According to documents from the Competition Commission of India (CCI), an investigation has shown that Zomato and Swiggy, two of India’s largest meal delivery services, have broken competition regulations.
The Zomato Exclusivity Contracts
According to news agency Reuters, the study revealed that these businesses used tactics that give particular eateries on their networks preferential consideration.
Zomato used preferential arrangements, sometimes known as “exclusivity contracts,” with partner eateries, offering lower commission rates in exchange, according to the CCI’s investigation. In a similar vein, Swiggy was shown to have promised eateries that opted to list only on its platform improved commercial performance.
Zomato Stock Decline
According to CCI’s research section, these exclusive agreements between delivery platforms and their restaurant partners “prevent the market from becoming more competitive.”
The National Restaurant Association of India expressed concerns about the platforms’ effect on dining venues, which prompted the investigation to begin in 2022. Although the results are still classified due to CCI laws, they were distributed to the parties involved in March 2024.
Following the announcement, Zomato’s stock fell 3%.
Recognizing the CCI case as a “internal risk,” Swiggy states in its IPO documents that “any breach of the provisions of Competition Act, may attract substantial monetary penalties.”
When Swiggy told investigators that its “Swiggy Exclusive” program ended in 2023, the probe found that the business “is planning to launch similar program (Swiggy Grow) in non-metropolitan cities.”
According to the CCI documents, both platforms mandated price parity across various distribution platforms, “directly reducing competition in the market.”
A Threat To Swiggy
Strict pricing restrictions were put in place by Zomato, along with possible sanctions for noncompliance. Some Swiggy-partnered eateries were “threatened that their rankings will be pushed down, if they do not maintain price parity.”
The case is currently pending a final evaluation by CCI leadership, who will decide whether to impose any penalties or make any required operational adjustments. The businesses are still able to challenge the results.
The platforms have grown significantly; since its offering in 2021, Zomato’s market valuation has increased to almost $27 billion.
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