The Indian antitrust watchdog ordered a wide-ranging investigation into the conduct of food delivery firms Zomato and Swiggy on Monday following a complaint from the National Restaurant Association of India, a body that represents over 50,000 restaurants in the country.
The Competition Commission of India acknowledged a series of allegations (PDF) — including food delivery firms’ practice of bundling delivery services with customers’ food orders, masking data from restaurant partners, operating cloud kitchens, “unfair and one-sided contracts” with the outlets, delayed payment cycle, and charging of exorbitant commission — and said they are worth probing to see if they violate the law.
“NRAI has further alleged that OPs are engaging in a dual role on their platform where they list their own cloud kitchen brands exclusively on their platform, akin to private labels, thereby creating an inherent conflict of interest in the platform’s role as an intermediary on one hand and as a participant on the other hand,” the watchdog described in its order Monday.
However, the watchdog said it is of view that prima facie “allegations pertaining to delayed payment cycle, imposition of one-sided clauses in the agreement, charging of exorbitant commission etc. and based on those submissions,” do not “seem to have an effect on competition in the facts and circumstances of the present case.”
And then came the change of heart, just a paragraph later: “However, as discussed in the foregoing paragraphs, the Commission is of the view that there exists a prima facie case with respect to some of the conduct of Zomato and Swiggy, which requires an investigation by the Director General (‘DG’), to determine whether the conduct of the OPs have resulted in contravention of the provisions of Section 3(1) of the Act read with Section 3(4) thereof, as detailed in this order.”
The Director General has been directed to carry out a detailed investigation and submit the findings within 60 days, the CCI said.
The investigation is only the latest headache for the food delivery firms. Zomato, which has been performing poorly on the public market, is exploring entering instant food delivery, a category that is bound to further complicate its relationship with restaurant partners.
This is a developing story. More to follow…