Zomato and Swiggy: An investigation by the Competition Commission of India (CCI) has revealed that food delivery giants Zomato and Swiggy violated India’s competition laws through practices that allegedly favor specific restaurants, limiting market competitiveness. The findings, reported by news agency Reuters, come as a blow to both platforms, raising questions about their impact on India’s restaurant and food delivery market.
Exclusive Agreements with Partner Restaurants
The CCI probe, initially launched in 2022 after complaints from the National Restaurant Association of India, highlighted that both Zomato and Swiggy engaged in exclusivity contracts. Zomato reportedly offered reduced commission rates to certain restaurants, while Swiggy promised enhanced visibility and performance to restaurants willing to list exclusively on its platform. The CCI noted that these agreements stifled competition, preventing smaller restaurants and platforms from competing on an equal footing.
Impact on Market Competition
The investigation found both companies enforced strict price parity agreements, meaning restaurants on their platforms could not offer lower prices on competing platforms. Zomato reportedly threatened penalties for non-compliance with its pricing policies, while Swiggy warned some partner restaurants that their rankings would be reduced if they failed to adhere to price parity. According to CCI, such practices reduced market competition and affected consumer choice.
Swiggy’s New Program Raises Concerns
While Swiggy informed investigators that it ended its “Swiggy Exclusive” program in 2023, the company plans to launch a similar initiative called “Swiggy Grow” in non-metropolitan areas. CCI considers these potential future developments an internal risk for Swiggy, which it noted in its IPO documentation.
Stock Market and Business Implications
Following the CCI’s findings, Zomato’s stock saw a 3% dip, highlighting investor concerns over the potential impact of the case. Both companies face the risk of significant financial penalties if found in violation of the Competition Act provisions.
The CCI’s investigation underscores the scrutiny facing major digital platforms, especially as they expand and consolidate influence over the Indian market. The final decision in this case could lead to regulatory changes for online food delivery companies across the country.
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