Domino's India Might Leave Zomato, Swiggy If Commissions Rise

SUMMARY

In case of an increase in commission rates, Jubilant Food will consider shifting more of its businesses from online restaurant platforms to the in-house ordering system

The CCI had ordered a probe into the conduct of Zomato and Swiggy in April this year

According to Reuters, as part of its ongoing investigation, the CCI had sought responses from Jubilant and several other restaurants

Update| July 23, 12:41 PM

Following reports that Domino’s Pizza’s Indian franchise will consider shifting some of its business from the leading food delivery platforms Zomato and Swiggy if commissions rise, Zomato told Inc42 that it has no plans in the pipeline to increase restaurant partner commissions at the top end.

“Zomato is very conscious of its stakeholder relationships, whether with restaurant partners, delivery partners or customers. No commercial decisions are unilaterally taken that may adversely impact any of our stakeholders,” said a Zomato spokesperson. “Zomato’s success is directly linked to each of stakeholders’ success.”

The spokesperson further added that it is very mindful, especially of its small restaurant partners.

Meanwhile, Jubilant FoodWorks, which runs Domino’s Pizza franchise in India, refrained from making any comments on the matter as the company is in a silent period.

Original Story | Published On July 22 at 6:21 PM

Multinational pizza chain Domino’s Pizza’s Indian franchise might consider taking away some of its business from the top two online food delivery platforms, Zomato and Swiggy, if their commissions increase further, as per a report.

Jubilant FoodWorks, which runs Domino’s Pizza franchise in India, disclosed this to the Competition Commission of India (CCI) in a confidential letter, seen by Reuters.

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“In case of an increase in commission rates, Jubilant will consider shifting more of its businesses from online restaurant platforms to the in-house ordering system,” the NSE and BSE listed company reportedly said in a July 19 letter addressed to the CCI.

The development comes at a time when the CCI is probing the food delivery giants on their alleged anti-competitive practices and predatory pricing. Moreover, top executives of Swiggy, Zomato, along with a few other tech startups from various sectors, met a parliamentary panel behind closed doors on Thursday to discuss the issue.

The CCI ordered a probe into the conduct of Zomato and Swiggy in April this year following restaurant lobby and advocacy group National Restaurant Association of India’s (NRAI) complaint to the CCI about the “exorbitant commission” they charge.

The NRAI had claimed that both the startups took away almost 25%-35% of each order value as commissions in 2020-21, while they also forced the restaurants to bear the discount expenses that the food delivery platforms provided to their customers.

According to the news agency, as part of its ongoing investigation, the CCI had sought responses from Jubilant and several other restaurants.

A senior industry executive with knowledge of the matter told the news agency that Zomato’s and Swiggy’s commissions had become a concern for Domino’s and several other restaurants.

“If commissions are increased further, they will lead to profit squeeze of businesses and will simply be passed on to consumers,” the executive was quoted as saying.

Meanwhile, the food delivery platforms have been denying any wrongdoing. In fact, in a recent incident, a social media post showed the pricing disparity on bills of orders placed on Zomato and offline orders of the same food items from the same restaurant.

In response to the claim, Zomato said, “Zomato being an intermediary platform between a customer and a restaurant, does not have any control over the prices implemented by the restaurant partners on our platform.”

India’s food delivery market has got a major boost with the increasing smartphone and internet adoption. Following the Covid-19 pandemic and with players including Zomato, Swiggy, and Domino’s Pizza introducing contactless delivery services, these platforms captured the Indian market further.

As per a report, the Indian online food delivery market is expected to grow at a compound annual growth rate (CAGR) of 28.9% between 2022 and 2027.