The Competition Commission of India (CCI) has ordered a probe into the operations and business models of food delivery majors, Swiggy and Zomato pertaining to alleged violations of Section 3(1) and 3(4) of the Competition Act.
The CCI, in its order dated April 4, 2022, stated 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 the conduct of these companies have resulted in contravention of the provisions of Section 3(1) 3(4) of the Competition Act. The DG is, thus, directed to carry out a detailed investigation, in terms of Section 26(1) of the Act, and submit a report to the Commission, within 60 days from the date of receipt of this order, the competition watchdog said. The probe is response to a complaint filed by the National Restaurant Association of India (NRAI) with respect to alleged anti-competitive practices by Swiggy, Zomato, which as per the association’s plea commands more than 90 per cent market share of food delivery industry in India.
The NRAI had alleged that these online food aggregators indulge in deep discounting, exclusive tie-ups and preferential treatments of restaurant partners in violation of the country’s competition rules, which also impacts the business of restaurants as well as inhibits the entry of new players into the market. The CCI observed that some of the assertions put forth by the NRAI, especially in reference to Swiggy, Zomato-owned cloud kitchen/private label brands directly operating on the platform, merits investigation. The other concerns of the restaurant body, including delayed payment cycle, imposition of one-sided clauses in the agreement, charging of exorbitant commission etc, do not seem to have an effect on competition in the facts and circumstances of the present case. The competition watchdog, however, said that a case is also made out of price parity allegations by the NRAI where it is claimed that the restaurant partners are not allowed to list the food items on their own websites or other third-party applications at a lower price than Swiggy and Zomato. The Commission observed that this could present entry barriers to the new players without accruing any benefits to the consumers. While Zomato in its response to the NRAI’s plea has informed the CCI that it does not operate any price parity policy, Swiggy has said that its price parity clause only requires the restaurant partner to provide a competitive ‘list price’ of its products as offered on other platforms.
However, the restaurant partners are free to offer discounts and schemes such that the final price charged to a consumer on a platform may differ from platform to platform, Swiggy said in its response.