Indian food ordering and delivery giants Swiggy and Zomato may face an investigation over anti-competitive practices as the local restaurant industry body has filed a complaint against the duo with the market regulator, the Competition Commission of India (CCI).
The National Restaurants Association of India (NRAI), which represents over 50,000 restaurants and eateries in the country, has submitted detailed information on the practices followed by food aggregators that are hurting the industry to the CCI on July 1.
“During the pandemic, the magnitude of anti-competitive practices of Zomato and Swiggy have increased manifold, and despite numerous discussions with them, these well-funded marketplace platforms are not interested in alleviating the concerns of the restaurants. In fact, during the pandemic, due to onerous terms imposed, a lot of our partners had to close shop,” the NRAI said in a statement on Monday.
In its petition to CCI, the NRAI alleged Swiggy and Zomato charge restaurants “exorbitant commissions” and “mask customer” data from them so that restaurants can’t approach consumers directly. The complaint highlighted the fact that Zomato and Swiggy arm-twist restaurants into providing steep discounts in lieu of maintaining an appropriate listing and that non-participation by them could lower their visibility on the platform.
The NRAI also said the two major online food marketplaces are breaching platform neutrality by favoring their in-house brands, aside from giving restaurants that sign exclusive agreements better benefits. Furthermore, it noted that Swiggy and Zomato sign price parity contracts with restaurants that bar them from offering their food items at lower prices on other platforms.
For the last few years, Swiggy and Zomato have been facing stiff protests from restaurants across India. Aside from unfair high commissions, deep discounting practices, and withholding customer data, the two food marketplaces bundle delivery services with their listing services that makes it mandatory for restaurants to use both services and rank restaurants as per the commissions paid by them, the NRAI had previously alleged.
This is the second time that the NRAI has knocked on the CCI’s door. The industry body had written to the CCI in early 2019 regarding Zomato and Swiggy misusing their dominant positions. This led the CCI to commission a market study and organize a series of workshops to bring the two parties together to discuss and resolve their issues. By the second half of 2019, hundreds of eateries had joined a nationwide logout campaign against Swiggy and Zomato. However, with the onset of the COVID-19 pandemic in early 2020, online channels emerged as the preferred medium for users who avoided going out, and this issue took a backseat.
“Since 2018 onwards, restaurants have been facing numerous issues in their dealings with marketplace platforms Swiggy and Zomato. When these marketplace platforms started, they had certain advantages; however, over time, their business practices started hurting the F&B industry massively,” said the industry body in a statement.
According to Anurag Katriar, president of the NRAI, the industry lobby has been in “constant dialog with foodservice aggregators over the last 15–18 months to resolve critical issues impacting the sector.”
However, he said they have not been able to resolve these issues and therefore approached the CCI to look into the matter and investigate them thoroughly. With a fresh petition to the CCI, the NRAI is now preparing to take this long-standing battle to another level. The market regulator will examine the complaint, based on which it may either order a formal investigation or dismiss the complaint by the NRAI.
Meanwhile, many restaurant members have started using alternate tech platforms to break the duopoly of Swiggy and Zomato in India’s online food delivery market.