Let’s take a look at what happened.
Companies deny breach
Zomato said the Competition Commission of India (CCI) had issued a prima facie order in April 2022 calling for an investigation into potential violations under the Competition Act, 2002. Zomato’s compliance officer, Sandhya Sethia, explained that the watchdog wanted to investigate aspects such as preferential listing of restaurant partners and pricing parity on these platforms. The company had subsequently issued a clarification, reiterating its alignment with competition laws.
Zomato told the bourses on Sunday that since then, no final findings or orders have been issued against it.
Similarly, Swiggy also denied violation of any law in a statement, saying that media reports are confusing “the investigative process with the final outcome and are misleading”. Citing the same 2022 order, the IPO-bound company said the watchdog investigated certain aspects of the conduct of its business, and its inquiry and report of March 2024 is a preliminary step in an ongoing investigation.
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“Once Swiggy submits its response and CCI conducts a hearing on the matter, CCI will pass its decision on whether any competition law violations have occurred,” it added.
What are the allegations?
It was reported on November 8 that a CCI investigation found the food delivery giants breached competition laws, with their business practices favoring select restaurants listed on their platforms.
This pertains to an investigation which began in 2022 after a complaint by the National Restaurant Association of India (NRAI) about the impact on food outlets of alleged anti-competitive practices of the platforms.
Some of these allegations are as follows:
-Zomato entered into “exclusivity contracts” with partners in return for lower commissions
-It was found to have imposed pricing and discount restrictions on restaurant partners
-Swiggy’s partner restaurants reportedly faced threats of lowered rankings if they didn’t maintain price parity
-It guaranteed business growth to certain players if they listed exclusively on its platform
Companies reassure compliance
Zomato said it will “continue to work closely with the commission (CCI) to explain why all our practices are in compliance with the Competition Act and that they do not have any adverse effect on competition in India.”
Swiggy said it is “fully cooperating with the investigation and is committed to complying with the extant laws of the country.”
