India’s antitrust watchdog, the Competition Commission of India (CCI), has ordered an investigation into the conduct of food aggregators Swiggy and Zomato regarding anti-competitive food practices.
The watchdog will be investigating Swiggy and Zomato following a complaint from the National Restaurant Association of India (NRAI), a body that represents over 500,000 restaurants in the country.
The NRAI alleges that Swiggy and Zomato mask data from restaurant partners, operate cloud kitchens, offer deep discounts, enter into unfair and one-sided contracts with food outlets and prohibit individual restaurants from delivering orders on their own due to compulsory bundling of ordering and delivery services.
The NRAI has further alleged that Swiggy and Zomato are 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 in the platform’s role as an intermediary on one hand and as a participant on the other hand.”
The NRAI had also alleged that the companies use customer data for their in-house cloud kitchens that sell on the platform.
“During the (Covid-19) pandemic, the magnitude of anti-competitive practices of Zomato and Swiggy have increased manifold and despite numerous discussions with them, these deep funded marketplace platforms are not interested in alleviating concerns of the restaurants,” the NRAI said.
Swiggy and Zomato also face allegations such as delayed payment cycles and exorbitant commissions.
The watchdog has asked its director general to conduct a detailed inquiry into the accusations and submit a report within 60 days.
“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, to determine whether the conduct of platforms have resulted in contravention of the provisions,” the CCI noted in its 32-page order.
“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,” the order says.
Responding to the CCI order, Zomato said in a statement that the watchdog has not found concerns with respect to their independence on the levy of commissions or alleged bundling of services, but intends to investigate aspects such as preferential listing of restaurant partners and pricing parity.
“We will continue to work closely with the Commission to assist them with their investigation and explain to the regulator why all of our practices are in compliance with competition laws and do not have any adverse effect on competition in India. We intend to promptly comply with any recommendations given to us by the Commission,” Zomato said.