In an online petition to the Competition Commission of India (CCI) and the Prime Minister’s Office (PMO), nearly 500 small to mid-sized restaurants alleged “misuse of dominant position by food delivery companies, including Swiggy, Zomato, UberEATS and Foodpanda.”
The petition accused the foodtech companies of using deep discounting, in-house kitchens and internal sourcing to take away their business. “The companies have been continuously found to misuse their dominant position with the aim to wipe out small and medium enterprises,” the petition said.
Swiggy and Zomato reportedly denied the accusations. A Zomato spokesperson said, “Discounts are merely a mechanism to encourage user participation and all our restaurant partners can choose to participate in a discounting campaign.”
Swiggy spokesperson also told Inc42, “Our fair practices have been widely acknowledged by the restaurant community and as a result, in the last 12 months alone, not only have we doubled the number of restaurant partners on the platform to over 55K, but more importantly our partners have seen a two-fold increase in Swiggy’s contribution to their business.”
Rahul Singh, president of the National Restaurant Association of India (NRAI), which represents over 5,000 brands said, “Unlike retail, FDI (foreign direct investment) restrictions are not applied on the restaurant sector or food service aggregators. As an association, we have a roundtable discussion next week with all four major food delivery aggregators to address deep discounting and the cloud kitchen issue, which is adversely affecting the restaurant industry.”
The discontent of restaurants against online food aggregators first came to light in December 2018, when the Group for Restaurateurs’ Empowerment, Advancement, and Togetherness (GREAT), an independent group comprising restaurateurs across Bengaluru, wrote an open letter highlighting their plight. The association had complained against deep discounting and the private label push on these platforms.
The group had also called for meetings and encouraged customers to order via a call or through the restaurant website. In the last few weeks, several restaurants have been observed as being “closed for online ordering” on platforms such as Zomato and Swiggy.
The petition asked the CCI to “put an end to unsustainable pricing by these companies, prohibition of cross-holdings of food services, delivery company to own or have a stake in any kitchen/restaurant, and appointing food regulators to ensure that a level playing field is not breached in the garb of cutthroat competition.”
The restaurants also said that Swiggy had started its own in-house kitchen, The Bowl Company, to “monopolise the market.” “They (Swiggy) are unethically diverting customers to their own kitchen. A client is required to pay huge tariffs to get their products listed on the platform; however, the first ad, which is shown to an end-user on logging in is Swiggy’s in-house kitchen — The Bowl Company,” the petition said. It added this amounts to “misusing the customer database.”
Swiggy spokesperson told Inc42, “Being the largest food aggregator in the country, we strongly believe that it is our job to expand the market by filling existing and future gaps in the consumers’ needs. Swiggy is primarily filling these gaps with our restaurant partner community through Access kitchens and to an extent through a private brand like The Bowl Company. With private brands, we aim to meet hitherto unmet consumer needs. For e.g. we saw that single-use ordering was a gap in the market and hence we created The Bowl Company. Despite the limited presence in the cities of Bengaluru and Hyderabad, we are happy that this has led to numerous partner restaurants (pan-India) following the trend- giving more choice to our consumers.”
The petition also targeted Zomato for setting up its in-house company HyperPure, which sells vegetables, chicken, and other meat. It alleged that it forces restaurants who want to list on the Zomato platform to purchase these items from Hyperpure, which is against the Competition Act.
Zomato denied this and said its aim was to provide fresh produce to restaurants. The petition alleged that UberEATS is also offering unsustainable discounts on some menu items.
[The development was reported by ET.]