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Bad food may lead to barring of ordering for a restaurant on Zomato: Report; MediaNama’s Take

This policy is expected to go live on April 18th 2022.

Zomato

Zomato may ‘temporarily disable’ online ordering from restaurants if a custom raises concern regarding the quality of food, an Economic Times report said. This policy is expected to go live on April 18th 2022.

According to the report, Zomato sent an email advisory to restaurants which said, “Any complaint raised by an end customer regarding the quality of food or beverage, which can potentially cause serious harm to the customer’s health or well-being will be classified as ‘severe food quality complaint’.” Additionally, the advisory said that “Depending on the nature of the complaint, you may be temporarily disabled from online ordering with Zomato till a third-party (Food Safety and Standards Authority of India (FSSAI) approved inspection of your premises is completed. The entire cost of such inspection will be borne by the restaurant.”

Complaints regarding the serving of pre-packaged food items that have expired, the wrong type of meat, presence of hazardous foreign objects in food like animal/animal parts or sharp and inedible objects, serving non-vegetarian food instead of vegetarian, or fungus or rotten food, may lead to such punitive action.

We have reached out to Zomato and a few restaurants with a few queries regarding this matter and we will update the post if we receive any response. According to the report, National Restaurants Association of India (NRAI) is opposed to this proposed change in Zomato’s policy.

The tussle between Zomato and restaurants

In 2019, the NRAI had started a #Logout campaign claiming that it was protesting “against aggregators who have distorted a vibrant marketplace by aggressive discounting and predatory pricing”. In the aftermath of this campaign, Zomato CEO Deepinder Goyal had said that Zomato had made “mistakes” and things hadn’t gone according to plan. He said that they needed to “do 100x more for our restaurant partners than we have done before”. As many as 1,200 restaurants had de-listed themselves from platforms such as Zomato Gold, EazyDiner, and Dineout’s Gourmet Passport, among others. These restaurants were protesting against discounts being offered by such platforms.

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During the campaign, Zomato CEO Deepinder Goyal called out NRAI President and The Beer Café founder Rahul Singh about his restaurant’s own “Gold” programme. Taking to Twitter, Goyal said that Singh wasn’t “against deep discounts, as these discounts [were] being offered on his own brand, on his own app”. “This is not about aggregators vs restaurants; this is about the small restaurant owner vs the large restaurant owner — and we are being painted as bullies”.

According to a Livemint report, now almost 2,500 restaurants have de-listed themselves from the food aggregating platforms to protest against discount practises. The NRAI also said that it will soon introduce an intense movement to stop the “unethical” practices being adopted by the food aggregators. Around the same time, Minister of Commerce Piyush Goyal had said that he would like to “intervene” between Zomato and the restaurants in order to help them resolve their issues.

NRAI had earlier flagged deep discounting, high commission charges to food aggregators

In 2019,(NRAI) sent letters to all food aggregators including Zomato, Swiggy, UberEATS, Foodpanda, flagging several issues such as lack of transparency, deep discounting and abuse of dominant position by the food aggregators. “This is specially impacting the growth, employment and sustainability of the thousands of small restaurants and start-ups in the country,” NRAI wrote in its letter.

  • Arbitrary terms and conditions: The terms and conditions upon which the restaurants’ enlist themselves on aggregator platforms are not standardised and favour the aggregators, the association asked for a standardised framework and contracts for the restaurants.
  • Private Labels: Large delivery aggregators are using sales and user data to create their own brands, thus creating unfair competition with other restaurants.
  • Forced use of services: Restaurants are forced to use delivery services of aggregators even when they have their own delivery infrastructures; they suffer losses if the aggregator lacks delivery personnel in certain areas. This issue can get solved if the restaurants are allowed to use their own logistics services.

Competition concerns surrounding Zomato and Swiggy

This may well turn out to be a new point of conflagration between restaurants and the food delivery platform. Earlier as a result of a complaint filed by the National Restaurant Association of India (NRAI) against Zomato and Swiggy, Competition Commission of India announced an investigation into the businesses of these platforms. The NRAI claimed that this upcoming policy was being introduced without any consultation, and that Zomato was overstepping its functions, the report added.

NRAI, in its previous complaint, which led to the order of investigation into the platforms by CCI had said that Zomato and Swiggy are dominant in the following ways —

  • They have significantly high and durable market shares: NRAI submitted that Zomato’s market share is close to 52% in terms of gross order volume and Swiggy commands a market share of 43% in the market.
  • Both platforms enjoy strong network effects by relying on a successful “fly-wheel” effect. On the restaurant side, they added more partners by reducing or waiving commissions and on the consumers’ side, these platforms gave huge discounts.
  • Significant entry barriers: The market consists of only two major players as these companies have absorbed any new, credible players. Furthermore, both platforms collect data from customers to personalise their experiences, which further dissuades new players from entering the relevant market, NRAI alleged.

Taking advantage of their significant market power and compounding network effect and strong barriers to entry, Zomato and Swiggy enforce vertical agreements and impose vertical restraints on the restaurant partners, NRAI alleged.

MediaNama’s take by Nikhil Pahwa

As I’ve written previously, there’s a gap between the accountability and responsibility of platforms: while customers are aware that they’re ordering food from a restaurant and the accountability of the quality of food lies with the restaurant, there is still a sense of responsibility that they attribute to the platform. If they’re ordering from Zomato or Swiggy, there is an expectation that the platform will protect consumer interest, and and at some level, the platform is responsible for the quality of the restaurants, and thus the quality of the food, that is available on the platform.

Platforms don’t take on such costs of accountability – these would render the platforms themselves unviable. At the same time, through measures such as these, they will try and fill the gap between the accountability and responsibility, because of consumer expectations.

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From a restaurants perspective, they have low negotiating power with platforms: platforms are much more powerful as aggregators, and they will continue to impose restrictions and conditions upon restaurants, which have little or no choice because platforms have greater power in this relationship. Platforms are built on the principle of increasing fragmentation and monetizing aggregation, and progressively reducing the negotiating ability of vendors and service providers. Thus, restaurants will almost always resent the power that platforms have over them, and there is bound to be friction, when platforms like Zomato flex their muscle.

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Among other subjects, I cover the increasing usage of emerging technologies, especially for surveillance in India

MediaNama’s mission is to help build a digital ecosystem which is open, fair, global and competitive.

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