Indian food ordering and delivery giants Swiggy and Zomato may encounter an inquiry over anti-competitive activities as the National Restaurants Association of India (NRAI) recently filed a complaint against the duo with the competition watchdog, the Competition Commission of India (CCI).
First co-founded in 1982, the NRAI is the prominent body reiterating the welfares of over 500,000 restaurants and cafeterias. It has a committee of 35 members, comprising CEOs and founders of leading F&B establishments. One of its chief objectives is to ensure that fair and competitive practices are followed in the industry, ensuring a level playing field for all stakeholders. And they felt that Swiggy and Zomato were definitely not living up to this.
DISHARMONY IN PARADISE
Since 2018, restaurants in India have been vociferous in their objections about Swiggy and Zomato business practices in India. In early 2019, NRAI raised a red flag and communicated to the CCI about Zomato and Swiggy mishandling their leading titles.
As a result, the CCI began a market study and organized several seminars to bring the two parties together to debate and resolve their problems. By the second half of 2019, hundreds of restaurants had joined a nationwide logout movement against Swiggy and Zomato.
However, when COVID-19 struck in early 2020, online channels became the desired mode for consumers for ordering food. And this dispute took a backseat.
NRAI’S LATEST APPEAL
On July 1, 2021, the NRAI approached CCI again and submitted comprehensive information on the business practices followed by the two leading food aggregators and outlined how it was harming the F&B industry. In a statement, the association mentioned that restaurants in the country were disturbed by the inherently anti-competitive practices of Zomato and Swiggy.
The case filing outlined how the food tech companies had created a hostile influence on competition and how their anti-competitive practices amplified during the pandemic. It added that despite several negotiations, these platforms are unconcerned about lessening the worries of restaurants.
NRAI alleged that they were involved in deep discounting, masking data, violation of platform neutrality, and bundled delivery services. They compelled restaurant partners to give discounts to maintain the appropriate listing. It has also accused that customers’ data and feedback appraisal were gathered to serve the likes and preferences of their business to create the monopoly.
Restaurants partners claimed that commissions paid by them affected their search positions and requested better clarity in listing guidelines of online food aggregators. The NRAI has added that food aggregators have made it compulsory for restaurants listed on the platform to use its delivery services.
Anurag Katriar, President of NRAI, stated that the association has been in continuous discussion with the foodservice giants over the past 15 to 18 months to solve few serious matters impacting the segment. However, regardless of all attempts it has unfortunately not been able to solve them with the aggregators.
STUCK BETWEEN A ROCK AND HARD PLACE
While Swiggy and Zomato have not issued any formal responses, they had earlier tackled some of the matters raised by their restaurant partners. They mentioned that data masking was needed to guard the confidentiality of their customers and that they provided restaurants data necessary to help them develop their functioning in terms of customer review and rating. The food tech companies also declared that restaurants are not required to join in deep discounting arrangements.
CCI has not passed any orders on NRAI’s contentions, though it did comment that it may specify its opinions on these issues. The agency observed that the lack of clarity of the online platforms’ performance and customs could lead to misrepresentation of competition, and suggested that they enhance transparency to lessen information irregularity between sellers using platforms and the platforms.
CCI also suggested that online platforms set a fundamental outline for negotiating agreements and set up avenues to regulate both their discount policies and clash solution between platform and sellers. It emphasised that the matter of the disparity in bargaining power between restaurants and platforms was at the heart of several issues, including the commissions charged by platforms and deep discounting of products.
WHAT NEXT?
All eyes are now on the CCI. It may conduct an investigation based on NRAI’s charges or terminate the complaint. Irrespective, this continuing turf war between food delivery tycoons and the industry association might end up affecting end-consumers. They would have to say goodbye to happy hour deals if modifications on flash sales become part of the new ruling and see a bump in prices.
In the meantime, the NRAI is also preparing to launch an app to deal with Swiggy and Zomato. Providing discounts and loyalty programs, it is being designed to counteract the platforms of the existing food aggregators.
Moreover, customers will not have to pay for the app unlike loyalty apps namely Zomato Gold, and can encash their loyalty points at any restaurant. Last year, NRAI was negotiating with tech partners to start its own app for deliveries, but this did not come through.
HEALTHY COEXISTENCE NEEDED
When the food delivery model picked up in India in 2014, the restaurant industry sensed that it would remove many worries revolving around delivering of food. Initially, the platforms helped restaurants access consumers in faraway locations, appearing to be a win-win situation for all. Soon, it emerged as a double-edged sword.
This saga has underlined the need for autonomy in business – F&B outlets should build their own channels like websites, social media and instant messaging to take orders and deliver it. It is also important for agencies like the CCI to act guarantee that the F&B sector is not run to ground, due to autocratic practices of by online delivery platforms.
