NRAI writes to CCI against special discounting offers by Zomato and Swiggy

On Monday, the National Restaurant Association of India (NRAI) said that it has filed information with the Competition Commission of India (CCI) highlighting practices by food aggregators Zomato and Swiggy that it claims “have an appreciable adverse effect on competition.”

The NRAI filed an information with the CCI on July 1 highlighting anti-competitive practices by Zomato and Swiggy that have a significant adverse effect on competition, according to a statement from the association. The restaurant body asked for a detailed probe against the food ordering platforms.

Its primary concerns have been service bundling, data masking, and exorbitant commission charges, price parity agreements, deep discounting, including forcing restaurant partners to give discounts to maintain an appropriate listing, the exclusivity of listed restaurants, and violations of platform neutrality, vertical integration, and lack of transparency on the platforms.

“We have been in constant dialogue with the foodservice aggregators over the last 15-18 months to resolve critical issues impacting the sector. However, despite all our efforts, we have unfortunately not been able to resolve them with the aggregators. The needle hasn’t moved much on these issues. We have therefore approached the CCI now to look into the matter and investigate them thoroughly,” said Anurag Katriar, President of NRAI.

According to NRAI, the magnitude of Zomato and Swiggy’s anti-competitive practices has increased dramatically during the pandemic, and despite numerous discussions with them, “these deeply funded marketplace platforms are not interested in alleviating the concerns of the restaurants. In fact, during the pandemic, due to onerous terms imposed, a lot of our partners had to shut shop”.

“We are committed to the cause of our partners, and we will put our best efforts with the CCI to ensure that the practices of these marketplace platforms are aligned to the benefit of the entire F&B industry,” said Katriar.

The move by NRAI comes just days before Zomato’s initial public offering (IPO), which was approved by regulator Sebi recently. Zomato had highlighted the risks associated with issues with restaurant and delivery partners in its draught red herring prospectus.

“If we fail to retain either our existing restaurant partners (especially our most popular restaurant partners), delivery partners (as a result of failing to provide compelling earning opportunities on our platform) or customers (including as a result of impaired relationships, decrease in popularity of a restaurant partner, delivery issues or competition) or fail to add new restaurant partners, delivery partners and consequently the customers, the value of our network may be diminished,” Zomato had said in its DRHP.

Zomato also cited the ‘logout’ movement by restaurants that did not agree on discount terms, saying that such issues in the future could harm its reputation and operations.

The restaurant bodies have been highlighting several issues in their dealings with marketplace platforms Swiggy and Zomato since 2018. When these marketplace platforms first launched, they had certain advantages; however, over time, their business practices began to significantly harm the food and beverage (F&B) industry, mentioned NRAI.

As part of the CCI’s e-commerce study as part of their advocacy measures, NRAI also sent their recommendations to the CCI and participated in various workshops held under the aegis of the CCI highlighting various practices conducted by Swiggy and Zomato. In the workshops, the NRAI took the lead in bringing the restaurant owners’ concerns to the CCI.

In recent months, the NRAI has promoted the ‘Order Direct’ campaign, which urged restaurants to avoid aggregators in order to avoid the steep commissions they charge and instead opt for channels that connect restaurants directly with customers.

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