CCI ON ABUSE OF DOMINANCE IN DIGITAL MARKETS: AN ANALYSIS
[Rama Priyadarshini Padhy is a third-year law student at National Law University, Odisha]
The Competition Commission of India (“CCI”), in a recent order, had issued an interim order granting relief to the applicants in a double sworded digital market. On 9th March 2021, CCI in the said order, directed the major Online Travel Agency (“OTA”) platforms providing intermediation services for hotel booking in India such as Make My Trip (“MMT”) and Go-Ibibo (“Go”) (hereinafter, collectively referred to as “MMT-Go”) to relist the properties of FabHotel and Treebo back on its platform. Pertinently, it was alleged before CCI that these OTA platforms i.e., MMT-Go were engaged in anti-competitive conduct. Pursuant to allegations, CCI had ordered for an investigation on 24th February 2020 into the conduct of MMT-Go primarily on two grounds i.e., (i) abuse of dominant position by entering into exclusive agreements; and (ii) entering into a vertical arrangement with OYO which is a franchise of budgetary hotels in India.
Indubitably, it becomes imperative to discuss the background of the whole tussle with the OTAs before the issues arising therein, are discussed. Pertinently, this issue triggered back in 2019 when both FabHotels and Treebo approached CCI with their respective grievances.
Treebo is a chain of Indian budgetary hotels. It gains revenue by listing out properties of budget hotels on its platforms along with various other platforms like MMT-Go. In this regard, MMT-Go and Treebo had initially entered into two agreements. These agreements were mainly a chain agreement and an exclusivity agreement according to which MMT-Go had the sole right to list out the properties of Treebo. However later on, MMT-Go unilaterally concluded these deals when it entered into a secret agreement with OYO wherein as a part of the convenant it agreed to remove all its (OYO) competitors in the market from its platform. With OYO being a significant downstream intermediary, Treebo alleged that its business arrangements with the dominant MMT-Go integrate the market vertically and create substantial obstacles for its foray into the market.
Similarly, FabHotel which also operates chain of Indian budgetary hotels filed a complaint on very similar grounds wherein it alleged that MMT-Go had unilaterally terminated the agreement with FabHotel causing it huge loss in its revenue. The loss was such that they were on the verge of shutting down if not relisted on MMT-Go. Consequently, CCI decided to club the matters given that MMT-Go, prima facie holds a dominant position in the relevant market (Online intermediatory servicing markets for hotel booking in India) and OYO holds a significant position in the downstream relevant market (franchise servicing markets for budgetary hotels in India). CCI thus, ordered for an investigation into the conduct of OYO and MMT-Go. In the wake of the COVID-19 pandemic, the hospitality sector has primarily suffered huge losses, some of which are still yet to recover from the aftershocks of the pandemic. Treebo and Fab Hotels both lacked the presence on a major hotel booking platform during these times.
The Three Pronge Test
CCI decided to merge both the cases i.e., of FabHotels and Treebo against MMT-Go, owing to the similarity of facts and circumstances of both the parties which pertains to relisting of their properties on the same platform i.e., MMT-Go. In this regard, Section 33 of the Competition Act, 2002 empowers CCI to issue interim orders to restrain a party temporarily carrying out an act in contravention which continues to be acting in contravention whilst an enquiry is under process and unless and until there comes a conclusion out of the said enquiry. CCI in order to do alleviate such concerns can issue interim order for the same. While doing so, it has to ensure that certain conditions are fulfilled as stipulated therein the judgement of Competition Commission of India vs. Steel Authority of India Ltd (hereinafter, ‘SAIL judgment’) such as:
1) CCI should be satisfied that an act of contravention has been committed and such satisfaction shall be of a higher degree than the one required to launch an investigation into the matter;
2) The necessity to issue order as the balance of convenience should lie in in favour of the applicant; and
3) Non-grant of interim relief would either cause irreparable damage to the applicant or have an adverse effect on competition in the market.
