CCI Orders Probe Against Zomato And Swiggy On Restaurants Association's Complaint Of Anti-Competitive Practices

The Competition Commission of India ("CCI"), on Monday, directed the Director General ("DG") to investigate and determine whether the conduct of Zomato and Swiggy are anti-competitive in terms of Section 3(1) read with Section 3(4) of the Competition Act, 2002 ("Act"). Being, prima facie, satisfied with some allegations made by the National Restaurant Association of India ("NRAI"), the CCI had directed the DG to carry out a detailed investigation as per Section 26(1) of the Act and submit a report within 60 days from receipt of order. NRAI, which represent the interest of more than 500000 restaurants in the country, filed a complaint under Section 19(1)(a) of the Act against Zomato Limited ("Zomato") and Bundl Technologies Private Limited ("Swiggy"), prominent online food delivery platforms, alleging anti-competitive practices and abuse of dominant position. Allegations raised by NRAI NRAI has alleged that on their respective platforms, Zomato and Swiggy bundles food delivery services with food ordering services. The restaurant partners who avail listing services are not allowed to self-deliver. However, the Vertically Integrated Food Chains, like Dominos, were permitted to offer self-delivery for the orders received through Zomata and Swiggy. Referring to the CCI's Market Study Report, it claimed that such bundling of delivery services was unfair and anti-competitive. It was pointed out that often the restaurants have to suffer for non-availability of delivery partners, delay in pickup and delivery on the part of Zomato and Swiggy. It was alleged that the bundling of services forecloses competitions and creates barriers for new entrants and in turn hinders innovation and improvement in distribution of food. Therefore, their conduct is in violation of Section 19(3) of the Act. Another issue that was highlighted by NRAI was that these online food delivery platforms practice data masking, keeping the restaurant partners in the dark about the end-consumers, though they are the ones who are held accountable for the services offered by these online food delivery platforms. Though Zomato and Swiggy state in their privacy policy that customer's consent is taken to share data with the restaurant, they don't pass on the same and use it to their own advantage. NRAI alleged that the online food delivery platforms play a dual role - that of an intermediary as well as a participant. Zomato and Swiggy list their own cloud kitchens and private labels on their platform. NRAI contended that preferential business terms are formulated for related entities, which would foreclose entry of competitors into the relevant market, in violation of Section 19(3)(a) to (c) of the Act. It was also alleged that owing to their superior bargaining power, Zomato and Swiggy enter into one-sided contracts with the restaurant partners. These online food delivery platforms also urge the restaurants to exclusively commit to be listed on their respective platforms. Both have been alleged to have imposed price parity terms on the restaurants which, inter alia, prevent them from charging lower prices on their own website or other food aggregator platforms. NRAI raised the issue of unviable rates of commission (20% to 30%) charged by Zomato and Swiggy from the restaurants. The discounts are, at present, mandated to be funded by the restaurant partners. Analysis by the CCI Bundling of ServicesThe CCI noted that Zomato and Swiggy had conceded that they do not allow restaurant partners to self deliver the orders placed through their platforms, but argued that the same is not anti-competitive. They have asserted that by providing end-to-end service of the orders, they aim to enhance consumer welfare. Zomato had stated that restaurants who do not want to be listed on its delivery platform can get listed on the restaurant search and discovery catalogue. It was also submitted that restaurants who wish to avail alternate delivery methods can do so after demonstrating requisite capacity. Swiggy had stated that from the inception they have been following the end-to-end model and if that does not suit the restaurants they are free to use the service of other aggregators. It argued that giving control of the delivery service to the restaurants would impede Swiggy's customer complaint resolution process. The Commission was of the opinion that the integrated service of food ordering and delivery was in the interest of the consumer and had no anti-competitive element to it. Moreover, it stated that NRAI was not able to make good its claim that bundling would cause appreciable adverse effects on trade-related competition in the relevant market. Data Masking and Preferential TreatmentOn the issue of Data Masking, Zomato averred that it protects customer data by choosing not to solicit the same. It had initially given access to the customers' data to the...

CCI Orders Probe Against Zomato And Swiggy On Restaurants Association's Complaint Of Anti-Competitive Practices

Sohini Chowdhury

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