Zomato-Swiggy to be investigated: CCI orders investigation of online food aggregators; Alleged violation of competition rules, DG will submit report within 60 days
The Competition Commission of India (CCI) has ordered a probe into the operation and business model of online food delivery companies Swiggy and Zomato. These orders have been given in the case of violation of Section 3(1) and 3(4) of the Competition Act. The CCI in its order has asked the Director General (DG) to conduct a detailed inquiry in the matter and submit the report to the commission within 60 days.
NRAI had filed a complaint
The National Restaurant Association of India (NRAI) had filed a complaint in July last year against Swiggy, Zomato, alleging anti-competitive practices. NRAI had alleged that these online food aggregators give preference to deep discounting, exclusive tie-ups and restaurant partners which is in violation of competition norms. This affects the restaurant business and also prevents the entry of new players into the market. NRAI represents more than 50,000 restaurant operators across the country.
Anti-competitive practice increased manifold
NRAI alleged that during the COVID-19 pandemic, the anti-competitive practices of Zomato and Swiggy increased manifold. Despite several discussions, no effort was made to allay the concerns of restaurant operators. NRAI said that 20%-30% commission is charged from restaurants, which is very high. These food aggregators are alleged to charge around 27.8% of the order value from restaurants listed on their platform, with the commission rate for cloud kitchens going up to 37%. CCI found that some of the claims of NRAI are verifiable.
Zomato 10 minute food delivery preparation
The CCI investigation comes at a time when Zomato is gearing up to start 10 minute food delivery. Recently, the company’s founder Deepender Goyal had said that the company is not pressurizing its delivery partners to distribute food faster. Explaining the new model, Goyal said that there is no penalty for delay in delivery of both 10 and 30 minutes and no incentive will be given for on-time delivery. Only food items like Bread Omelette, Poha, Coffee, Tea, Biryani, Momos will be added to the new service.
