Business

What Landed MakeMyTrip And Oyo In A Soup?

  • The Competition Commission of India found MakeMyTrip (MMT) to be a significant player in the "market for online intermediation services for booking hotels in India".
  • It found that MMT had been delisting franchisee hotels like Treebo and FabHotels due to its agreement with Oyo.

Business BriefsOct 27, 2022, 06:04 PM | Updated Oct 28, 2022, 11:32 AM IST
Makemytrip, Goibibo and Oyo

Makemytrip, Goibibo and Oyo


In a recent order, the Competition Commission of India (CCI) slapped a fine of Rs 392 crores on MakeMyTrip (MMT), GoIbibibo and Oyo after it found the companies guilty of engaging in anti-competitive behaviour.

MMT, GoIbibo (a wholly owned subsidiary of MMT), and Oyo were under investigation after CCI received a complaint about the preferential treatment given to Oyo from the Federation of Hotels and Restaurants Association of India.

MMT and GoIbibo would pay Rs 223.48 crore, while Oyo would pay Rs 168.88 crore in fines.

Online Travel Agents (OTAs) allow hotel properties to list on their sites for a commission after the properties receive bookings from guests. According to the complainant FHRAI, MMT signed contracts with hotels where it would be required to have price parity across channels.

Under the price parity system, hotels are not allowed to sell rooms are lower rates on other OTAs or their website.

Since a hotel doesn't pay commissions on a direct booking, they can pass on cost savings to customers and offer lower rates. However, a contract that requires the same price across channels might mean that customers wouldn't benefit from cost savings.

In addition, MMT was allegedly selling rooms at lower rates by offering deep discounts to gain market share and drive smaller OTA players out of the market.

A highly consolidated OTA market would mean that there would be lower competition among OTAs to lower commissions and attract more hotels and guests onto their platform. These hotels were charged 22-40 per cent commissions for each booking. MMT allegedly removed some hotel chains like Treebo and FabHotels after they declined to pay up large commissions.

Instead, MMT signed a deal with Oyo, which gave Oyo preferential treatment over Treebo and FabHotels. MMT and Oyo have argued that the contract was in place because Oyo had a much larger inventory than Treebo and FabHotels combined, allowing MMT to offer a large variety of rooms at competitive prices to its customers.

However, in 2021, CCI asked MMT to relist the Treebo and FabHotel properties that had been delisted.


Since MMT has a significant market share, delisting these hotels could mean lower bookings – thereby, MMT cut off an important distribution channel for these players.

While the statement provided by CCI is redacted, it found that MMT holds the lion's market share and is a dominant player. Other players, such as Easemytrip, Cleartrip, Expedia, and Yatra, do not offer strong competition for MMT. Even Booking.com, which initially posed a threat to MMT, became a marginal player after 2016-17.

According to industry professionals, MMT's strong presence in India makes it the top portal that domestic guests rely on for bookings. Some hotels even offer higher discounts on MMT due to the high volume of business the platform generates – making it a positive feedback loop.

In addition, offering lower prices or maintaining price parity allows the hotels' visibility to remain high. In case of price disparity, the hotels' ranking slips lower, making it a low visibility property.

The MMT platform has 45,000 listed hotels in India, making it a preferred site for domestic travel. For locations like Goa, which have a significant proportion of international tourists, Booking.com and Expedia have a relatively larger market share of bookings.

CCI has asked MMT to modify its agreements to remove price parity and room availability causes and to do away with some exclusivity conditions.

Oyo has already been battling FHRAI on several fronts, including its Initial Public Offering, which the FHRAI opposes citing irregularities. The volatile markets aren't helping its chances for a good IPO either.

According to reports, Oyo's main backer, Softbank, has already cut Oyo's valuations by more than 20 per cent. However, Oyo has denied the speculations and believes there is no reason for a valuation cut.

With Softbank struggling with its problems, and Oyo's need for funding, the IPO is necessary for the company to raise new capital. On the positive side, Oyo has come up with positive operating profitability – a feat that only a few recently-listed start-ups have shown.

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