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Why companies like Zomato and Swiggy are in trouble with the Indian government over user complaints?

Zomato

Major e-commerce food business operators like Swiggy and Zomato* have been asked to furnish details about their consumer grievance redressal mechanism within 15 days, according to a press release shared by the government. The Department of Consumer Affairs (DoCA) has also asked the companies to submit a proposal on how they can improve this framework.

Why it matters: The popularity of food aggregators has surged in recent years as people are forced to stay indoors on account of the pandemic. The popularity has also led to an increase in the number of complaints from consumers casting spotlight on business practices of these companies.

Where was this decision made: The companies were instructed during a meeting chaired by the secretary of the department, Rohit Kumar Singh. The meeting was held to discuss several issues affecting the consumers of these companies.

Who all attended the meeting: The meeting saw attendance of major online food business operators such as Swiggy and Zomato.

  • The National Restaurant Association of India (NRAI), which has been at loggerheads with these companies, was also present in the meeting attendance.
  • The following officials were also present:
    • Nidhi Khare, Additional Secretary, DoCA
    • Anupam Mishra, Joint Secretary, DoCA

What was discussed during the meeting: The issues raised by consumers in their complaints were discussed during the meeting.

  • The NRAI stressed that the online food business operators should share customer information with the restaurants so that they can serve the needs of their consumers better.
  • It also informed the government that delivery charges are determined and levied by these companies.The rate of commission is around 20 per cent on each order, the release said.
  • The companies were directed by the DoCA to be transparent in their dealings and provide consumers the breakup of all charges included in the amount of the order. It includes parameters like delivery charges, packaging charges, taxes, surge pricing etc.
  • These platforms were also asked to display individual consumer reviews transparently and refrain from showing only the aggregation of reviews.
  • The DoCA also advised the online platforms to give consumers the choice to share their contact information with the restaurants if they want to so that the consumer’s right of choice is respected.

How many complaints were received by DoCA: It was revealed that the National Consumer Helpline registered over 3,631 and 2,828 grievances against Swiggy and Zomato respectively.

  • A majority of these complaints (over 20 per cent) concerned deficiency in services, according to the release. Swiggy had 803 complaints whereas Zomato had 707 complaints.

Source: Press Information Bureau (PIB)

What were the issues raised by consumers: The issues raised in these complaints touched upon the following-

  • Veracity of the amount of delivery and packing charges
  • Reasonability of such charges,
  • Disparity between the price and the quantity of food items shown on the platform and actually offered by the restaurant,
  • Inconsistency in the delivery time shown to consumers at the time of placing an order and the time at which the order is actually delivered,
  • Absence of a mechanism to separate genuine reviews from fake ones.

Have you faced any such issues with delivery services? Leave a comment


 

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Source: PIB

What did the companies say: The operators informed the government that the prices of food items are decided by the restaurants and not the platforms.

  • Moreover, they clarified that there is a grievance redressal mechanism in place. They, however, acknowledged that there was scope for improvement given the number and nature of grievances registered by consumers.

CCI’s investigation into food aggregators: The Competition Commission of India (CCI) said that there “exists a prima facie case with respect to some of the conduct of Zomato and Swiggy, which requires an investigation,” in an order on April 4.

  • The order is the result of a complaint filed by the NRAI against Zomato and Swiggy in July 2021, alleging anticompetitive practices like bundling of services, data masking, exorbitant commissions, deep discounting, and violation of platform neutrality.
  • The Director-General will carry out a detailed investigation and submit a report to CCI within 60 days.

What are problems highlighted by the NRAI in the past: The association had flagged issues such as deep discounting, high commission charges to food aggregators in 2019 in a letter sent to all food aggregators.

  • Arbitrary terms and conditions: The letter revealed that the terms and conditions upon which the restaurants’ enlist themselves on aggregator platforms were not standardised and favoured the aggregators. The association asked for a standardised framework and contracts for the restaurants.
  • Private Labels: Many large delivery aggregators were using sales and user data to create their own brands, thus creating unfair competition with other restaurants.
  • Forced use of services: The restaurants were forced to use delivery services of aggregators even when they have their own delivery infrastructure.

*Disclaimer: This author was alloted shares in Zomato’s IPO. 

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Written By

I cover several beats such as Crypto, Telecom, and OTT at MediaNama. I can be found loitering at my local theatre when I am off work consuming movies by the dozen.

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

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