Indian competition authority issues interim order: Digital Players to watch out

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To grant an interim relief, the CCI must be satisfied that an act in violation of the Act was committed or continues to be committed.

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The degree of satisfaction for grant of interim relief is higher than the threshold used by the CCI while passing the prima facie investigation order. However, such a degree requires a subjective assessment on a case-to-case basis.

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The CCI noted the peculiarities of the present case, and held that there was sufficient compelling evidence against MMT-GO such that the threshold test for granting interim relief was satisfied.

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Digital markets, such as the OTA Market, are characterised by strong network effects and big data which play a crucial role in strengthening the market position of such platforms (for e.g., MMT-GO is a dominant OTA player);

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Owing to a significant shift in consumer preference towards digital platforms, online visibility of hotels / accommodations on prominent platforms (such as, MMT-GO) is indispensable for their survival.

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The exclusive agreement between MMT-GO and OYO was exclusionary in nature as it was conditioned upon delisting of OYO’s competitors from MMT-GO’s online portals.

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By delisting budget hotels like, FabHotels and Treebo pursuant to the agreement, MMT-GO foreclosed an effective distribution channel for these hotels causing them to incur significant losses in revenue.

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Denial of market access in any manner which takes away the freedom of an enterprise to effectively compete in the market, amounts to a contravention of the Act.

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More particularly, denial of market access in dynamic markets (where the winner-takes-it-all) can have the irreversible effect of tipping the market in favour of market incumbents who enjoy significant market strength (in this case, OYO).

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Timely and early intervention to redress competitive harm in such markets is crucial because any delay in corrective recourse can pose the dangerous risk of permanent distortion of the competitive landscape since growth of inter-platform competition will be stunted.

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For example, in this case, the CCI noted that the downstream market of franchisee hotels face the risk of marginalisation and can be forced to exit the market.

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Last year, the CCI published its market study on the e-commerce sector which highlights the potential competition issues in digital markets in India, including the OTA market. As such, by granting the interim relief, the CCI has shown its pro-activeness and has set the tone for future investigations into digital markets.

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What stands out in this case is the CCI’s categorical recognition of the importance of swift corrective actions to redress competitive harm in dynamic markets lest the competitive landscape of these markets should be permanently distorted. Recent modifications to the European Union’s competition legislation, also resonate with the stance that early intervention in such new-age markets is imperative to prevent marginalisation of rivals and irreparable ramifications to the competitive landscape.

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Further, not only did the CCI highlight the role of network effects and data in strengthening the market position of digital platforms, it also analysed current market realities i.e., the COVID-19 stimulated boost to digital markets, shift in consumer preferences to “go digital”, and the resultant necessity of online visibility.