India’s anti-monopoly watchdog has ordered a probe against food delivery apps Zomato and Swiggy for suspected discriminatory pricing practices and other issues raised in a complaint by a restaurants’ association last year.
The National Restaurants Association of India (NRAI), which represents over 500,000 restaurants, filed a complaint with the Competition Commission of India (CCI) in July 2021, stating that meal delivery companies were engaging in anti-competitive actions.
Now, the CCI has asked its director-general to submit a report within 60 days.
The order stated: “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.”
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 restaurant aggregators, according to NRAI, have also resorted to playing a dual role on their platform where they list their own cloud kitchen brands exclusively, similar to private labels, thus creating an inherent conflict of interest.
While referring to the aggregators’ launch of private labels, which could lead to them acting as intermediaries and market participants, the CCI said that a conflict of interest situation has arisen.
It is also said that this is due to the presence of commercial interest in the downstream market, which may prevent them from acting as neutral platforms.
The CCI also noted that while Zomato shut down its cloud kitchen service Access Kitchen last year, the fact that it has a ‘revenue interest’ in these third-party-owned cloud kitchens, through commissions on orders and rent, calls for scrutiny and further investigation.
However, NRAI stated that operating parties frequently induce restaurant partners to commit exclusively to the respective platform. In response, the CCI stated that it would investigate the issue of “platform neutrality” against food-tech companies.
During the investigation, it may also be seen whether exclusivity in conjunction with a minimum guarantee obligation is further emphasising the structure, which may obstruct the platform from operating in a neutral manner, noted the CCI.
The CCI will also look into NRAI’s allegations about ‘price parity’ arrangements, which were followed by Zomato and Swiggy. The competition regulator observed that restaurant partners were not permitted to maintain lower prices on the aggregators, which could have an impact on the competitive market by creating barriers.
Concerning the allegation of service bundling, the commission stated that ‘bundling’ of food delivery services with food ordering services does not appear to raise any competition concerns.
The restaurant partners intend to make additional submissions on the dropped allegations.
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