The Competition Commission of India (CCI) has ordered a thorough investigation into Zomato and Swiggy’s business practices. There is an allegation on these two online food delivery platforms of malpractice in their dealings with restaurant partners.
The order came after the National Restaurant Association of India (NRAI) lodged a complaint. The case will be investigated by the watchdog’s probe arm, the Director-General (DG).
According to the report by PTI, CCI said that “prima facie there exists a conflict of interest situation, warranting a detailed scrutiny into its impact on the overall competition between the restaurant partners (RPs) vis-à-vis the private brands or entities which the platforms may be incentivized to favor”.
Competition Commission of India (CCI) said both Zomato and Swiggy operate as intermediary platforms in the food delivery space, highlighting their market dominance and ability to adversely and appreciably alter the level playing field.
It further stated that preferential treatment given to Restaurant Partners (RPs) in which these platforms own equity or revenue could make it hard for current RPs to compete on equal footing.
“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. that can only be examined appropriately in an investigation,” it said.
Besides, the price parity clauses readily mentioned in Zomato and Swiggy agreements seem to expand the limitations on RPs by prohibiting them “to maintain lower prices or higher discounts” on any of their supply channel or any other aggregator, so the same (to maintain lower prices or higher discounts) can be in control of the platform.
“Such price parity clauses may discourage the platforms from competing on the commission basis as RPs need to maintain similar prices on all platforms and provide similar prices to the customers, regardless of the commission rates paid to the platform. Given that Zomato and Swiggy are the two biggest platforms present in the food delivery segment, their respective agreements with RPs of this nature are likely to have an Appreciable Adverse Effect on Competition (AAEC) in the market by way of creating entry barriers for new platforms, without accruing any benefits to the consumers,” CCI said in a 32-page order.
The CCI probe has come when Zomato has announced its instant 10-minute food delivery services.
Zomato Stock:
Shares of Zomato slipped to Rs 82.15 on the BSE in Tuesday’s intra-day trade over the report by PTI concerning Competition Commission (CCI) ordering a detailed probe against food delivery platforms, Zomato and Swiggy.
Zomato’s stock tumbled to a record low of Rs 75.55 on March 16, 2022, and recorded an all-time high of Rs 169.10 on November 16, 2021.
Zomato raised Rs 9,375 crore via initial public offer (IPO), with shares having an issue price of Rs 76 apiece.