As we delve deeper into the age of the internet, the average individual's dependence on internet-based service providers is also increasing by the day. In a bidding war to appease this ever-expanding customer base, we see service providers cropping up around every corner, taking businesses online, in most industries. Since this enables service providers to cut back on the costs incurred in providing the same service at a physical location, online services have proven to be far cheaper than the same services being provided in the physical domain. This has led to the creation of competitive imbalances in the physical and digital realm, thereby making it much harder for service providers in the physical domain to compete in the relevant market. Under these circumstances, it has become all the more difficult for the Competition Commission of India (CCI) to identify what practices deployed by online service providers constitute anti-competitive practices under the Competition Act, 2002 (Competition Act).
We have seen allegations of price-fixation being levied against Ola and Uber in the past, and numerous complaints against e-commerce giants such as Flipkart and Amazon; but more recently, focus seems to have shifted to the online hotel booking service sector as well. In 2019, two complaints (information) were filed with the CCI in relation to this sector. In both complaints, allegations with respect to abuse of 'dominant position' were levied against the opposite parties, among other ancillary anticompetitive practices that were sought to be highlighted. We will be analysing the orders rendered by CCI in both of these matters so far, and offer some insights on the manner in which we perceive the CCI seems to be treating complaints of this nature against online hotel booking service providers.
The RKG-Oyo Case1
A complaint was filed against Oravel Stays (Oyo), by RKG Hospitalities (RKG). The primary allegation levied against Oyo was that it had abused its 'dominant position' in the 'relevant market' to impose certain one-sided, unfair and discriminatory terms in its marketing and operational consulting agreement (Agreement) with RKG. Additionally, RKG also alleged that Oyo offered predatory discounts on hotel room bookings, and the conduct of Oyo was stated to be malafide, since its primary focus seemed to be to garner a high market share to the exclusion of other players in the 'relevant market', by creating unviable market conditions for its competitors.
The FHRAI Case2
The Federation of Hotel & Restaurant Associations of India (FHRAI) had filed information under Section 19(1)(a) of the Competition Act, alleging that MakeMyTrip India (MMT), Ibibo Group (Goibibo) and Oyo (collectively referred to as Opposite Parties) have entered into anti-competitive arrangements/agreements and have abused their 'dominant position' in the 'relevant market'.3 In early 2017, the merger/combination of MMT and Goibibo was approved by the CCI (MMTGoibibo).4 FHRAI submitted that this merger has facilitated their dominance in the 'relevant market' of OTA(s), and has empowered the two entities to operate in a manner independent of the competitive forces prevailing in the 'relevant market'. FHRAI also alleged that Oyo's unusually high market share in the 'relevant market' indicates that it has gained a competitive advantage and has secured a position of dominance in the 'relevant market'
DEFINING 'RELEVANT MARKET'
The CCI reiterated that under the Competition Act, there are two dimensions to the term 'relevant market' viz. a 'product/service' dimension, and a 'geographic' dimension. The relevant product market is a culmination of all those products or services which are similar to the particular product or service in question, and are interchangeable or substitutable by the consumer, by reason of their similarity in characteristics, price and intended use. Consumer perceptibility with regard to interchangeability among products or services is said to be the most important parameter for defining the relevant product market.
In the RKG-Oyo Case, the CCI analysed the structure of the hospitality industry, to determine the relevant product market for Oyo. On one hand, there are online travel agencies (OTAs) such as MakeMyTrip, Goibibo, Yatra.com, Booking.com etc., which operate like aggregators that primarily facilitate bookings by connecting the hotels/properties with the end consumer. As aggregators, these OTAs use a variety of tools such as filters, directed searches, guest reviews and recommendations, and online payment options to provide a smooth and hassle-free booking experience to consumers. On the flip side, these aggregators offer a platform to various hotel owners to list their hotels on these aggregators' apps, thereby making their hotels and properties that much more accessible to potential consumers. In return, these aggregators charge a commission from the hotel/property owners which may comprise a listing fee and/or a transaction fee, based on certain completed transactions using their services.
However, the CCI was of the opinion that Oyo did not qualify as an OTA. Oyo followed a franchise model, whereby standalone budget hotels partnered up with known brands such as Oyo, to take advantage of their brand value. Therefore, the CCI determined that what Oyo offers to these budget hotels is quite different from what an OTA offers. Oyo's business relations with its partner hotels constitute a franchising service, comprising a bouquet of other services, which enables the franchisee hotels to reap the benefits of Oyo brand. Oyo in turn gets a commission or share in the revenues of its partner hotels, while assuring minimum monthly guarantee of revenues to such partner hotels.
Considering the discussion set out hereinabove, the CCI identified the relevant product market in the RKG-Oyo Case as "market for franchising services for budget hotels", as opposed to "market for service providing budget hotels to customers through online booking", as suggested by RKG. Further, since Oyo is a panIndia service and other partner hotels of Oyo are likely facing the same issues, the relevant geographic market was identified as the territory of India. The 'relevant market' was therefore demarcated as "market for franchising services for budget hotels in India".
Relying on its decision in the RKG-Oyo Case, the CCI, in the FHRAI Case, held that the 'relevant market' for Oyo is different from the 'relevant market' for MMT-Goibibo, since Oyo is not an OTA. Accordingly, the 'relevant market' for Oyo was affirmed to be the "market for franchising budget hotels in India", whereas the 'relevant market' for MMT, as well as Goibibo, both individually and taken together, was set out as "market for online intermediation services for booking of hotels in India". Therefore, although the geographic element of the relevant markets was found to be the same for all the Opposite Parties, a distinction was observed in the product/service element of the relevant markets.
1 Case No. 03 of 2019, dated 31 July 2019, available at: https:// www.medianama.com/ wp-content/uploads/oyocci-order.pdf.
2 Case No. 14 of 2019, dated 28 October 2019, available at: https:// www.cci.gov.in/sites/ default/ files/14of2019_0.pdf.
3&4 Under Section 3 and Section 4 of the Competition Act, 2002
Originally published 23 July, 2020
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