India’s Competition Commission (CCI) has found food delivery giants Zomato and Swiggy in violation of competition laws, following an investigation that began in 2022. The probe was triggered by a complaint from the National Restaurant Association of India, which accused both companies of engaging in anti-competitive practices that favored certain restaurant partners and hindered market competition.
Key findings from the CCI’s investigation highlighted that Zomato entered into exclusivity agreements with specific restaurants, offering them lower commission rates in exchange for their sole listing on the platform. Similarly, Swiggy provided growth guarantees to restaurants that committed exclusively to its platform. These practices were deemed to limit market access for new players, thus stifling competition. The investigation also found that both companies exerted pressure on restaurants to maintain uniform pricing across platforms. Zomato allegedly imposed pricing restrictions and penalties for non-compliance, while Swiggy threatened to downgrade the ranks of restaurants offering lower prices elsewhere.
The confidential findings, which were shared with Zomato, Swiggy, and the National Restaurant Association of India in March 2024, have already impacted Zomato’s stock, which saw a 3% drop following Reuters’ coverage of the issue. Both companies have declined to comment on the findings, with Swiggy also not responding to queries.
The investigation carries significant consequences, particularly for Swiggy, which is currently in the process of closing bids for its $1.4 billion IPO, the second-largest in India this year. The IPO prospectus for Swiggy included a note about the ongoing investigation, highlighting it as a potential internal risk, as any violations of competition laws could lead to severe penalties.
In response to the findings, Swiggy discontinued its “Swiggy Exclusive” program in 2023. However, the company plans to launch a new initiative, “Swiggy Grow,” focused on expanding its presence in non-metropolitan areas. Both Zomato and Swiggy have also ventured into the “quick commerce” sector, offering ultra-fast grocery delivery, which is also under scrutiny for allegations of predatory pricing.
The CCI is reviewing the investigation’s conclusions, and a final decision on penalties or operational changes is expected soon. Both Zomato and Swiggy may challenge any final decision through the appropriate legal channels. This case illustrates the growing regulatory scrutiny on India’s fast-evolving digital market, as platforms like Zomato and Swiggy balance aggressive growth with increasing compliance pressures in a competitive landscape.
Disclaimer:The information provided is for informational purposes only and should not be construed as financial, legal, or investment advice. Please conduct your own research or consult a professional before making any decisions.
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