effect on Competition in terms of Section 19(3) of the Act while creating entry barrier for new OTAs, driving out existing OTAs out of the market and there were no accrual benefits to the consumers.

OYO abused its dominant position in the relevant market for ‘franchising services for budget hotels in India’ by entering into an anti-competitive vertical arrangement with MMT. By Imposing restrictive conditions on MMT, OYO and MMT’s deal tantamount to ‘refusal to deal’ and violates Section 3(4) read with Section 3(1) of the Act.

Analysis & Decision

Commission held that restrictive arrangement between OYO and MMT, both of whom have considerable presence in their respective market segments, may lead to refusal to deal which may have adverse effects on competition.

Parity Restrictions are anti-competitive and are to be directed to be investigated under Section 3(4) as well as Section 4 of the Act.

With regard to imposition of exclusivity condition by MMT on Treebo, it appears to be unfair and hence exploitative under Section 4(2)(a)(i) of the Act, for the Treebo partner hotels as it denies them an opportunity to list on other platforms and to gains access to those platforms. The restriction also seems to be prima facie in contravention of Section 4(2)(c) of the Act.

In view of the above, DG is directed to investigate the present matter. [Rubtub Solutions Pvt. Ltd v. MakeMyTrip India Pvt. Ltd. (MMT), Case No. 01 of 2020, decided on 24-02-2020]

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