In their defence, MMT-Go challenged the notion of existence of any abuse of dominance and claimed to be competing with the offline players like offline travel agents etc. In its counter response, CCI further noted that that the whole worldly order has shifted to the online platforms giving MMT-Go a huge advantage in the digital distribution channels since the outbreak of pandemic. People are largely relying on the online sources and digital channels thereby making it necessary for the hotels and other franchising service providers to be visible online on the OTAs to stay pertinent. MMT-Go thus serves as a portal to internet hotel reservations by connecting these independent hotels to the end customers. Therefore, relisting of properties of players like FabHotels and Treebo is imperative since they depend substantially on MMT-Go for their growth. Further, CCI further observed that delisting of franchisee service providers like Treebo and FabHotels along with budgetary hotels who avail logistic support from them has indeed affected the market competition by denying access to an important channel of distributions through foreclosure. Hence, it is in the interest of free market and trade that CCI finds it fit to issue an interim order.
After ensuring that the first condition as laid down in the SAIL Judgement is met with CCI proceed to the scrutinize the second condition i.e., the balance of convenience lies in favour of the applicants. In this regard, it measured and contrasted the inconvenience caused to MMT-Go in case such a relief is granted vis-à-vis the inconvenience to the applicants in case the interim relief is denied. CCI noted that MMT-Go would earn commission through all the hotel bookings and the chances of an increase in these commission would only be higher when the properties of FabHotel and Treebo would be listed. In doing so, the consumers would also be benefitted as they would have an access to a wide array of choices. The inventory of about 1100 properties that FabHotels and Treebo bring together have been affected since their delisting on MMT-Go. Not surprisingly, they have suffered a significant decline in growth. FabHotels which registered an annual growth of 370% in 2016-17 and 238% in 2017-18 (during which it was listed on MMT-Go), has only shown a growth of 34% from 2018-2020. After doing all the permutation and combination in order to reach a conclusion, CCI was therefore satisfied that the convenience lies in favour of the applicants.
Lastly, towards the satisfaction of the third condition, there has to be either a likelihood of any irreparable damage to the applicants or a direct apprehension of detrimental effect on the market competition. It was also observed by CCI that the online medium of distribution has huge network effects which can tip the market in favour of the player along with entrenching this coveted position. And when access to such platform is denied, then it generates a huge gap between the consumers and the hotels. CCI also stated that this denial in any absolute manner would completely cart off the freedom to complete merit. Therefore, this denial should not be absolute and complete in nature. Furthermore, the smaller players which are actively operating on these platforms would be completely overthrown of business, if such unilateral acts by these platforms of denial to market access is permitted, especially if these markets are prone to tipping. It is hence important to take the necessary coercive steps by the market regulator before things slip out of one’s hands. Consequently, it was therefore ordered by CCI to relist the properties of FabHotel and Treebo back on the online dominating portals of MMT-Go in the interest of free market and trade. It was also recommended by CCI that the matter of investigation should be expediated by the Director General and that the reports of the investigation should be provided as soon as possible.
CCI, by granting the interim relief in favour of the applicants proved that one should always strike when the iron is hot. Such an action by CCI shows us the evolution of gaining control in an effective manner over who-takes-it-all-in the market. While this can be termed as one-of-a-kind measures taken by CCI in its history, it also shows us that the timing forms the most crucial component of an interim order. Such pre-emptive intermediate solution stands between ex-ante enforcement and ex-post regulation.
Furthermore, CCI vide the issuance of such interim orders in order to preserve its character shows its laudable character. It can also be noticed that the interim measure has been issued by CCI as an ex-ante measure in order to prevent any future potential harm. The pre-emptive intermediate solution stands between ex-ante enforcement and ex-post regulation. Moreover, CCI endeavouring to undertake market studies based on the potential competition in the field of digital markets in India especially OTAs reflect its proactiveness which further set a norm for all the investigations in Indian digital market. However, CCI needs to further constrict the form of evidentiary standard in order to grant interim relief in the digital market. It is pertinent to note, that OYO was not given an opportunity to put forth its arguments at any point of time during the hearing which is in clear violation of the principles of natural justice. This could be an indication that CCI might have overstepped while pursuing its objectives. CCI thus, needs to strike a fine balance between its objectives and its intervention measures which requires to be used only in exceptional circumstances. In other words, CCI in its further endeavours should necessarily ensure that such boundaries are properly demarcated.