Probe into Swiggy, Zomato for unfair business practices by Competition Commission
On Monday, a detailed probe was ordered by the Competition Commission of India (CCI) against food delivery platforms Swiggy and Zomato for engaging in unfair business practices allegedly in relation to restaurant partners’ dealings. The probe order follows an official complaint filed by NRAI (National Restaurant Association of India).
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 incentivised to favour”.
“Both Zomato and Swiggy operate as major intermediary platforms in the food delivery space, underscoring their market power and ability to adversely as well as appreciably affect the level playing field,” the CCI added.
The watchdog further added that practice by both Swiggy and Zomato to give preferences to restaurant partners in which they have equity or revenue interest can be a hurdle for other RPs to compete in the market on fair terms. “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,” it said.
In the 32 page long order to open investigation into the food delivery platforms, CCI said, “Such price parity clause 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) on the market by way of creating entry barriers for new platforms, without accruing any benefits to the consumers.”
The reference here by CCI was to the price parity clause that is mentioned in the agreements of Zomato and Swiggy. The clause indicates wider restrictions wherein the RPs are not allowed to keep low prices or high discounts on their own supply chain or another channel. This enables the platforms to keep minimum price and maximum discount available on their channels.