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CCI’s Investigation into Zomato and Swiggy

Context

In 2022, the National Restaurant Association of India (NRAI) filed a complaint against Zomato and Swiggy, two of India's largest food delivery platforms, accusing them of anti-competitive practices that harmed other restaurants and disrupted fair market competition. The Competition Commission of India (CCI), which monitors business practices to ensure fair competition, launched an investigation into the matter.

What are the issues?

The NRAI’s complaint highlighted two main issues:
Exclusivity Contracts: Zomato and Swiggy allegedly entered into exclusive agreements with certain restaurants. In exchange for offering lower commission fees, these platforms required some restaurants to list only on their platforms, making it harder for other food delivery services to compete.
- For example, Swiggy ran a program called "Swiggy Exclusive", where it promised business growth to restaurants that only partnered with it. Though this program was claimed to be phased out in 2023, it might return under a new name, "Swiggy Grow", targeting restaurants in smaller cities.
- These exclusivity deals concentrated market share among a few platforms, hurting competition.
Price Parity Requirements: Both Zomato and Swiggy imposed price parity clauses on restaurants. This meant that restaurants had to match their prices across platforms, preventing them from offering cheaper prices on other food delivery apps.
- Swiggy reportedly threatened to lower the ranking of partner restaurants if they failed to maintain price parity.
- Zomato also enforced discount restrictions and penalized restaurants that violated these conditions.

CCI’s Findings:

The Competition Commission of India concluded that these practices hindered competition in the food delivery market by favoring certain restaurants over others and reducing consumer choice.
The investigation found that the food delivery platforms' actions, such as imposing exclusivity and price parity requirements, harmed the overall fairness of the market and restricted competition.
Q-Commerce Under Scrutiny: Apart from food delivery, both Zomato and Swiggy have expanded into quick commerce (q-commerce), offering grocery deliveries within 10 minutes. The retail distributors' association has also raised concerns about predatory pricing in this new sector, which means offering products at a loss to eliminate competition.

Fact Box:

Competition Commission of India (CCI)

The Competition Commission of India (CCI) is a statutory body of the Government of India responsible for enforcing the Competition Act, of 2002, it was duly constituted in March 2009.
The Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) was repealed and replaced by the Competition Act, 2002, on the recommendations of the Raghavan committee.
Composition: The Commission consists of one Chairperson and six Members who shall be appointed by the Central Government.

The Competition Act, of 2002:

The Competition Act, 2002, regulates competition in the Indian market and prohibits anti-competitive practices such as cartels, abuse of dominant market position, and mergers and acquisitions that may have an adverse effect on competition.
The Act has been amended by the Competition (Amendment) Act, 2007.
The Competition Commission of India (CCI) is responsible for implementing and enforcing the Act.
Judicial bodies:
- The Competition Appellate Tribunal is a statutory body created in accordance with the Competition Act, 2002 to hear and regulate on appeals against any rules made, decisions made, or orders made by the Competition Commission of India.
- The government replaced the Competition Appellate Tribunal with the National Company Law Appellate Tribunal (NCLAT) in 2017.

Key-Terms

Predatory Pricing: Predatory pricing occurs when a company sets prices below cost to drive competitors out of the market, with the intention of raising prices once competition is eliminated.
Cartels: Cartels are illegal associations of businesses or countries that collude to fix prices, control production, or limit competition in a specific market.
Mergers: Mergers involve the combination of two or more companies, which can sometimes reduce market competition, prompting regulatory scrutiny to prevent monopolistic outcomes.
Price Discrimination: Price discrimination involves charging different prices to different customers for the same product or service, and while not always illegal, it can harm competition if it leads to market distortion.
Price Fixing Agreements: Price fixing occurs when competitors agree to set prices at a specific level, eliminating competition and artificially inflating prices, violating antitrust laws.

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GS Analyst: Daily Current Affairs

9th November 2024 (10 Topics)

Copy

CCI’s Investigation into Zomato and Swiggy

What are the issues?

CCI’s Findings:

Fact Box:

Still Have Questions?

GS Analyst: Daily Current Affairs

CCI’s Investigation into Zomato and Swiggy

What are the issues?

CCI’s Findings:

Fact Box:

Still Have Questions?

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