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Oyo not in dominant position in the market, CCI says, dismissing allegations of unfair business practices

Dismissing RKG Hospitalities’ allegations of unfair business practices against Oyo, the Competition Commission of India said on July 31 that it can not be concluded that Oyo was in a dominant position and thus, did not engage in unfair business practices. The watchdog said that the relevant market for this particular case was “market for franchising services for budget hotels in India”. CCI didn’t find Oyo in violation of Section 4 of the Competitions Act, as accused by the complainant. The complainant had entered into a ‘Marketing and Operational Consulting Agreement’ with Oyo in 2017.

The company alleged that its agreement with Oyo contained clauses which were one-sided, unfair and discriminatory, and which OYO was able to impose only because of its dominant position. The company also raised questions on seven clauses under its business contract with Oyo, including its policy-based incentives and disincentives, forcing hotel partners to modify premises to meet its standards, opaque scoring policy impacting the performance score of the hotel with no redressal, and other.

‘Significant market share doesn’t indicate dominance’: What CCI said in its order

  • The Commission said that while Oyo “appears” to be the leading player in the relevant market with a “significant market share” in terms of number of hotels and rooms on its network, market share alone may or may not indicate dominance.
  • RKG Hospitalities had alleged that as part of their agreement with Oyo, they were required to not to enter “into any agreement directly or indirectly to engage with online aggregators like MMT and Goibibo”. CCI dismissed this allegation by saying that franchisee agreements stand on a different footing as the “branding” plays a vital role in such arrangements.
  • The watchdog further said, on allegations that Oyo could modify structure of RKG’s hotels without paying a single penny to them, appears to be a “valid business justification” to ensure that “services offered are of a standard benchmark quality and to ensure consumer satisfaction”.
  • On the allegation of charging GST and platform fees by Oyo, the CCI said that it realised that the hotels were receiving input credit for the GST while not paying the same to the tax authorities. The Commission also said that Oyo communicated it to RKG Hospitalities that GST would be charged over and above the commission in 2017.
  • Commenting on Oyo’s 3C scoring policy (based on ‘constant’ availability of rooms, ‘compatible’ rooms and ‘customer’ reviews) to evaluate hotels, which RKG had accused Oyo of violating in giving preferential treatment to certain hotels,  CCI said it finds no reason to interfere with such quality evaluation tool.

It is worth noting that  during the first hearing of All India Online Vendors Association’s (AIOVA) appeal against the Competition Commission of India’s (CCI) clean chit to Flipkart over the issue of abuse of dominant position to favour “preferred sellers” through unfair and discriminatory pricing, it was alleged that Flipkart abused its market dominance because it had a 40% in the market. The Judge however dismissed the claim on the grounds that it was a projection that was used to justify allegations of current market dominance. He further said that a 40% market share meant that 60% was with someone else.


[embeddoc url=”https://www.medianama.com/wp-content/uploads/oyo-cci-order.pdf” download=”all”]

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