5 April 2022 11:08 AM GMT
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...
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
Analysis by the CCI
Bundling of Services
The 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 Treatment
On 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 restaurants, but upon getting negative feedback decided that it adversely impacts customers' interest. It also stated that it doesn't own any restaurants that are listed on its platform. Thus, it refuted the allegations of preferential treatment. Swiggy submitted that it treats its private labels and the cloud kitchen with which it collaborated in a non-discriminatory manner and preferential treatment is not provided. On the issue of non-sharing of data, Swiggy asserted that the same is done to protect privacy of users and enhance the user experience of the Swiggy App.
The Commission was of the prima facie view that there seems to be a conflict of interest. It stated that their commercial interest in the downstream market would impede them from acting as neutral platforms. It felt there was a pressing need to investigate if preferential treatment was meted out to the private labels, cloud kitchen and restaurant partners the concerned aggregators have collaborated with.
"Thus, in case of both Swiggy and Zomato, from an overall appreciation of the facts, prima facie there exists a conflict of interest situation, warranting a detailed scrutiny into its impact on the overall competition between the RPs vis-à-vis the private brands/entities which the platforms may be incentivised to favor…Such preferential treatment can be through various ways given the platform's control over different aspects that influence competition on them, including control over deliveries, search ranking etc. which can only be examined appropriately in an investigation. In view of the foregoing as well as conflicting submissions made by the parties, including relevant data brought on record, the Commission is of the view that this allegation merits an investigation under Section 3(4) read with Section 3(1) of the Act."
Price Parity Agreements
With respect to the price parity agreements, the CCI, on perusal of the terms of the agreement noted that there exist wide restrictions, wherein restaurant partners are not allowed to maintain lower prices and higher discounts on their own supply channel or other aggregators. The Commission found it to have an appreciable adverse effect on competition and allowed investigation into the issue.
On the allegations pertaining to delayed payment cycle, imposition of one-sided clauses in the agreement, charging of exorbitant commission etc. the Commission was of the preliminary view that they don't seem to be anti-competitive in nature.
Case Title: National Restaurant Association of India v. Zomato Limited and Bundl Technologies Private Limited CCI Case No. 16 of 2021
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