Have No Control Over Prices Set By Restaurants On The Platform: Zomato

SUMMARY

Zomato said that being an intermediary platform between a customer and a restaurant, it has no control over the prices set by the restaurant partners

The foodtech unicorn was responding to a post by a customer complaining about the higher prices for food items on the platform compared to the price at restaurant

Zomato and its rival Swiggy have often faced allegations of unfair business practices, and are being probed by the Competition Commission of India

Zomato, which has often faced allegations of unfair business practices, again found itself in a controversy recently on the difference in food prices of same items offline and on the food delivery platform. Responding to the allegations, Zomato said that it has no control over such price differences.

A person named Rahul Kabra wrote a post on LinkedIn a few days back that showed bills of both online and offline orders of the same food items from the same restaurant. The bill amount when the food items were ordered from Zomato was higher, and Kabra asked the reason for the same.

“Proof that #Zomato wants to make more money per order than the food service provider,” wrote Kabra, a performance marketing manager at LEAD School.

He further said that on an apple-to-apple comparison of online versus offline orders, it could be noticed that the cost for the offline order was INR 512 while the cost for the Zomato order was INR 690 after a discount of INR 75.

“…cost escalation 34.76% per order at INR 178 = (690-512)/512,” he noted.

Kabra further pointed out, “assuming Zomato brings visibility and more orders to the food service provider, should it charge such high price?”

“I think there is a need to cap this cost escalation which should be implemented by the government so as to make this a win-win for all stakeholders,” he added.

Zomato replied to the post on Wednesday (July 6). “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,” it said.

“That said, we have conveyed your feedback to the restaurant partner and have requested them to look into this,” the startup added.

Why Is This Matter Important?

Zomato has already come under the scanner of the Competition Commission of India (CCI) after multiple complaints were raised by restaurant bodies against the listed food delivery unicorn about unfair pricing practices.

Restaurant lobby and advocacy group National Restaurant Association of India (NRAI) complained to the CCI about the “exorbitant commission” charged by both Zomato and Swiggy from its restaurant partners. The NRAI claimed that both the players took away almost 25%-35% of each order value as commissions in 2020-21.

Besides, there were also complaints about forcing the restaurants to bear the discount expenses on these food delivery platforms.

Earlier in 2019 as well, NRAI, along with the Federation of Hotel and Restaurant Association of India (FHRAI), had initiated campaigns complaining against Zomato’s Gold subscription programme.

Following these complaints, the CCI launched a probe against Zomato and its peer Swiggy earlier this year.

As per a 2022 Statista report, the Indian online food delivery market was expected to rise to $13 Bn by 2025. In 2020, the market was worth about $2.9 Bn.

The startup also joined the quick commerce frenzy recently with the acquisition of Blinkit for INR 4,447 Cr.