Explained: Why some restaurants are not happy with Swiggy, Zomato

Written by Karunjit Singh, edited by Explained Desk | New Delhi |

Updated: July 7, 2021 at 7:13:57 AM

The National Restaurants Association of India (NRAI) has contacted the competition regulator, alleging that food aggregators Swiggy and Zomato ‘violated’ laws by charging restaurants ‘exorbitant commissions’ and ‘hiding’ customer data .

The move is the latest in a growing dispute between restaurants and food delivery platforms, with the NRAI alleging that the “onerous terms” imposed by Swiggy and Zomato have led many restaurants to wind up operations during the pandemic.

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What are the NRAI’s allegations against Swiggy, Zomato?

The NRAI alleged that Swiggy and Zomato violated competition standards by “hiding” customer data and charging “exorbitant commissions” for using their online platforms. The NRAI noted that the two companies’ anti-competitive practices particularly hurt restaurants during the pandemic, as they had to deal with an increased preference for delivery over on-site restaurant services and an overall decline in business. .

“During the pandemic, the scale of Zomato and Swiggy’s anti-competitive practices has multiplied, and despite much discussion with them, these deeply funded market platforms are not interested in alleviating restaurant concerns. In fact, during the pandemic, due to the onerous conditions imposed, many of our partners had to go out of business, ”the NRAI said in a statement on Monday.

Restaurants previously alleged that Swiggy and Zomato do not share critical customer information with restaurants, but leverage the data to promote their own cloud kitchens.

The NRAI also alleged that restaurants are forced to offer large discounts to maintain an “appropriate” listing on online platforms.

In a market study previously commissioned by the Competition Commission of India (ICC), restaurants alleged that the commissions they paid affected their search rankings and sought greater transparency in the listing policies of online food aggregators. .

The NRAI alleged that restaurants that agree to be listed exclusively on one platform enjoy better terms such as lower commissions. The non-participation of restaurants in the large discount programs offered by the platforms could reduce their visibility, he added.

The NRAI also claimed that in some cases companies have bundled delivery services with listing services, forcing restaurants listed on the platform to use its delivery services as well.

How did Swiggy and Zomato react?

While Swiggy and Zomato have yet to release official responses, they have already addressed some of the issues raised by restaurants.

In the CCI e-commerce study, food aggregators said data masking is necessary to protect the privacy of their customers and that they provide restaurants with the necessary data to help them improve their performance by terms of customer reviews and ratings.

The platforms have also previously said that restaurants are not required to participate in large discount programs, according to the CCI market research.

What is the vision of the CCI?

Although the ICC has so far made no orders regarding the NRAI’s allegations, it has made observations in a market study that may indicate its perspective on these issues.

The ICC noted that the lack of transparency in the operation and practices of online platforms could lead to distortions of competition and recommended that online platforms improve transparency to reduce information asymmetry between sellers using the platforms and platforms.

The ICC also recommended that online platforms establish a basic framework for negotiating contracts, and put in place means to govern both their discount policies and the resolution of disputes between the platform and sellers.

The ICC pointed out that the issue of the imbalance in bargaining power between restaurants and platforms was at the heart of a number of issues, including commissions charged by platforms and large product discounts.

After that ?

The ICC will review the complaint and take a prima facie case on the basis of which it can order a formal investigation by the Director General of the ICC or dismiss the complaint by the NRAI.

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