Zomato shares decline 2% after CCI orders probe into 'unfair' practices

Zomato | Competition Commission of India orders investigation against online food delivery platforms Zomato and Bundl Technologies, the operator of Swiggy, into some of their conduct following a complaint filed by National Restaurant Association of India that alleged contravention of rules by the two companies.

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Zomato share price was down over 2 percent in the morning session on April 5 after the top two food delivery apps came under wrath from the competition watchdog.

The Competition Commission of India (CCI) on April 4 said that the conduct of Swiggy and Zomato required investigation following allegations such as delayed payment cycle, imposition of one-sided clauses and exorbitant commission.

At 9:50am, the stock was trading at Rs 83.95, down Rs 2.25, or 2.61 percent, on the NSE. It touched an intraday high of Rs 84.70 and an intraday low of Rs 82.15.

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"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 fair trade regulator has asked its director general to submit a report within 60 days.

The order was issued on the complaint filed by the National Restaurant Association of India (NRAI), which represents over 50,000 restaurant operators across the country.

"During the pandemic, the magnitude of anti-competitive practices of Zomato and Swiggy have increased manifold and despite numerous discussions with them, these deep funded marketplace platforms are not interested in alleviating concerns of the restaurants,” it had claimed.

NRAI 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.