Case Study: Swiggy and Zomato: Allegation of anti-competitive practices?

Zomato's and Swiggy's official logos

The nation’s restaurants are being forced! They have been complaining about the monopoly reign created by the food aggregators Swiggy and Zomato. Zomato has been preparing to launch their IPO, and this could serve as a potential threat to their listing, or it can impact their stock prices after the listing. But, this article will focus on why the food aggregators are alleged of anti-competitive prices.

Regarding Swiggy’s and Zomato’s competition in India, the National Restaurant Association of India (NRAI) has approached the regulator for competition, and it has alleged that both food delivery firms of anti-competitive pricing in the industry. The association had also approached the Competition Commission of India (CCI) because the restaurants in India were being affected by the anti-competitive prices by both the food delivery firms.

As the lockdowns were implemented, the restaurants had no choice but to depend on these start-ups to run their businesses. They also charged a case on the 1st of July 2021 against these firms.

Why restaurants are complaining – the main reason

Along with the conflict between the firms and restaurants about the massive discounts affecting the restaurants, the association has stated that both these start-ups are trying to mold a monopoly in the industry and have been charging commissions from the restaurants. Coupled with this, the food delivery start-ups are not providing the restaurants with customer data.

Although the association has been in constant touch with the food aggregators for the past year and a half to seek a solution, they have not been able to reach one despite all the efforts.

What are the problems?

There are some problems that the restaurants have been reporting since 2018, and the biggest of them all is the accusation against providing discounts to customers. The association expressed that to let the start-ups stay listed on their mobile applications, they have been forcing the restaurants to offer discounts. Not only this, they have not provided customer data to the restaurants and are collecting the data and storing it for their leverage.

The response

Zomato and Swiggy have not provided an official comment regarding the complaints and concerns that the association has taken towards the competition regulator. Like mentioned, they have been in constant communication with the firms to find a solution. However, the efforts taken by the association have failed since the start-ups are not cooperating to find a solution.

The firms have conveyed why they have been hiding data from the restaurants, and it is due to the reason that they are maintaining the privacy of the customers and providing better services to the consumers.

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