NRAI approaches CCI for investigation into Zomato, Swiggy’s business practices

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July 06, 2021 2:00 AM

In its submission filed on July 1, the NRAI said the online food aggregators engage in data masking, charge exorbitant commissions and coerce restaurant partners to give deep discounts to maintain appropriate listings.

ZomatoIPO, Zomato, grofers Zomato, India’s home grown unicorn, would be the first of many Indian tech startups to list on the stock exchanges.

The National Restaurant Association of India (NRAI) has filed a submission with fair trade regulator Competition Commission of India (CCI) highlighting certain business practices of Zomato and Swiggy which the association believes to be anti-competitive.

In its submission filed on July 1, the NRAI said the online food aggregators engage in data masking, charge exorbitant commissions and coerce restaurant partners to give deep discounts to maintain appropriate listings. Bundling of services, violation of platform neutrality and lack of transparency on the platform are some of the other issues mentioned by the industry body that represents the interests of more than 500,000 restaurants across the country. The NRAI said such business practices have an “appreciable adverse effect on competition”.

“We have been in constant dialogue with the food service 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. The needle has not moved much on these issues. We have therefore approached the CCI to investigate them thoroughly,” NRAI president Anurag Katriar said.

Pandemic-led disruption has squeezed incomes of restaurants, forcing many companies to shut outlets and review their business strategies. Mid- and small-sized restaurants that do not have a sound financial standing have been hit harder. As intermittent lockdowns hurt business, restaurants have been banking on home deliveries to sustain themselves.

“During the pandemic, the magnitude of anti-competitive practices of Zomato and Swiggy has increased manifold and despite numerous discussions with them, these deep 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 shops,” the NRAI said.

Since 2018, restaurants have been facing numerous issues in their dealings with the marketplace platforms. Although partnering with Zomato and Swiggy initially seemed to be beneficial, their business practices eventually started hurting the F&B industry massively, the association said.

A clutch of restaurants under the aegis of NRAI have also joined ranks to launch direct ordering to save up on commission costs and engage directly with consumers. They have partnered with tech platforms like DotPe and Thrive to power their own ordering websites.

Zomato and Swiggy recorded significant growth in order volumes through the course of the pandemic as consumers restricted movement and took to online ordering of food. The two firms also attracted sizeable funding from investors. On Monday, Sebi formally approved Zomato’s initial public offering application.

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