This article is written by Jolly Tewari who is pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho.
Firms like yatra.com, Spotify, Netflix, Uber are termed as aggregators, they collect data from service providers such as production companies, taxi drivers, Indigo airlines, these aggregators sign contracts with such service providers, and sales are done under their own brand name.
Being a well-known brand aggregator only take products with good quality and at a feasible price.
Service providers are not employers but owners of their own like production companies.
They only need aggregator firm services for marketing of their products.
The Service Aggregation function means that we become the central point of contact for all service issues, and the central point of contact for all customer service providers.
Aggregators and online marketplaces(like Flipkart and Myntra) are different, these can quote price as per their freedom even for standardized price and price brands. Examples can be taken of Oyo: it keeps the price as per revenue generated whereas Uber uses a set price per kilometer. The competition is rough though as services of service providers can also be provided to aggregators and also to the rival one (like Indigo airlines providing services to yatra.com, makemytrip, and cleartrip).
These aggregator companies act as intermediaries and come under the Business web model between customer and the producer.
Aggregators sometimes partner among themselves to provide better services.
Recently news came that Oyo and Makemytrip came together to provide services where oyo became a service provider for the next five years. Here the agreement will be at two levels of service provider and aggregator agreements.
One between Makemytrip and Oyo and the other between Oyo and the hotel and homestay providers.
Customers planning to outsource to a services aggregator should understand some of the limitations of this model. With suitable retention of skills and retained scope, these limitations may be managed. The question to ask is whether the use of the services aggregator reduces the risks or costs, or improves the quality, of sourcing services as compared to the customer’s use of its employees (or even a third party other than the aggregator) to manage the customer’s services providers. Let’s understand it with this article-
Elements of an Aggregator Contract
- They belong to the same industry. For example, Airbnb will only provide services for hotel or homestays, Spotify will only provide services for audio books, music, podcasts, etc.
- Partnership model is used: Taj hotels, Emirates airlines and these kind of good service providers would not want to be employees of an aggregator hence a contract between a service provider and an aggregator will have a clause to accept or reject the aggregator’s offer.
- Brand reliability and quality is built by spending money by aggregator firms (to maintain brand value). Aggregators provide all services under one brand although service providers can be different.
- They have a contract with their service providers: Contract is signed between aggregator and service provider to highlight all important terms on the basis of their commission through partnership.
- The terms are usually unbiased and balanced in each party’s favour, giving quality service to the customer is very important.
- Hence, aggregator is there to market the services by creating leads for its service provider partner.
Steps in an aggregator business model
- Visit to service provider by aggregator.
- A partnership model is proposed by aggregator to service provider to get more and more customers.
- Both are now conducting business in a partnership.
- A brand is built by the aggregator in need for more customers for the service provider through the method of marketing.
- Service provider’s services are purchased by customer through aggregator.
- More customers are given as promised to service provider.
- As per their revenue share model the aggregator gets revenue.
Contract clauses that must be included in a contract between an aggregator and service provider
- Terms about Branding: the service provider and aggregator company are really very particular about branding. No disservice is expected at the cost of their brand’s reputation. No service provider wants to hear negative reviews by their customers on social networking sites or on their website. Example of a clause from an agreement-
Proprietary Information. All work performed under this Agreement (“Work Product”), including without limitation all notes, reports, documentation, drawings, computer programs, inventions, creations, works, devices, models, work-in-progress and deliverables will be the sole property of the service provider, and company hereby assigns to the service provider all right, title and interest therein, including but not limited to all audiovisual, literary, moral rights and other copyrights, patent rights, trade secret rights and other proprietary rights therein. The company retains no right to use the Work Product and agree not to challenge the validity of the service provider’s ownership of the Work Product.
- Quality and standards are expected of a service provider by aggregator, customer once decides the aggregator she is assured of the quality service For example, if she picks to use Makemytrip to book an airline ticket, she knows she does not have to call the airline customer number to confirm her ticket. She would not be cheated of her money and instead of booking an Indigo flight she would not be put on a 3rd AC train ticket or cheated of her money during the transaction.
- Revenue model: Either take-up-rate model like Oyo or model based on commission like Uber. In this model, a customer is provided by the aggregator to the service provider and in return commission is taken for the number of customers provided(a percentage of money is charged). And on the second take-up-rate model service provider gives a fixed amount and on top of that the aggregator charges an additional amount and charges the final amount which comes like OYO. Lets take an example of Independent Contractor clause:
Independent Contractor Status. The Service Provider is serving as an independent contractor in providing the Services. Under these Agreements, the Service Provider is neither an employee nor a partner of the Company.
But between service providers and the aggregator, these revenue models are not strictly adhered to in Contracts. For different business seasons and cycles the revenue model can be different. For determining dynamic pricing and discounts plays a very major role in accessing total revenue.
- Other terms based on industry of aggregator and service provider: Let’s take example of Airbnb and Amazon, both will have different terms for their service as their areas of service are different so the clauses will not be exactly the same. Example-
The scope of Services. The Service Provider is to provide the Company with the following services (the “Services”):
- [Describe the services]
- [Describe additional rights and responsibilities of both parties]
- [Describe the timeline, if any, including a “time, is of the essence” clause]
- A disclaimer of Warranties clause in case there is any information provided by the service provider which is incorrect on its website
- It is specifically stated by the aggregator that only works as a facilitator or booking agent and just intermediary for service providers.
- Breach clause is also provided in case any breach is caused by the aggregator due to not verifying any data given by the service provider, causing breach to the contract.
- There is prohibition on use of any such website which can in future cause great loss to both aggregator and service provider’s reputation by its use and decrease its brand value.
- A partnership clause mentioning the capital and its amount invested by the partners and registration of that partnership is also necessary
- Other boilerplate clauses such as termination, severability, indemnification, notice, dispute resolution clause, etc.
This aggregator model is preferred by the customer because there are so many variations in pricing and by saving money and time the method given to them is comparatively cheaper to consume services. If not for Aggregator the customer would have to visit and research those websites himself spending a whole lot of time, googling webpages, comparing prices, get reviews and finally, he would decide which services to choose and for which he will pay. An Aggregator like Myntra would show the best shopping options with the customer reviews to help in decision making for the customer.
Similarly, aggregators like Netflix, Amazon and other OTT platforms offer movies and shows through a feasible and cheaper method of consuming entertainment rather than individually purchasing or googling free or paid stuff and their premier versions are also ad free. Customer would not prefer that version where each and every time while watching something you need to pay and such kind of investment for media consumption won’t be preferred.
Aggregators such as Netflix or Disney+ Hotstar provide a one-stop shop for multiple genre media consumption through its host of service providers.
Hence, the aim of this article was to give insights to the important elements which should be kept in mind while drafting a service provider and Aggregator’s agreement, we saw how Business model can affect revenue, a good business model by service provider will never compromise on that then we some contract clauses which may or may not be included as per requirement, then a good pricing policy attracts customer, at the end everyone will prefer that model which is cheaper and saves their time.
Coronavirus came into this world and spread, since then service providers and aggregators have been hit. For example: when many booked hotel stays and flights they were not refunded their money for cancellation by the aggregator companies. People who booked through service providers directly were refunded sooner than the aggregators so we can see that aggregators are one who do not provide services directly. It is just a medium between customer and service provider to exchange information and take a fee for providing such online service.
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