An investigation has revealed that leading food delivery platforms Zomato and Swiggy have violated competition laws in India, according to documents from the Competition Commission of India (CCI).
The investigation found these companies implemented practices that gave preferential treatment to certain restaurants on their platforms, news agency Reuters reported.
The CCI’s probe uncovered that Zomato implemented preferential agreements or “exclusivity contracts” with partner restaurants, offering reduced commission rates in exchange. Similarly, Swiggy was found to have promised enhanced business performance to restaurants that agreed to list exclusively on its platform.
EXCLUSIVE AGREEMENTS WITH SOME PARTNER RESTAURANTS
The investigation unit of CCI pointed out that these exclusive arrangements between the delivery platforms and their restaurant partners “prevent the market from becoming more competitive.”
The probe originated in 2022 following concerns raised by the National Restaurant Association of India regarding the platforms’ impact on food establishments.
The findings were shared with the involved parties in March 2024, though they remain confidential under CCI regulations.
Following the news, Zomato’s stock experienced a 3% decline.
In Swiggy’s IPO documentation, the company acknowledges the CCI case as an “internal risk,” noting that “any breach of the provisions of Competition Act, may attract substantial monetary penalties.”
The investigation revealed that while Swiggy informed investigators its “Swiggy Exclusive” program ended in 2023, the company “is planning to launch similar program (Swiggy Grow) in non-metropolitan cities.”
FOUND GUILTY OF ‘REDUCING COMPETITION’
Both platforms were found to have enforced price parity across different delivery platforms, with the CCI documents indicating this practice “directly reducing competition in the market.”
Zomato implemented strict pricing controls and included potential penalties for non-compliance, while some restaurants partnering with Swiggy were “threatened that their rankings will be pushed down, if they do not maintain price parity.”
The case now awaits final review by CCI leadership, who will determine potential penalties or necessary operational changes. The companies retain the right to contest the findings.
The platforms have seen significant growth, with Zomato’s market value reaching approximately $27 billion since its 2021 listing.
Swiggy is currently seeking a valuation of $11.3 billion through its IPO. According to Macquarie Capital’s projections, Swiggy’s food order values for 2024-25 will reach $3.3 billion, about 25% lower than Zomato’s.
