The Competition Commission of India’s Rs 392-crore penalty on online travel aggregators MakeMyTrip (MMT) and Goibibo and hospitality firm Oyo for instances of unfair business practices has triggered a fresh debate on price parity agreements and discounting practices implemented by consumer Internet firms.

A price parity agreement in a consumer Internet context can be defined as a contract under which suppliers or sellers are obligated to provide exclusive or lower prices to an online platform or better terms, even if the sellers are working with other rival platforms.

Legal experts told FE such parity clauses in contracts between hotel owners and online travel aggregators (OTAs) are prevalent and do not necessarily hurt the competition unless the OTA is a dominant force. The entirety of CCI’s judgment is based on the examination of whether MMT is a dominant force in the online travel market. CCI held that MMT is a dominant player in the business of “online intermediaries” that aggregate hotels and lodges, without taking into consideration the offline market and other meta-search engines.

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MMT may appeal this ruling by attempting to prove that its total market share should be based on all available hotel booking options for a consumer. These include meta-search sites such as Google and Expedia, online booking portals operated by hotel brands, and direct front desk bookings in the offline channel.

R Sudhinder, senior partner at Mumbai-based law firm Argus Partners, said Booking.com, which hardly has a single-digit market share in India’s hotel booking space, also has parity clauses. Since it’s not a dominant force, however, this does not adversely affect the competition. Sudhinder, however, said since an Internet consumer looks at all suitable options before finalising a hotel booking, CCI’s exclusion of relevant booking channels to determine MMT’s market share is contestable.

“For example, five-star hotel properties such as Taj are always in high demand and offer bookings at high prices at their front desk. If other OTAs or search engines compete to offer discounts or added benefits such as free breakfast coupons, the end user will compare all options before finalising a booking,” Sudhinder said.

Price and room parity agreements are common, especially among online travel aggregators and other consumer Internet apps, said industry experts and lawyers that FE spoke with. In fact, the director general of CCI while investigating MMT and Oyo found that price and room parity clauses are “implemented widely by all OTAs in the hotel industry”. But such agreements were deemed illegal in international jurisprudence when it comes to the travel market, CCI added in its order.

Nevertheless, MMT’s previous agreements with Oyo, under which it delisted the latter’s competitors such as FabHotels and Treebo, are still widely considered “predatory” by legal experts and other executives in the travel market.

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“During CCI’s investigation, it does seem like they (MMT and Oyo) tried to give some justification for their behaviour (of delisting competitors) but one can see through it easily. There are a lot of issues with CCI’s order which can be contested in court, but at the same time, there are a lot of issues with the MMT and Oyo’s previous market behaviour as well,” said Sudhinder.

The CCI, while passing its order last week, took note of Oyo’s exclusivity deal with MMT as well. After signing the deal, MMT delisted Treebo and Fabhotels, essentially denying both players access to a large share of the market. The CCI had earlier ordered MMT-Go to reinstate Treebo and FabHotels’ hotel room listings on its platform in March 2021 after the two startups approached the authority in February 2020.

A lawyer who has previously represented clients before the CCI and various high courts told FE that Oyo, at the time of its close competitors being delisted from the MMT platform in 2018, was a significant player in the hotel franchisee market. Subsequent to its merger with Goibibo in 2017, MMT became the largest player in OTA bookings, with a 70% share of the market. Oyo’s tie-up with MMT created a monopolistic situation in the vertical sector of hotel franchisors, the lawyer said.

“The very public tie-up led to the illegal delisting of close competitors of Oyo such as FabHotels and Treebo from the MMT platform. The same deprived the competitors to have access to the largest platform for OTA bookings. Creating entry barriers in a marketplace is against the interest of hotel owners, other (travel) aggregators, anti-customer and therefore grossly against national interest at large,” the lawyer said.