CCI to probe Zomato, Swiggy over alleged conflict of interest

The Competition Commission of India (CCI) said it will conduct a detailed investigation into alleged platform neutrality concerns surrounding food delivery giants Zomato and Swiggy.

This comes after the National Restaurant Association of India (NRAI) alleged that Zomato entered into preferential agreements with certain restaurant partners, going against the ethos of platform neutrality.

The antitrust regulator said that it has found merit in investigating the issue pertaining to platform neutrality.

"After careful perusal of the allegations as well as the submissions made by the parties, the Commission is of the view that prima facie a conflict of interest situation has arisen in the present case, both with regard to Swiggy as well as Zomato, because of the presence of commercial interest in the downstream market, which may come in the way of them acting as neutral platforms. This requires a detailed examination," CCI said in its order.

Arrangements where preferential treatment is accorded to some entities can be looked at as a potential contravention of the Competition Act, 2002, the antitrust regulator said, adding that the conduct of food ordering platforms requires a holistic examination to ascertain whether these intermediaries prevent competition on merits.

The conflict of interest situation warrants a detailed scrutiny into its impact on the overall competition between the restaurant partners vis-à-vis the private brands which the platforms may be incentivised to favour, it said.

The commission has asked the director general of CCI to submit its report within 60 days from the date of receipt of this order.

According to the CCI order, Zomato has submitted that it has not violated the principles of platform neutrality, as it does not have any ownership in any of the restaurants listed on its platform nor own or operate cloud kitchens or private labels or restaurants. With respect to advertisements, Zomato has averred that merely accepting advertisements does not violate any platform neutrality obligations.

As per NRAI, Swiggy commands an overwhelming market share of nearly 70% in the southern region, and in northern India it is Zomato that commands an overwhelming market share of 70%.

Zomato and Swiggy collectively hold a very high market share -- stated to be around 90-95% -- in almost all regional markets, the order said.

Meanwhile, Swiggy has accepted having presence with regard to both private brands as well as cloud kitchens, the order stated. "Though Swiggy has claimed that private labels operated by it constitutes a small portion of its business with less than 1% of its turnover, NRAI in its rejoinder has disputed the said percentage stating that Swiggy's private labels for FY2020 constituted 15% of the operating revenue of Swiggy."

In a major setback to the restaurant lobby, the antitrust watchdog said that allegations pertaining to delayed payment cycle, imposition of one-sided clauses in the agreement, and charging of exorbitant commissions do not seem to have an effect on competition in the facts and circumstances of the present case.