MUMBAI (NewsRise) -- India's competition watchdog is probing if online travel company MakeMyTrip and SoftBank Group-backed Oyo formed a cartel to dominate the market, signaling fresh trouble for the hotel aggregator already facing growing discontent among its partners.
The Federation of Hotel and Restaurant Associations of India (FHRA) alleges that U.S.-listed MakeMyTrip and Oyo, which allows users to book hotel rooms online, are restricting the market access of other operators such as Fab Hotels and Treebo by breaching competition rules, according to the Competition Commission of India. The regulator said FHRA alleges that MakeMyTrip and Oyo entered into confidential agreements, and MakeMyTrip has agreed to give preferential treatment to Oyo on its platform.
In a statement dated Oct. 28, the commission said "there exists a prima facie case for investigation" against MakeMyTrip and Oyo for alleged violation of the rules that barred uncompetitive agreements between parties.
The allegations come close on the heels of rising protests against Oyo by hoteliers in different parts of the country, alleging unethical business practices, including charging multiple hidden fees that were not initially disclosed. According to a Reuters report, hotel groups in the southern Indian city of Bengaluru have sought for criminal probe into Oyo last month, saying it was withholding money after unfair fee increases.
Oyo's 25-year old Chief Executive Ritesh Agarwal is battling multiple police complaints from hoteliers, the report said. Agarwal and the company reportedly denied all allegations.
Oyo, which charges hotels a fee on room rentals, also signs up hotels under its brand. According to the Competition Commission order, FHRA in its complaint has alleged that both Oyo and MakeMyTrip levy commissions in the range of 40% to 45%, which are "exorbitant" and provide deep discounts.
Earlier this year, a New Delhi-based hotel owner filed a case with the competition watchdog against Oyo alleging it was abusing its dominant position in the market. In July, the regulator dismissed the case in favor of Oyo, saying "it cannot be unambiguously concluded that the company is in a dominant position."
In a statement on Tuesday, Oyo said the company is fully-compliant with rules and "have utmost faith" in India's administrative and judicial processes. "We will continue to cooperate with CCI's investigation process as we review the complete order," an Oyo spokesperson said.
"We are confident of demonstrating compliance with the principles of competition law while providing our partners and consumers the best in class services," a spokesperson for MakeMyTrip said Tuesday. "We shall extend full cooperation to the Competition Commission of India in the matter."
Started in 2013, Oyo claims to be the world's second-largest hotel operator with a portfolio of more than 12 million rooms across 80 countries. Earlier this month, the Gurugram-based company said it is raising $1.5 billion in its largest ever fundraising from Agarwal and main investor Japan's SoftBank Group, valuing the company at $10 billion.
SoftBank Group had, last year, pumped in $1 billion into Oyo through its Vision Fund.
The company has been expanding at a fast pace across international markets including in the U.S. and Europe, though growing focus on profitability has taken the bite out of its massive expansion plans in markets in China and Japan.
Oyo, which entered Japan in April with an ambitious expansion plan to become the country's largest hotel operator, is locked in a labor dispute. The company is struggling to sign up rooms, falling way short of its initial targets, leading up to pay cuts and growing employee discontent, labor representatives, who declined to be named, told the Nikkei Asian Review last week.
According to Chinese media reports, the company is planning large-scale lay-offs in the mainland. Oyo has denied the reports.
The string of setbacks at Oyo also portends more concerns for SoftBank Group, which is already roiled by a failed share offering of co-working space WeWork and sliding valuation at ride-hailing service Uber.
--Dhanya Ann Thoppil