CCI believes Zomato and Swiggy have violated antitrust laws, documents show
An investigation by India’s antitrust agency found that food delivery giants Zomato and SoftBank-backed Swiggy violated competition laws with their business practices favoring select restaurants listed on their platforms, documents show.
Zomato entered into ‘exclusivity contracts’ with partners in return for lower commissions, while Swiggy guaranteed business growth to certain players if they listed exclusively on its platform, according to non-public documents prepared by the Competition Commission of India (CCI).
Exclusivity arrangements between Swiggy, Zomato and their respective restaurant partners “prevent the market from becoming more competitive”, the CCI’s research arm noted in its findings reviewed by Reuters on Friday.
The antitrust probe against Swiggy and its biggest rival Zomato began in 2022 following a complaint by the National Restaurant Association of India over the impact on food retailers of the platforms’ alleged anti-competitive practices.
The CCI documents are not public, in accordance with confidentiality rules, and were shared with Swiggy, Zomato and the complainant restaurant group in March 2024. Their findings have not been previously reported.
Zomato declined to comment, while Swiggy and the CCI did not respond to queries from Reuters.
Shares in Zomato fell three percent after the Reuters report, after remaining flat in earlier trading.
The CCI case is listed as one of the “internal risks” in Swiggy’s IPO prospectus, which states that “any violation of the provisions of the Competition Act could attract significant monetary penalties.”
The CCI report noted that Swiggy told researchers that the ‘Swiggy Exclusive’ program was being phased out in 2023, but the company “plans to launch a similar program (Swiggy Grow) in non-metro cities.”
Food delivery giants Swiggy and Zomato have changed the way Indians order food in recent years, as hundreds of thousands of outlets listed on their apps when using a smartphone and online ordering have both grown rapidly.
Swiggy, which is closing bids on Friday for its $1.4 billion (about Rs. 11,811 crore) IPO – India’s second largest this year, and Zomato have also urged restaurants in recent years to raise prices equal, which directly reduced competition in the marketplace by preventing restaurants from offering lower prices on other online platforms, the CCI documents said.
Zomato was found to have imposed price and discount restrictions on restaurant partners, and in some cases included a “penalty provision” if the outlet failed to comply.
Some of Swiggy’s partner restaurants were “threatened that their rankings will be pushed down if they do not maintain price parity,” the CCI’s research arm said.
The next and final phase of the CCI case is a decision by the CCI leadership, which is still reviewing the investigation results to decide on any fines or order changes in Swiggy and Zomato’s business practices.
That decision could take several weeks, and the companies still have the option to challenge the study results with the CCI.
Zomato, which went public in 2021, has seen its shares more than triple to a valuation of around $27 billion amid rising demand. Swiggy values itself at $11.3 billion upon its IPO.
Macquarie Capital estimates that the value of Swiggy’s food orders will reach $3.3 billion by 2024-25, about 25% lower than Zomato’s.
Both are now rapidly diversifying into fast commerce, with groceries delivered in as little as 10 minutes.
India’s largest retail distributor group has asked the antitrust authority to investigate the high-speed trading activities of Zomato, Swiggy and another rival Zepto for alleged predatory pricing, Reuters reported last month.
© Thomson Reuters 2024
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
