2019 (11) TMI 1199 - Commission - Indian Laws

Directions for investigation under Section 26(1) of the Competition Act, 2002 - To discontinue Abusive/Anti-competitive practices - price discrimination - fixation of commission rate for all partner hotels - elimination of Performance Linked Bonus (PLB) or other additional promotional incentives which indirectly add to fixed commission - prohibition of discrimination and offering of heavy discounting on hotel room tariffs over above fixed commission - remittance of advance payments etc. - contravention of the provisions of Sections 3 and 4 of the Competition Act, 2002. HELD THAT - The Commission is of the view that there exists a prima facie case for investigation against MMT-Go and OYO for alleged violation of the provisions of Section 3(4) of the Act. Further, a prima facie case for investigation under Section 4 of the Act 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 into the matter, in terms of Section 26(1) of the Act, and submit a report to the Commission, within 150 days. During the course of investigation, if involvement of any other party/entity is found, the DG shall investigate the conduct of such other party/entity(s) who may have indulged in the said contravention. It is, however, made clear that nothing stated herein shall tantamount to an expression of final opinion on the merits of the case and the DG shall conduct the investigation without being influenced by any observations made herein.

Summary

Issues Involved:
1. Allegations of abuse of dominant position by MMT-Go and OYO.
2. Determination of relevant market.
3. Assessment of dominance.
4. Analysis of conduct, including room and price parity impositions, denial of market access, predatory pricing, exorbitant/unfair commissions, misrepresentation of information, and hotel service fee.

Detailed Analysis:

1. Allegations of Abuse of Dominant Position by MMT-Go and OYO:
The Informant alleged that MMT-Go and OYO abused their dominant positions by charging excessive commissions, engaging in predatory pricing, and imposing unfair contractual terms. They also alleged that MMT-Go and OYO cartelized and entered into anti-competitive agreements. The Commission noted that the Act does not envisage collective dominance, thus the allegations of collective abuse were dismissed.

2. Determination of Relevant Market:
The relevant market was delineated to assess the dominance of MMT-Go and OYO. For OYO, the relevant market was identified as the "market for franchising services for budget hotels in India," based on previous findings in Case No. 03 of 2019. For MMT-Go, the relevant market was identified as the "market for online intermediation services for booking of hotels in India," considering the distinct nature of online platforms and their growing importance in the hotel reservation space.

3. Assessment of Dominance:
The Informant provided data suggesting that MMT-Go held a 63% market share in the online OTA segment, indicating dominance. MMT-Go contested this, citing a broader market share of less than 11% in the overall travel market. However, the Commission found MMT-Go to be prima facie dominant in the relevant market for online intermediation services for booking hotels. OYO, despite being a significant player, was not found to hold a dominant position in the franchising services market for budget hotels.

4. Analysis of Conduct:
Room and Price Parity Impositions:
MMT-Go imposed terms preventing hotels from offering lower prices on other platforms or their own websites, and required room parity. Such broad APPAs (Across Platform Parity Agreements) could inflate commissions and prevent new low-cost platforms from entering the market. This needs investigation under Sections 3(4) and 4 of the Act.

Denial of Market Access:
Treebo and Fab Hotels were allegedly removed from MMT-Go's platform for not agreeing to high commissions, and OYO was given preferential treatment. This could contravene Section 3(4) of the Act if it leads to refusal to deal or exclusive arrangements that harm competition.

Predatory Pricing:
MMT-Go and OYO were accused of offering deep discounts below the average room rate, potentially to eliminate competition. This practice, especially by a dominant player like MMT-Go, warrants investigation.

Exorbitant/Unfair Commissions:
The Informant claimed MMT-Go charged commissions ranging from 22-40%, which included additional charges like volume discounting incentives. The Commission noted that determining excessive pricing requires further investigation into market structure and cost conditions.

Misrepresentation of Information:
MMT-Go allegedly showed rooms as unavailable instead of delisting them, creating information asymmetry and denying market access to hotels. This conduct, potentially abusive, needs investigation.

Hotel Service Fee:
MMT allegedly charged a service fee from consumers in the name of hotels, which was not passed on to the hotels and was discriminatory. This conduct also merits investigation.

Conclusion:
The Commission found a prima facie case for investigation against MMT-Go and OYO for alleged violations of Sections 3(4) and 4 of the Act. The Director General (DG) was directed to conduct a detailed investigation and submit a report within 150 days. The investigation would also consider the involvement of any other parties/entities found during the investigation.