Double whammy: Hotel federation FHRAI goes after Swiggy, Zomato as NRAI flags private label concerns on quick commerce

Swiggy and Zomato butt heads with restaurants over private labels

The Federation of Hotel and Restaurant Associations of India (FHRAI) is planning to approach the Ministry of Commerce and Industry against Swiggy and Zomato’s standalone quick food delivery apps.

The restaurant body has alleged that food aggregator platforms are leveraging their dominant positions and access to restaurant data to promote their own private labels, namely Blinkit’s Bistro and Swiggy’s Snacc.

“We are seeking an appointment with the commerce secretary, and also trying to meet the commerce minister (Piyush Goyal) next week. We will be requesting the implementation of the e-commerce rules in letter and spirit, and plan to strongly put forward that these quick commerce players cannot have their own private labels. They must operate as a marketplace and their neutrality has to be maintained,” Pradeep Shetty, Vice President of FHRAI, told Moneycontrol.

The industry body represents as many as 60,000 hotels and 5 lakh restaurants across the country.

Meanwhile, the National Restaurant Association of India (NRAI), which also represents 5 lakh Indian restaurants, too, has considered moving the Competition Commission of India (CCI) against Swiggy and Zomato for allegedly flouting anti-competitive norms, as well as the Copyright Act and related laws.

“We are definitely considering taking a serious legal route. As long as these aggregators are okay working with restaurants and enable restaurants to go quick, we’re absolutely fine with it but we will not want to be demolished as an industry where they end up selling our similar products,” Sagar Daryani, President of NRAI, said in a statement.

“This has not been allowed even for larger e-commerce players operating in the marketplace,” he added.

Under Section 3 of the Competition Act, 2002, any anti-competitive agreements are prohibited which lead to reduced competition, market foreclosure, or the creation of a dominant position.

Moreover, Section 4 of the Act prohibits the abuse of a dominant position by an enterprise or group. This may be through practices resulting in denial of market access, or if the enterprise or group “uses its dominant position in one relevant market to enter into, or protect, another relevant market.”

Misuse of restaurant data

Restaurant bodies have alleged that Swiggy and Zomato are monetizing proprietary data derived from restaurant partners to help their private labels gain an unfair advantage.

“If Swiggy and Zomato use proprietary data from partner restaurants to unfairly dominate the market, this could constitute an abuse of dominance, warranting scrutiny by CCI,” said Sonal Alagh – Partner, Alagh & Kapoor Law Offices.

Blinkit has, however, denied the use of restaurant data, claiming that Bistro is a standalone app with a separate team.

“Zomato will never launch private brands on the Zomato app to compete with its restaurant partners. This still holds true. Which is why this service is not being built within Zomato (the organisation which runs the brand, or the app). This is a standalone team, with a standalone app - and no Zomato restaurant data has been used. We will not even use the Zomato app to market Bistro,” Blinkit CEO Albinder Dhindsa said in a post on X (formerly Twitter).

Swiggy did not immediately respond to queries sent by Moneycontrol.

Nevertheless, FHRAI’s Shetty begs to differ.

“It is very difficult to believe that they will not be using the (restaurant) data. It is very apparent from the way Blinkit is setting up cafes, in select locations and micro-markets where traffic is high,” he said.

Legal recourse

In terms of legal recourse, experts say that the NRAI could file a complaint with the CCI or seeking judicial intervention, if there is evidence of anti-competitive practices or contractual breaches.

“Comparisons with the e-commerce sector, where restrictions exist against private labels, suggest a potential for similar grievances here,” said Alagh.

If foul play is detected, the Competition Commission of India can direct the aggregators to cease unfair practices, impose fines for anti-competitive behaviour and require structural changes if abuse of dominance is proven.