The Competition Commission of India (CCI) has asked its director-general to submit a report on the matter in 60 days.
The National Restaurants Association of India (NRAI), which represents over 500,000 restaurants, had moved CCI in July 2021 alleging anti-competitive practices by the food delivery platforms.
“The Commission is of the view that there exists a prima facie case with respect to some of the conduct of Zomato and Swiggy, which requires an investigation by the director general (DG), to determine whether … (they have) resulted in contravention of the provisions of Section 3(1) of the Act read with Section 3(4) thereof,” CCI said in its order late on Monday.
Swiggy and Zomato have previously denied the allegations in confidential as well as non-confidential submissions to the CCI.
When contacted, Zomato declined to comment, while Swiggy did not respond to ET’s queries until press time on Monday.
Discover the stories of your interest
“I do look at this as a step in the right direction, because a piece of matter has been looked at and is being investigated to see if the grounds that we’ve shared have any meaning,” Kabir Suri, president of NRAI, told ET.
“Major issues such as bundling, data masking, ad hoc commissions etc, needed to be looked at,” Suri, the co-founder and director of Azure Hospitality – which operates Mamagoto, Sly Granny and other outlets across cities – said.
Scope of investigation
NRAI had complained that Swiggy and Zomato were indulging in deep discounting, data masking, exorbitant commissions, and imposing price parity terms on restaurant partners.
The association had also said that the restaurant aggregators had resorted to “engaging in a dual role on their platform where they list their own cloud kitchen brands exclusively on their platform, akin to private labels, thereby creating an inherent conflict of interest.”
CCI has decided to look at these allegations.
“After careful perusal of the allegations as well as the submissions made by the parties, the Commission is of the view that prima facie a conflict of interest situation has arisen in the present case, both with regard to Swiggy as well as Zomato, because of the presence of commercial interest in the downstream market, which may come in the way of them acting as neutral platforms,” CCI said, referring to the private labels launched by the aggregators, which could lead them to act as intermediaries and as market participants.
Interestingly, while Zomato shut down its cloud kitchen service Access Kitchen last year, the fact that it has a ‘revenue interest’ through commissions on orders and rent for these third-party owned cloud kitchens calls for ‘scrutiny’ and further investigation, CCI added.
NRAI had also alleged that operating parties often induce restaurant partners to commit exclusively to the respective platform. In response, the CCI said it would also look at the issue of ‘platform neutrality’ against the food-tech companies.
“It may also be seen during investigation whether exclusivity in conjunction with minimum guarantee obligation is further accentuating the structure which may come in the way of the platform operating in a neutral manner,” CCI said.
CCI will also investigate NRAI’s allegations around ‘price parity’ arrangements followed by Zomato and Swiggy. The competition regulator noted that restaurant partners were not being allowed to maintain lower prices on the aggregators, which could likely impact the competition market by way of creating barriers.
Submissions to follow
On the allegation of bundling of services, CCI noted that ‘bundling’ of food delivery services with food ordering services does not seem to raise any competition concern as such.
However, restaurant partners through NRAI still plan to make further submissions on the dropped allegations.
“Now that CCI has taken an interest and it sees merit in the complaints, we will have a chance to further explain these concerns,” said Riyaaz Amlani, former president of NRAI and chief executive of Impresario Handmade Restaurants, which operates eateries such as Social, Saltwater Cafe, and Smokehouse Deli.
On matters related to delayed payment cycles, CCI said it had “given a thoughtful consideration to the submissions made by Zomato and Swiggy on the allegations pertaining to delayed payment cycle, imposition of one-sided clauses in the agreement, charging of exorbitant commission etc … the Commission is of the view that prima facie these do not seem to have an effect on competition.”
