Swiggy, Zomato To Undergo Probe Over Alleged Unfair Business Practices

Synopsis – As per the Competition Commission of India (CCI), Swiggy and Zomato are among the few intermediary platforms present in the food delivery space and their market space and power are adversely as well as positively affecting the complete food delivery market.

On Monday, the Competition Commission of India (CCI) took the two largest food delivery platforms – Zomato and Swiggy under the scanner. The CCI has started an investigation against both companies for alleged unfair business practices regarding the way they are dealing with the restaurant partners. This order has been given after a complaint filed by the National Restaurant Association of India (NRAI). According to the regulator, the case will be investigated by the Director-General and the regulator also stated,

prima facie there exists a conflict of interest situation, warranting a detailed scrutiny into its impact on the overall competition between the restaurant partners (RPs) vis-à-vis the private brands or entities which the platforms may be incentivized to favor.

As per the Competition Commission of India (CCI), Swiggy and Zomato are among the few intermediary platforms present in the food delivery space and their market space and power are adversely as well as positively affecting the complete food delivery market. CCI also said,

 Such preferential treatment can be through various ways given the platform’s control over different aspects that influence competition on them, including control over deliveries, search ranking, etc. which can only be examined appropriately in an investigation.

According to CCI,

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.

Although Zomato never agreed to such comments and declined all the accusations, in addition to this, Swiggy, operated by Bundl Technologies did not respond to any emails which asked for permission to publish the report. However, Zomato has also been allegedly charged by NRAI for using customer data in order to build cloud kitchens and for offering facilities to some of the particular brands, such as rental commissions, and additional fees. NRAI also claimed that Swiggy is doing the same and has gained benefit from the sales portion of the private labels thus incentivizing in a way of diverting consumer traffic towards them.

For the same reason, CCI said in its 32-page order, 

Such price parity clause may discourage the platforms from competing on a commission basis as RPs need to maintain similar prices on all platforms and provide similar prices to the customers, regardless of the commission rates paid to the platform. Given that Zomato and Swiggy are the two biggest platforms present in the food delivery segment, their respective agreements with RPs of this nature are likely to have an Appreciable Adverse Effect on Competition (AAEC) in the market by way of creating entry barriers for new platforms, without accruing any benefits to the consumers.