CCI orders probe against Zomato, Swiggy

The Competition Commission of India (CCI) on Monday ordered a probe into allegations of anti-competitive practices against food delivery companies Zomato Ltd and Bundl Technologies Pvt. Ltd which runs the Swiggy app.

This followed a complaint filed by the National Restaurant Association of India (NRAI) which charged the online platforms with levying unilaterally decided commissions on restaurants, leading to entry barriers for new players, bundling of food ordering and delivery services without an option for restaurants to use their own delivery persons and being non-transparent with restaurants about customer details, the CCI said in its order, a copy of which was seen by Mint.

The allegations refer to Competition Act provisions that disallow agreements that cause appreciable adverse effect on market competition.

Zomato and Swiggy did not immediately respond to emailed queries.

The CCI has asked its director general of investigation to complete the probe in 60 days.

The competition watchdog said it was of the view that there existed “a prima facie case with respect to some of the conduct of Zomato and Swiggy, which required an investigation by the director general” to determine whether it breached the competition law.

The regulator also clarified that nothing in its order should be tantamount to a final expression of opinion on the merits of the case and that the director general should conduct the investigation without being swayed in any manner by the commission’s observations.

The CCI also said based on the responses from Zomato and Swiggy, it was of the view that certain allegations against them regarding delayed payment cycle, imposition of one-sided clauses in the agreement or charging of exorbitant commissions did not seem to have an effect on competition.

The NRAI, which represents more than 500,000 restaurants, alleged that the commissions were solely decided by Zomato and Swiggy and were presented to the restaurant partners as a “take it or leave it proposition”, showed the order.

The regulator said some clauses in the merchant terms were onerous and showed the skewed bargaining power of Swiggy and that Swiggy’s statement that it has an objective criterion for charging commission was liable to be investigated.

The NRAI informed the CCI that the market has seen a consolidation to the point where it consists of only two major online food platforms that do not face competitive pressures from other players or restaurant partners.

Besides, there has not been any effective credible entry a new competitor since the last three years and others have been absorbed either by Zomato or Swiggy, demonstrating significant entry barriers, the CCI order said quoting the NRAI.

Online food delivery apps became popular during the pandemic as they connected restaurants and consumers while mobility restrictions were in place to fight back the pandemic.

gireesh.p@livemint.com