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NRAI submits additional info to CCI on anti-competitive practices of Swiggy, Zomato

Despite the NRAI’s allegations that the online delivery platforms charge high commissions and delay payments, Zomato and Swiggy continue to attract investors. 

The National Restaurant Association of India (NRAI) filed additional information with the Competition Commission of India (CCI) regarding the alleged anti-competitive practices of Zomato and Swiggy, a press release stated. The association represents over 5 lakh restaurants across the country.

Why this matters? NRAI and food aggregators have been going back and forth for over 18 months now, but restaurants appear to remain unsatisfied with the responses from the aggregators. The latest filing is a follow-up to the July 1 complaint filed by NRAI asking CCI to investigate the “inherently anti-competitive practices” of the two online food-delivery platforms. The issues that NRAI has asked CCI to probe include bundling of services, data masking, exorbitant commissions, deep discounting, price parity agreements, violation of platform neutrality, lack of transparency, vertical integration, and exclusivity of listed restaurants.

The government on June 21 proposed amendments to the existing Consumer Protection (E-Commerce) Rules, 2020, covering food delivery platforms like Zomato and Swiggy. The amendments contain provisions that might address many of the concerns raised by NRAI.

What additional info has been submitted?

Since the July 1 complaint, restaurants “have come forward and given us [NRAI] more evidence to show how Zomato and Swiggy have used their market power, especially during the pandemic, to impose terms which the restaurants have no choice but to accept,” the press release stated. “This prompted us to file some additional information with the CCI to ensure that our continued efforts to safeguard the interests of the F&B industry will bear fruit and this, in turn, will help in providing a level playing field for each player in the marketplace,” said Anurag Katriar, NRAI president.

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Here is the additional information submitted by NRAI:

Exorbitant commissions: NRAI stated that Zomato and Swiggy charge restaurants exorbitant commissions in the range of 25-35 percent of the order value in 2020-2021.

Discounts borne by restaurants: NRAI has alleged that Zomato and Swiggy force restaurants to give discounts and that the entire cost burden for these discounts is borne by the restaurants. In a recent interview with MoneyControl, Zomato co-founder Gaurav Gupta and CFO Akshant Goyal claimed otherwise, saying that the company, along with restaurants, fund the discounts offered to customers. The two also said the issues highlighted by NRAI were “misplaced.”

Delayed payments: “There have been numerous instances of delay in payment by Zomato & Swiggy which has affected the entire cash flow of our partners,” the release stated.

Threatened to get delisted: NRAI also claimed that the delivery platforms threaten to de-list restaurants if they offer better rates to consumers on other channels.

“A lot of our partners are in extreme stressful conditions and are on the verge of closing. The restaurants are running at a loss since they cannot meet their expenses, yet they had to rely on Zomato and Swiggy due to the pandemic curbs and sentiments.” – NRAI in press release

Funds continue to flow into Zomato, Swiggy

The issues raised by NRAI do not seem to deter investors from pouring money into these two platforms. Zomato is set to raise Rs 9,375 crore ($1.25 billion) from its initial public offering (IPO), which will remain open between July 14 to July 16. Notably, Zomato increased its fresh offer size to Rs 9,000 crore, up from the Rs 7500 crores, it stated in the draft red herring prospectus (DRHP) filed with SEBI in April, due to increased demand and positive response from investors, Zomato Co-Founder Gaurav Gupta said in an interview with CNBCTV18.

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Meanwhile, SoftBank received CCI approval to invest $450 million in Swiggy, taking the total funds raised by Swiggy in 2021 past $1.2 billion.

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