MakeMyTrip and Oyo are in trouble with the CCI, opening up a gray area for business partnerships in India

• The Competition Commission of India is probing into MMT and OYO’s deal for an adverse effect on competition in the market.
• There is a thin line indeed between businesses which want to share benefits and those who want to control the market.
• With the Indian digital penetration, is it time to bring in a new era of competitive businesses in India?

MakeMyTrip and Oyo’s commercial agreement has brought a new problem at their doors – the Competition Commission of India. The CCI is now probing into their deal for a possible adverse effect on the market.

The alleged dominance that they would enjoy is now under scanner. And prima facie, MakeMyTrip is identified as ‘dominant’ in the online travel market while OYO holds the same position in the hotels market. And the joint effect of their partnership could alter the way the market operates.

“OYO has been prima facie found to be a significant player in the ‘market for franchising services for budget hotels in India’,” said the report. Both Oyo and MMT had begun their partnership in February 2018. In 2019 they renewed their partnership for five years.

In an earlier conversation with Business Insider India, Deep Kalra, founder and chairman of MakeMyTrip, had said, “Oyo for us would be more a partner, because they are now on the supply side and the fastest growing hotel chain in the world. Like all other hotel chains, they also go direct, they aren’t selling other services. We have always seen competition in the market otherwise.”

If CCI finds discrepancies, it could turn a precedent for several deals forged recently. Reliance Jio acquired music streaming app Saavn, which strengthened the latter’s position in the Indian market against competition like Gaana, Spotify and even the Airtel-backed Wink.

As per an exclusive partnership, OnePlus phones come pre-installed with the Amazon app. There is a thin line indeed between businesses which want to share benefits and those who want to control the market.

“There is a clear need of legal audit of all such agreements. Such partnerships should always and periodically be evaluated on the touchstone of AAEC. Unless the CCI establishes AAEC, it can’t bring a case against a party under section 3(4) of the Act,” said KK Sharma, Chairman, KK Sharma Law Offices & ex-Director General and Head of Antitrust and Merger Divisions, CCI.

We have a vertical relationship with MMT, says Oyo

The Federation of Hotel and Restaurant Associations of India lodged a complaint against MMT and its acquired unit GoIbibo and Oyo Hotels and Homes. The complaint was against MMT-Go and Oyo’s alleged dominance in the market, predatory pricing. It also alleges that their commercial agreement has led to the presumable exclusion of other competitors on MMT’s platform.

“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,” the CCI order said.

Oyo argued that it is not an online aggregator but a hotel chain which is listed on MMT and has a vertical relationship with the latter.

“We will continue to cooperate with Hon’ble CCI’s investigation process as we review the complete order. We will actively engage with the Hon’ble Commission in this process,” said an OYO spokesperson.’

The CCI further said that any restrictive agreement which may lead to refusal to deal with some players or exclusive arrangement with some players, may have potential adverse effect on competition.

“The problem is not merely because of there being an exclusive partnership. It is because of conduct much beyond this,” said Sharma.

He further explained that the Commission has asked DG to examine violation of Section 3(4) of the Act. It means CCI has to establish that such conduct exists and if it does, if it can have an adverse effect on the competition.

“Only after the above are established, can it be said that there is a violation of the provisions of the Act; and further only after the above are done, can the onus of proof move to the person against whom allegations are made,” said Sharma.