Swiggy, Zomato Breached Competition Laws, Finds CCI Probe

Subscription Boom: Can Differential Pricing Strategy Help Swiggy-Zomato Boost Monetisation?

SUMMARY

CCI has reportedly found that foodtech majors Swiggy and Zomato breached competition laws, with their partnerships favouring select restaurants.

The antitrust body’s probe found that Zomato entered into exclusivity contracts with certain restaurant partners in return for lower commissions.

The exclusivity arrangements between Swiggy, Zomato and the restaurant partners "prevent the market from becoming more competitive".

The Competition Commission of India (CCI) has reportedly found that foodtech majors Swiggy and Zomato breached competition laws, with their partnerships favouring select restaurants.

Citing a non-public CCI report, Reuters reported that the antitrust body’s probe found that Zomato entered into exclusivity contracts with certain restaurant partners in return for lower commissions. Meanwhile, Swiggy was said to have guaranteed business growth to select players if they listed exclusively on the platform.

The exclusivity arrangements between Swiggy, Zomato and the restaurant partners “prevent the market from becoming more competitive,” the report was cited as saying.

Zomato declined to comment on the development. Inc42 has reached out to Swiggy seeking its response on the development.

Notably, the companies were earlier been investigated by the CCI in 2022, based on a complaint filed by the National Restaurant Association of India (NRAI) in 2021 alleging that the food delivery giants engaged in anticompetitive practices such as bundling of services, exorbitant commissions, delayed payment cycle and imposition of one-sided clauses.

At the time, the NRAI alleged that both the companies indulged in deep discounting, hurting the interests of local restaurants as well. Besides, their pricing practices violated platform neutrality, it alleged.

The development comes at a time when Swiggy’s IPO is open for subscription. The company’s public issue, which will close today, was subscribed 3.58X at the time of publishing this story.

The company saw the most interest from Qualified Institutional Buyers (QIBs), with the portion reserved for them getting oversubscribed 602%.

The company kickstarted its three-day IPO marathon with a dull response from investors on Wednesday (November 6), and a mere 12% subscription. This was followed by the public issue getting subscribed 35% at the end of the second day.

Shares of Zomato ended today’s trading session 2.37% lower at INR 249.10 on the BSE.