Zomato, Swiggy to face probe for alleged unfair business practices

CCI’s observations

The CCI noted that the issue has raised a conflict of interest. “…the Commission is of the view that prima facie a conflict of interest situation has arisen in the present case, both with regard to Swiggy as well as Zomato, because of the presence of commercial interest in the downstream market, which may come in the way of them acting as neutral platforms,” the CCI said, directing its investigative arm to submit an investigation report in 60 days.

Zomato declined to comment on the order while Bundl Technologies, which operates Swiggy, did not respond to emailed requests for comment till the time of publishing this report.

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The NRAI had alleged that Zomato had used consumer data to build cloud kitchens and offered facilities to certain brands for additional fees or rental commissions, often guaranteeing minimum revenues to such brands. It also alleged that Swiggy also similarly benefited from a portion of sales from private labels and was thus incentivised to divert consumer traffic to them.

Payments and Commissions

In a setback to the NRAI, the CCI said that allegations of delayed payments and high commissions charged by platforms to restaurant partners prima facie “do not seem to have an effect on competition in the facts and circumstances of the present case.”

The commission also said that complainants had not been able to make out a case that bundling of restaurant listing and food delivery services had an appreciable adverse effect on competition.

The CCI had released a market study on e-commerce in 2020 which also analysed competition dynamics in the online food delivery space. It had also highlighted concerns of the marketplace acting as a market participant in the study.

The CCI noted that the lack of transparency of online platforms’ functioning and practices could lead to distortion of competition and had recommended that online platforms improve transparency to reduce information asymmetry between sellers using platforms and the platforms.

CCI chairperson Ashok Kumar Gupta had previously said that the commission has urged e-commerce platforms to improve transparency in certain areas of their functioning and that in the absence of self-correction, the CCI may use the “instrumentatily of the law”.