Zomato reacts to CCI probe, says its practices comply with the laws

Zomato Ltd.

Zomato has said that the Competition Commission of India has prima facie not found concerns with respect to their independence on levy of commissions or alleged bundling of services but it wants to investigate aspects such as preferential listing of restaurant partners and pricing parity.

"We will continue to work closely with the Commission to assist them with their investigation and explain to the regulator why all of our practices are in compliance with competition laws and do not have any adverse effect on competition in India. We intend to promptly comply with any recommendations given to us by the Commission," the food delivery and restaurant discovery platform said in a statement on April 5.

The statement comes a day after the competition watchdog ordered an investigation into the conduct of both Zomato and Swiggy following allegations made by a restaurant association of increasing predatory behaviour by the food aggregators.

"The Commission is of the view that there exists a prima facie case with respect to some of the conduct of Zomato and Swiggy, which requires an investigation by the director general (DG), to determine whether the conduct of platforms have resulted in contravention of the provisions," the CCI noted.

The National Restaurants Association of India (NRAI) welcomed this investigation and said they are very happy that the CCI "saw merits in our submission which highlighted restaurant industry’s concerns".

"It may be noted that the NRAI has been engaging with both the aggregators and the concerned government authorities in the past few years to resolve existing pain points of the Industry vis-à-vis operations of the aggregators. These pain points were acutely amplified during the pandemic when restaurants and cloud kitchens were struggling for survival by way of their increased dependence on these aggregators," it said in a statement.

NRAI, which represents over 50,000 restaurant operators in the country, had moved the CCI against Zomato and Swiggy in July 2021, alleging delayed payment cycles, data masking, imposition of one-sided clauses and exorbitant commissions.

In addition to this, the association has blamed the aggregators of conflict of interest as they themselves operate a few cloud kitchens that sell on the platform. While Zomato and Swiggy refuse to share customer information with other restaurants, the data is used for their in-house cloud kitchens.

"The Commission is of the view that prima facie a conflict of interest situation has arisen in the present case, both with regard to Swiggy as well as Zomato, because of the presence of commercial interest in the downstream market, which may come in the way of them acting as neutral platforms. This requires a detailed examination," CCI noted this in its order.​

NRAI also alleged that the commissions that are charged from restaurants are "unviable" and "are to the tune of 20 percent to 30 percent, which are extremely exorbitant".

Zomato was accused of charging approximately 27.8 percent of the order value from the restaurants listed on its platform. For cloud kitchen, the commission rate is as high as 37 percent, the complainant had claimed.

In addition, the restaurant body also alleged that these players also force restaurants to commit to list exclusively on their platforms.

"Zomato offers exclusivity on the basis of commission as low as zero percent and also offers minimum guarantee in the form of order volume guarantee and order value guarantee. Swiggy is also stated to be imposing exclusivity on the RPs on the basis of signage policy," the CCI order said.

In response to the CCI order, Zomato has said that only 1 percent of restaurant partners listed on its platform are exclusive to it. ​