CCI to probe Zomato, Swiggy for alleged unfair business practices

Competition Commission on Monday ordered a detailed probe against food delivery platforms, Zomato and Swiggy, for alleged unfair business practices with respect to their dealings with restaurant partners.

The order comes months after the National Restaurant Association of India (NRAI) asked the CCI to investigate the companies for breaching platform neutrality by providing priority to exclusive contractors.

The watchdog's probe arm -- Director General (DG) -- will investigate the case and submit the report in 60 days. 

The regulator said that "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 favour".

CCI said allegations such as delayed payment cycle, imposition of one-sided clauses and exorbitant commission require investigation

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 Competition Commission of India (CCI) said.

It also noted that preferential treatment accorded to the Restaurant Partners (RPs) in which these platforms have an equity or revenue interest can create barriers for the existing RPs to compete 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.

Besides, the anti-trust regulator said the price parity clauses mentioned in the agreements of Zomato and Swiggy appear to indicate wide restrictions where the RPs are not allowed to maintain lower prices or higher discounts on any of their own supply channel or on any other aggregator, so that the minimum price or maximum discounts can be maintained by the platform.

"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 AAEC on 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.

AAEC refers to Appreciable Adverse Effect on Competition (AAEC).

The CCI probe will come at a time when Zomato is gearing up to start instant 10-minute food delivery.

Recently, the company founder Deepinder Goyal said the company is not putting any pressure on its delivery partners to deliver food faster but will achieve the target by relying on a dense finishing stations' network, which is located in close proximity to high-demand customer neighbourhoods.