This article is written by Pallavi Chandrasekhar who is pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho.

Introduction

An Aggregator is a firm like yatra.com, Netflix, Spotify, Uber that collects data from a particular service provider (like Indigo airlines, production companies, taxi drivers, respectively), signs contracts with such service providers, and sells its services under its own brand name.  As the aggregator is a well-known brand, it will only provide an offering which has uniform quality and price (like a five-star or four-star hotel or a known airline career).  These service providers would never be an employee of the aggregator and continue to be the owner of their service (flights or hotel stays, production companies holding copyright ownership over their music, movies, and TV shows).  The aggregator firm only helps them market their services.  

Aggregators are different from online marketplaces like Amazon and Flipkart.  They have the freedom to provide offers for a standardized price or price bands or some can even set their own prices.  For example, Uber has set a fixed price per kilometer whereas Oyo sets its own price utilizing the take-up rate revenue model.  Competition between aggregator firms are rough because the same service providers can provide their services to the aggregator and to a rival aggregator firm (like Indigo airlines providing services to yatra.com, makemytrip, and cleartrip).

Aggregator companies would come under the Business web (B-web) model acting as a value adding intermediary between the producer and the customer.

Sometimes aggregators partner with other aggregators to provide services as well.  For example, it was stated recently that Oyo and Makemytrip had extended their commercial aggregator and service provider (here Oyo would be the service provider) for another five years.  This means that there would be two levels of aggregator and service provider agreements.  One between Makemytrip and Oyo and the other between Oyo and the hotel and homestay providers.

Characteristics of an Aggregator

• They belong to the same industry.  For example, Airbnb will only provide services for hotel or home stays, Spotify will only provide services for audio books, music, podcasts, etc.  
• They use the partnership model:  A good service provider like Taj Hotels or Emirates Airlines would not want to be an employee of an aggregator.  Thus, the contracts between an aggregator and a service provider will have a clause wherein the service provider can either accept or reject the aggregator’s offer. 
• They have a brand value: Aggregator firms spend money to market and build their brand’s reliability and quality.  It would have quality, a price bracket, on-demand delivery of the service, etc.  All services would be provided by the aggregator under a single brand, but the service providers would be different.
• They have a contract with their service providers: The service provider and aggregator sign a contract with each other highlighting all the terms of the partnership and basis of their commission.  The terms are usually balanced in either party’s favour, importance is also given to giving quality service to the customer.  The aggregator’s role is that of marketing the said services and creating leads for its partner service provider.

Steps in an aggregator business model

1. The aggregator visits a service provider.
2. Aggregator proposes a partnership model for the service provider to get more customers.
3. Both are now partnering in a business
4. Aggregator builds a brand and tries to get more customers for the service provider through marketing.
5. Through the aggregator, customers purchase services of the service provider.
6. Service provider gets more customers as promised.
7. The aggregator gets revenue according to their revenue share model in the contract.

Contract clauses that must be included in a contract between an aggregator and service provider

• Terms about Branding: The aggregator company and the service provider are very particular about their branding.  They would not want any disservice to be brought to the reputation of their brands by negative reviews of their customers on their website.
• The standard and quality required by the aggregator from the service provider.  Once a customer picks which aggregator to use, she is assured of a certain quality of 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 based on commission as done by Uber or take-up rate model as done by Oyo. Under the commission model (followed by Uber), the aggregator provides (Uber) the service provider (cab driver) with the customer and in return takes a percentage of the fare charged by the service provider called commission.  Under the take-up rate model (followed by Oyo), where the service provider (provider of rooms/stays) estimates a minimum price at which it would operate, and the aggregator (Oyo) would add the overhead costs and charge a final amount from the customer.

However, these revenue models are not strictly followed in the contracts between the aggregator and the service provider.  The revenue could possibly be different for different business cycles and seasons.  Sometimes discounts and dynamic pricing also plays a major role in determining the total revenue for the aggregator.

• Other terms based on the industry of the service provider and aggregator.  For example: Netflix would have different terms for its movies with production companies and Airbnb would have some different clauses in its contract with hotel owners, etc.
• A disclaimer of warranties clause where in the aggregator does not take liability for incorrect information provided by the service provider on its website.  The aggregator specifically states that it is only the booking agent or facilitator for the service provider.
• The breach clause would include a clause where if the aggregator is unable to verify any data provided by the service provider, it would cause a breach of contract.
• Prohibits the service provider from using its website for unlawful use or purposes that could potentially damage the brand value of the aggregator and even the service provider.
• Partnership clause wherein it is stated the amount of capital invested by the partners in the business model, registration of that partnership if required, etc.
• Other boilerplate clauses such as termination, severability, indemnification, notice, dispute resolution clause, etc.

Pricing

The customers prefer this aggregator’s model because they have the option of choosing over a variety of price ranges and it offers them a cheaper method to consume services by saving their money and time.  Without an aggregator, a customer would have to individually visit the websites of at least a few service providers, toggle between web pages of each, compare prices, get reviews, and then finally decide which service she would like to pay for.  An aggregator like yatra.com would immediately give her the best flight options to her destination and show her customer reviews to help her with her decision before making payment.  

Similarly, when it comes to movie or tv show aggregators like Netflix, provide a cheaper method of consuming media instead of individually purchasing or viewing movies with or without ads depending on whether it is free or paid.  If one had to pay for watching every movie, or every episode, customers would not invest that kind of money in media consumption.  Aggregators such as Netflix or Disney+ Hotstar provide a one stop shop for multiple genre media consumption through its host of service providers.

Conclusion

Ever since the coronavirus pandemic has hit the world, since early 2020 aggregator companies and service providers have been hit.  Many customers had booked hotel stays, flights, etc. with travel aggregator companies and were not refunded their money on cancellation. The ones who booked directly with the service provider were given a refund faster than those booked through an aggregator.  The aggregator is someone who directly does not provide the service.  It only acts as a medium through which customer and service providers can meet and exchange consideration and services with the service provider and takes a fee for being the online medium.  

But once the pandemic hit, neither the customer could enjoy benefits nor could the service provider give the service. The aggregator suddenly experienced demands for refunds and shortage of funds for making such refunds while simultaneously trying to run the aggregator company. The aviation sector was one of the worse hit economic sectors by COVID  when the government ordered lockdown.  Aggregators like Yatra.com and Makemytrip.com lost huge money on tickets that were booked and cancelled. They were unable to make customer demanded refunds and faced huge backlash online with negative reviews reducing its brand value.

In August 2020, the Delhi High Court in a Public Interest Litigation (PIL) case asked the Central and Delhi Government to shut down health care aggregators that were operating illegally and collecting COVID samples by posing as ‘medical diagnostic laboratories’.  These instances of misrepresentation and lack of quality control calls for a legislation for regulating aggregator services.

References

1. https://www.feedough.com/aggregator-business-model/
2. https://www.researchgate.net/publication/224079803_Service_Aggregators_in_Business_Networks
3. https://www.yatra.com/online/yatra-user-agreement.html
4. https://health.economictimes.indiatimes.com/news/policy/hc-directs-action-against-illegal-health-service-aggregators/77393095
5. https://economictimes.indiatimes.com/industry/services/hotels-/-restaurants/oyo-makemytrip-extend-commercial-agreement-for-a-further-five-year-period-/articleshow/68398726.cms?from=mdr

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