Zomato and Swiggy found guilty by CCI for violating competition laws: Report

India's Competition Commission of India (CCI) has found food delivery giants Zomato and Swiggy guilty of violating competition laws, according to a report by Reuters. The investigation revealed that both companies allegedly engaged in practices favouring select restaurant partners, thereby limiting market competitiveness, according to documents cited in the report.

The CCI's probe into Swiggy and Zomato began in 2022 following a complaint by the National Restaurant Association of India. It identified exclusivity agreements as a core issue. Key findings include Zomato's "exclusivity contracts" with certain restaurants, allowing them lower commission rates, and Swiggy's growth guarantees to restaurants exclusively listing on its platform. These arrangements reportedly prevent new players from entering the market and stifle competition, ultimately disadvantaging consumers.

The investigation also highlighted that both companies pressured restaurants to maintain consistent pricing across platforms. Zomato imposed pricing and discount restrictions, including penal provisions for non-compliance, while Swiggy reportedly warned partners of potential rank downgrades if they offered lower prices elsewhere.

The findings, confidential under CCI regulations, were shared in March 2024 with Swiggy, Zomato, and the National Restaurant Association of India. Zomato declined to comment, and Swiggy did not respond to queries. The investigation's outcomes have already impacted Zomato's stock, which dropped 3% following Reuters' coverage.

This case has broader implications for Swiggy, particularly as its $1.4 billion IPO is currently closing bids, making it the second largest IPO in India this year. The investigation was cited as an "internal risk" in Swiggy's IPO prospectus, warning that a breach of competition laws could attract severe penalties.

In response to the findings, Swiggy reportedly halted its "Swiggy Exclusive" program in 2023 but plans to introduce "Swiggy Grow," targeting non-metropolitan areas. Both companies have significantly reshaped India's food delivery landscape and are expanding into "quick commerce," offering grocery delivery in as little as 10 minutes, a sector under separate scrutiny for alleged predatory pricing.

The CCI leadership is currently reviewing the investigation findings, with a final decision on potential penalties or required operational changes expected soon. Both Swiggy and Zomato may contest any final decisions through the CCI.

This case reflects the growing regulatory focus on India's fast-evolving digital market, as platforms like Zomato and Swiggy navigate aggressive growth strategies amidst compliance pressures in a highly competitive landscape.