Why Zomato and Swiggy are accused of Anti Competitive practices?

Alan Joseph Alan Joseph
Jul 12, 2021 5 min read
Why Zomato and Swiggy are accused of Anti Competitive practices?

The Restaurants around the country have been complaining about the monopoly that is created by the Food aggregators Swiggy and Zomato. Zomato has been getting ready for their IPO launch and this could create a potential threat to their listing or even can affect their stock prices after the listing. However, in this article let’s look at why the food aggregators are accused of anti-competitive prices.

Food delivery Platforms – Latest News
The main reason Why Restaurants are complaining against Food delivery platforms
What are the Problems faced by Restaurants?
Response from the Food Aggregators
The possible outcomes
FAQ

Food delivery Platforms – Latest News

The National Restaurant Association of India (NRAI) has approached the regulator for competition in India with regards to Swiggy and Zomato. The Restaurant Association has accused the food delivery startups of anti competitive prices in the industry.

The restaurant association had approached the CCI (Competition Commission of India) as the restaurants in the country were affected due to the competitive prices charged by the food delivery startups in the country.

The restaurants were forced to rely on these startups in order to run their businesses as lockdowns were implemented in different places in the country. They have also filed a case against the startups on 1 July 2021 and added that they have an adverse effect on the competition in the restaurant industry.

The main reason Why Restaurants are complaining against Food delivery platforms

The association has conveyed that the restaurants have been complaining against the food delivery startups in regards to the massive discounts that the startups provide to customers which in turn are affecting the business of the restaurants. There has been a conflict between the restaurants and the food aggregators regarding this.

The association has stated that the food delivery startup companies are trying to create a monopoly in the industry and have been charging commissions from the restaurants. The restaurants have also stated that the food aggregators are not providing them with the data of the customers.

Anurag Katriar who is the president of NRAI has stated that they have been in constant communication with the food aggregators for the past 15-18 months in order to find a solution to the problems faced in the industry. However, they were not able to come to a solution regarding the problems despite all their efforts with the food aggregators.


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What are the Problems faced by Restaurants?

The restaurants have been reporting certain problems that they are facing with the startups since 2018 and some of the major accusations made by the restaurants association in India are providing discounts.

The association has stated that the food delivery startups have been forcing the restaurants in order to provide discounts in order to let them stay listed on their mobile applications, the startups have been hiding the customer details from the restaurants and are collecting the preferences and the data of the customers and storing it for their personal use.

The food aggregators have forced the restaurants to use their delivery services in order to complete the order and they are forced to pay huge commissions in order to maintain their listing on the mobile applications.

Response from the Food Aggregators

The Food aggregators Zomato and Swiggy have not officially provided any comments regarding the concern that is taken by the restaurant association towards the competition regulator. However, the association has stated that they had been constantly communicating with the startups for the past 15 – 18 months in order to find a solution.

The association has also conveyed that the efforts taken by them have failed and the startups have not cooperated in resolving the issue and that is one of the major reasons for them to approach the CCI.

In the earlier studies conducted by the CCI, the food aggregators have conveyed that in regards to masking the data of the customers is done as they are maintaining the privacy of the customers and would not want the data to be leaked outside. The aggregators had also stated that the details are used to provide better and quality services to the customers.

The possible outcomes

The next step can be that the CCI may take the case up and investigate further into the concern that is mentioned by the National Restaurant Association of India or maybe even not take it into consideration as a research was conducted into it previously.

The NRAI has stated that they are working towards developing a mobile application in order to resolve the issue that is faced by the restaurants. They are working towards developing their own food aggregator app which would avoid all the problems faced by the restaurants.

The association has conveyed that the mobile app is under development and would be ready to launch in the next two months and added that the back-end team is working towards the development of the mobile application.


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Conclusion

However, whatever steps that are taken by the CCI or the NRAI the end customers and the consumers would be affected. The customers will have to pay a higher price and would not be able to enjoy the discounts that are offered by the current food aggregators and they will have to face poor delivery services as well or even pay huge amounts for the delivery of their food.

FAQ

What is a food delivery aggregator?

The food delivery aggregators offer access to multiple restaurants through a single online portal and they collect a fixed commission of the order, which is paid by the restaurant.

How much commission does Zomato charge from restaurants?

Swiggy and Zomato obtain 22-25 percent on order value from their restaurant partners.

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