The Competition Commission of India (CCI) on Monday, April 4, ordered a thorough investigation into the conduct of online food delivery platforms Zomato and Swiggy, which are allegedly involved in delayed payment cycle and exorbitant commissions.
Following a complaint from the National Restaurant Association of India (NRAI), the CCI said that it is of the view that there exists a prima facie case with respect to the conduct of Zomato and Swiggy, "which requires an investigation by the Director General (DG), to determine whether the conduct of platforms have resulted in contravention of the provisions " of the Competition Act, 2002. The NRAI represents over 50,000 restaurant operators across the country.
In its complaint filed in July 2021, the NRAI had sought an inquiry into alleged data masking, violations of platform neutrality and other charges against Zomato and Swiggy. "Given that platforms are vertically related with the restaurant partners (RPs), including their private brands and those operating through their respective cloud kitchens, such arrangements whereby preferential treatment is accorded to some entities can be looked at as a potential contravention of Section 3(4) read with Section 3(1) of the Competition Act," the CCI said.
The NRAI had alleged that the commissions that are charged from restaurants are "unviable" and "are to the tune of 20% to 30%, which are extremely exorbitant". Zomato was accused of charging approximately 27.8% of the order value from the restaurants listed on its platform. For cloud kitchens, the commission rate is as high as 37%, the NRAI told the CCI.
"By bundling delivery services with listing services along with data masking, Zomato hinders competition in the market in two ways," according to the CCI. "Firstly, availing the platform's delivery services drives up the cost of doing business, which is passed on to the end consumers; and secondly, even non-price factors such as the quality of delivery are adversely affected, as certain RPs who can avail trained delivery fleet are not allowed to make deliveries," said the order.
Zomato and Swiggy were yet to react to the CCI order.
The NRAI has also stated that Swiggy and Zomato collect data from customers based on their past purchases and use that data to customise the offerings being made to each consumer.