Zomato, Swiggy Face Accusations Of Unfair Practices

An investigation by the Competition Commission of India revealed that major food delivery platforms Zomato and Swiggy have violated competition laws in India.

According to CCI documents, the investigation found that both companies engaged in practices that gave preferential treatment to select restaurants, potentially stifling competition.

The probe uncovered that Zomato entered into “exclusivity contracts” with restaurant partners, offering them reduced commission rates in return for listing exclusively on its platform.

Similarly, Swiggy reportedly promised better business performance and visibility to restaurants that agreed to exclusive partnerships. These exclusive agreements have been flagged by the CCI as actions that hinder market competitiveness.

The investigation was launched in 2022 after concerns were raised by the National Restaurant Association of India over the negative impact of such practices on food establishments. The findings, shared in March 2024, remain confidential under CCI regulations.

In response to the probe, Zomato’s stock saw a 3% dip, reflecting investor concern over potential consequences. Swiggy, meanwhile, acknowledged the ongoing investigation in its IPO documentation, labeling the CCI case as an “internal risk” and warning that breaches of competition laws could lead to substantial financial penalties.

The investigation also uncovered that both platforms implemented price parity across different delivery services, a practice that directly reduces competition. Zomato, for instance, imposed strict pricing controls on its restaurant partners, with penalties for non-compliance.

Similarly, Swiggy allegedly threatened to lower the rankings of restaurants that did not maintain price parity.

Swiggy informed investigators that its “Swiggy Exclusive” program ended in 2023, but it plans to introduce a similar initiative, “Swiggy Grow,” in non-metropolitan cities.

The case is currently under final review by CCI leadership, which will determine whether penalties or operational changes are warranted. Both Zomato and Swiggy have the option to contest the findings.

Despite these regulatory concerns, both platforms have shown substantial growth. Zomato’s market value reached approximately $27 billion after its 2021 listing, while Swiggy is seeking a valuation of $11.3 billion through its ongoing IPO.

Macquarie Capital forecasts Swiggy’s food order value for 2024-25 at $3.3 billion, about 25% lower than Zomato’s.

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