The Competition Commission of India (CCI) on Thursday rejected a complaint against Eternal, formerly known as Zomato, for allegedly abusing its dominant position by charging excessive platform fees, inflated menu prices and adopting “drip pricing,” which is a sales technique where only part of a product’s price is displayed at the beginning of the purchase process.
The CCI order stated that pricing differences between restaurant purchases and online food delivery stem from the distinct nature of the two business models and do not constitute anti-competitive conduct.
Regarding the excessive price charged by the Opposite Party (Eternal) compared to the concerned restaurant partner, the commission holds the prima facie view that this may not be considered abusive, as selling food items through online platforms includes other services like platform services and delivery services, the order stated.
Multi-Sided Business Model
According to the regulator, online food delivery platforms operate as multi-sided businesses, charging platform fees from consumers for online ordering services, delivery fees for logistics, and commissions from restaurant partners for listing and selling food on the platform. Restaurants may choose to pass these commissions on to customers by increasing menu prices, making it natural for prices on online platforms to differ from those at physical outlets.
Regulatory View
Addressing the complainant’s reliance on the price of a single food item, the CCI said the comparison was insufficient to establish abuse of dominance. It noted that the informant had chosen a sample of a single, low-priced food item to argue that the platform charged 88% more than the restaurant price. The order stated that such a comparison is misleading because if the food item were priced higher, “the percentage difference in price would accordingly decline as the delivery charge is a fixed charge and it may vary depending on the distance.”
Regarding drip pricing, the CCI explained that the practice involves initially displaying only part of a product’s price and gradually revealing mandatory charges such as platform fees, delivery charges and taxes during the purchase process. However, it held that these charges are linked to additional services and are disclosed before the order is placed. “Consumers have option to accept or reject the item till the last moment of placing order. Thus, drip pricing does not raise any competition issue, as such,” the order said.