An investigation by India’s antitrust body found that food delivery giant Zomato and SoftBank-backed Swiggy violated competition laws with their business practices by favoring select restaurants listed on their platforms, documents show.
According to non-public documents prepared by the Competition Commission of India (CCI), Zomato entered into “exclusivity agreements” with partners in return for lower commissions, while Swiggy guaranteed business growth to some players if they exclusive Get formally listed on its platform.
The exclusivity arrangement between Swiggy, Zomato and their respective restaurant partners “prevents the market from becoming more competitive”, the CCI’s investigation arm said in its findings reviewed by Reuters on Friday.
The antitrust investigation against Swiggy and its top rival Zomato began in 2022 after a complaint by the National Restaurant Association of India about the impact of the platforms’ alleged anti-competitive practices on food outlets.
The CCI documents are not public in line with its privacy rules, and were shared with Swiggy, Zomato and the complainant restaurant group in March 2024. Their findings have not been reported before.
Zomato declined to comment, while Swiggy and CCI did not respond to Reuters queries.
Zomato shares fell three percent following the Reuters report, having been flat in earlier trading.
The CCI case is mentioned as one of the “internal risks” in Swiggy’s IPO prospectus, adding that “any violation of the provisions of the Competition Act may attract substantial monetary penalties.”
The CCI report said Swiggy told investigators that the “Swiggy Exclusive” program was phased out in 2023, but the company “plans to launch a similar program (Swiggy Grow) in non-metropolitan cities. “
Food delivery giants Swiggy and Zomato have reshaped the way Indians order food in recent years, as smartphone usage and online ordering with hundreds of thousands of outlets listed on their apps have both grown rapidly.
Swiggy, which is closing bids for its $1.4 billion (roughly Rs. 11,811 crore) IPO on Friday — making it India’s second-biggest IPO this year, and Zomato have both priced restaurants at parity in recent years. This directly reduced competition in the market. Preventing restaurants from offering lower prices on other online platforms, the CCI documents said.
Zomato was found to have imposed pricing and discount restrictions on restaurant partners, and in some cases also included “punitive provisions” if the outlets failed to comply.
“Some of Swiggy’s partner restaurants were threatened that their rankings would be pushed down if they did not maintain price parity,” the CCI’s investigation branch said.
The next and final stage of the CCI case is the decision of the CCI leadership which is still reviewing the investigation findings to decide on any penalty or order changes in the business practices of Swiggy and Zomato.
That decision could take several weeks, and the companies still have the option to contest the investigation findings with the CCI.
Zomato, which listed in 2021, has seen its shares more than triple to a valuation of about $27 billion amid rising demand. Swiggy is putting its valuation at $11.3 billion in its IPO.
Macquarie Capital estimates Swiggy’s food order value to be $3.3 billion in 2024-25, about 25% less than Zomato.
Both are now rapidly diversifying into instant commerce where groceries are delivered in just 10 minutes.
India’s largest group of retail distributors has asked the antitrust authority to investigate the instant commerce businesses of Zomato, Swiggy and another rival Zepto for alleged predatory pricing, Reuters reported last month.
© Thomson Reuters 2024
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
