With an aim to seek recommendations on an e-commerce policy, the Competition Commission of India (CCI) has called for a meeting with the National Restaurant Association of India (NRAI) and consulting firm Ernst and Young on August 30th, reports the Economic Times. CCI’s objective is to seek recommendations from stakeholders on policy options to address the issues of deep discounting and predatory pricing, while “safeguarding both, freedom of trade and innovation incentives of online platforms”. This report comes weeks after the DPIIT had summoned online food aggregators, including Swiggy, Zomato, Foodpanda and UberEATS for a meeting earlier this month. Restaurants have been facing problems similar to those faced by brick-and-mortar retailers in their tussle with e-commerce platforms, which centre around predatory pricing and deep discounting. MediaNama has reached out to NRAI for comment and will update this story once they respond.
It’s worth nothing that in January this year, about 500 small restaurants had sent an online petition to CCI and Prime Minister’s Office alleging that the food delivery companies were misusing their “dominant position”. They had complained against the use of deep discounting, in-house kitchens and internal sourcing by food-tech companies which affected the small businesses.
Trouble for food-tech companies
Apart from predatory pricing issues, food-tech companies have also been under the scrutiny of Food Safety and Standards Authority of India (FSSAI) since July 2018 after the body directed 10 online food order and delivery companies to delist non-FSSAI licensed food operators/restaurants from their platform. In February 2018, FSSAI had made it mandatory for e-commerce food business operators (FBOs) to display both the FSSAI licence numbers of the listed food operators on their platforms, and the agreement between both the parties to comply with the Food Safety and Standards Act, Rules and Regulations.
As many as 10,500 restaurants had been de-listed by online food delivery platforms between July and September 2018, Ashwin Kumar Choubey, the Minister of State in the Ministry of Health and Family Welfare, said in his reply to the Parliament in December 2018.
Policy changes around predatory pricing
Predatory pricing is a pricing strategy which involves undercutting the prices of goods and services with an intent to onboard more customers or push out rivals from the business. The issues of predatory pricing in the e-commerce sector have been well-highlighted; small and local shopkeepers have expressed their concerns about being adversely affected by heavy discounting offered by e-commerce companies. The government had addressed this in the revised FDI guidelines for e-commerce in December 2018 and also released the Draft E-commerce Policy in February.
According to the FDI guidelines implemented from February 1, an e-commerce marketplace is not allowed to directly or indirectly influence prices of products being sold, and must offer a level playing field to all vendors/players — those controlled by marketplaces, or other vendors. Platforms will provide the same services of cash backs, fulfillment, logistics, warehousing, advertisements, marketing, payments, finance, etc. across all vendors.