Swiggy- Zomato breaks competition rules to give advantage to big restaurant chains

New Delhi| Online food delivery platforms Zomato and Swiggy have violated competition rules to benefit the big restaurant chains listed on their respective platforms. This has been revealed in the investigation of Competition Commission of India (CCI). According to non-public documents prepared by the commission, Zomato entered into ‘exclusivity contracts’ with restaurants listed on its platform in exchange for lower commissions. At the same time, Swiggy assured some restaurants that their business will grow rapidly if they are listed only on its platform.

This special contract between Zomato, Swiggy and their associated restaurants prevents the market from becoming more competitive, the Competition Commission of India said in its investigation findings. CCI’s investigation documents have not been made public due to confidentiality rules. These have been shared with Zomato, Swiggy and the Restaurants groups that complained about them in March, 2024. However, Zomato, Swiggy and CCI refused to comment in this regard.

Both companies are also accused of threatening
Swiggy and Zomato have driven restaurants to maintain price parity in recent years, the investigation document said. Also, competition in the market has been reduced by stopping restaurants offering lower prices on other online platforms.
Zomato had imposed pricing and discount restrictions on its restaurant partners. In some cases, punitive action was also taken against those restaurants which did not follow these restrictions. Some of Swiggy’s partner restaurants were threatened that if they did not maintain price parity, their rankings would be downgraded, the CCI’s investigation arm said.

The action may take several weeks
CCI is reviewing the investigation findings against Swiggy and Zomato. It may take several weeks for the Commission to take a final decision, only after which action will be taken against both the companies. On the other hand, Swiggy and Zomato have the option to challenge the investigation findings of CCI.

Other restaurants are suffering losses
The Competition Commission of India document said other restaurants are being affected due to the anti-competitive business practices of Swiggy and Zomato as they cannot offer lower prices on other online platforms. The National Restaurant Association of India had complained to the CCI in view of the loss caused to restaurants due to these anti-competitive business practices of both the companies. It was only after this that the Competition Commission of India started an investigation in 2022 against Swiggy and its rival Zomato.

Zomato shares fell 2.37%

Zomato shares closed 2.37 per cent lower at Rs 249.10 on the BSE on Friday after the investigation report came out. Swiggy’s food order will be valued at $3.3 billion in 2024-25, about 25 percent less than Zomato, according to Macquarie Capital estimates. Both companies are now increasingly diversifying into quick-commerce, where groceries are delivered in less than 10 minutes.