The National Restaurants Association of India moves the Competition Committee of India over competition issues between Swiggy and Zomato

While investors are eagerly waiting for Zomato’s US$ 1.2 billion IPO, a troublesome event has occurred for the Indian food delivery giant. The National Restaurants Association of India (NRAI) has filed information with the Competition Committee of India (CCI) against Zomato and its rival Swiggy. NRAI claims that their practices have an “appreciable adverse effect on competition”.

NRAI’s submission highlights issues such as bundling of services, data masking, deep discounting, lack of transparency and exorbitant commission.

“We have been in constant dialogue with the food service aggregators over the last 15-18 months to resolve critical issues impacting the sector.  However, despite all our efforts, we have unfortunately not been able to resolve them with the aggregators. The needle hasn’t moved much on these issues.  We have therefore approached the CCI now to look into the matter and investigate them thoroughly.,” said Anurag Katriar, President of NRAI.

Many Indian restaurants have been facing issues in their dealings with the food delivery giants. They feel that over a period of time the business practices of Zomato and Swiggy started hurting the food and beverages (F&B) industry massively. They have been accused of forcing the restaurant partners to give discounts to maintain appropriate listings, among others.

Even during the pandemic, their anti-competitive practices have increased and despite numerous discussions they both have failed to alleviate the concerns of the restaurants, stated NRAI’s submission. “In fact, during the pandemic, due to onerous terms imposed, a lot of our partners had to shut shops,” NRAI said in a statement.

Currently, the commission rate on Zomato is 16-17 percent from the restaurants, and there were talks of increasing them. This step by NRAI may lead to putting some control on these high commission rates.

The Securities Exchange Board of India (SEBI) has already approved Zomato’s application for initial public offering (IPO). Moreover, Swiggy has just raised US$ 800 million in a funding round, valuing the company at US$ 5 billion.

However, on the NRAI moving CCI, Karan Taurani, VP at Elara Capital said, “I don’t think the move will hurt the IPO listing because things are not going to be possible without the aggregator ecosystem. The order value in India is predominantly low. And apps like Zomato and Swiggy offer scale. While the system cannot survive without the online food aggregators, these platforms will also have to be wary and know that they can’t charge anything and there needs to be a balance.”

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