More than 500 small and mid-sized restaurants filed a petition to India’s competition watchdog, Competition Commission of India (CCI), and Prime Minister’s Office (PMO) urging them to put a halt to the unsustainable pricing standards by online food aggregators.
Through the petition, the restaurants alleged that online food delivery companies such as Swiggy, Zomato, Uber Eats and OLA promoted FoodPanda are misusing their dominant market position “with the aim to wipe out small and medium enterprises”.
The allegations include the use of deep discounting, in-house kitchens and internal sourcing, mentioning these moves part of a strategy to wipe out small restaurants. Zomato and Swiggy denied the allegations however.
In one of several instances of alleged unethical practices by food aggregators, the petition says, “They (Zomato) have started an in house company called Hyperpure. This company sells vegetables, chicken and other meat. Zomato forces the restaurants who want to list on the Zomato platform to purchase raw vegetables, chicken and other meat from this company only. This is clearly against clause 6 A of the Competition Act.”
Zomato offering food delivery to restaurants and forcing restaurants to purchase raw items from their own sister concern, added the petition, while emphasizing on its plea to put an end to unsustainable pricing by online food aggregators.
About Swiggy, the petition states, “They (Swiggy) are unethically diverting customers to their own kitchen. They started off with food delivery platform. Now they have started their own kitchen to monopolize the market.They use the customers visiting the platform for food delivery to their own kitchen. A normal client is required to pay huge tariffs to get their products listed on the platform.”
“..the first advertisement which is shown to an end user on log in is Swiggys in house Kitchen – The Bowl Company. This clearly misusing customer database who visit their platform to order food to their own kitchen. There should be a clear law in India that there cannot be cross holding of a company which is into delivery of food services for clients to have a stake in any kitchen/restaurant, ” said the petition.
Rahul Singh, president of the National Restaurant Association of India (NRAI), which represents over 5,000 brands told the publication, said in a media statement, “Unlike retail, FDI (foreign direct investment) restrictions are not applied on the restaurant sector or food service aggregators.”
Rahul further said that the predatory practices will be investigated by the CCI and a roundtable discussion with all four major food delivery aggregators has been slated for next week to sort out deep discounting and the cloud kitchen issue. Notably, Rahul Singh is the promoter of The Beer Café, which runs 40 outlets.
Zomato has responded with following update –
“At Zomato, we believe in providing the best services and experiences to our users; and endeavour to meaningfully help grow the businesses of our partners as well. Our platform lists more than 75,000 restaurants, of which a significant majority are small and mid-size restaurants. We have significantly expanded our online ordering and food delivery services and are currently present across 118 cities in India. We have been able to deliver long-term growth for our restaurant partners by connecting them with more users. Infact, a lot of our restaurant partners have been able to expand their operations since food delivery has helped them exponentially leverage the fixed and man-power costs. Discounts are merely a mechanism to encourage user participation and all our restaurant partners can choose to participate in a discounting campaign,” said the company spokesperson, Zomato.
“With HyperPure, our aim is to provide organic and residue free fresh produce to all the restaurants at their doorsteps while helping them save on the purchasing cost. The service is only present in Bangalore currently and already has a quality breadth of restaurants. HyperPure has received a great reception so much so that our order list is bigger than our what we can currently service. It is helping restaurants save efforts of sourcing food ingredients from an otherwise unorganised market. A small to mid-size restaurant stands to save 10-15% in their monthly expenses on ingredients purchase. We don’t constrain the restaurants on our platform to associate with HyperPure, doing so will be completely against our ethics. Restaurants can choose the HyperPure services if they find them beneficial enough.”
“Zomato’s prime objective is to contribute to the growth of the restaurant industry in the country, which we have been doing over the last decade with the help of our various services. We are discussing the matter with the involved restaurant partners to achieve an amicable solution, which would benefit all the parties in the ecosystem, said the Zomato statement, in an email to IndianWeb2.com.
Swiggy has responded with following statement –
As the leader and category creator in Indian food delivery, Swiggy has been at the forefront of expanding the market and ensuring our consumers have access to the widest selection of restaurants on the platform. Swiggy has partnered with restaurants from the start of our journey. Since then, they have grown tremendously and so have we. We do not practice diversion of traffic to any brand unethically.
Our fair practices have been widely acknowledged by the restaurant community and as a result, in the last 12 months alone, not only have we doubled the number of restaurant partners on the platform to over 55,000, but more importantly our partners (including small and medium restaurants) have seen a two-fold increase in Swiggy’s contribution to their business. Like any marketplace, the commissions we charge are a function of the value we generate for our partner and is mutually agreed upon.
Being the largest food aggregator in the country, we strongly believe that it is our job to expand the market by filling existing and future gaps in the consumers’ needs. Swiggy is primarily filling these gaps with our restaurant partner community through Access kitchens and to an extent through a private brand like The Bowl Company. With private brands we aim to meet hitherto unmet consumer needs. For e.g. we saw that single use ordering was a gap in the market and hence we created The Bowl Company. Despite limited presence in the cities of Bangalore and Hyderabad, we are happy that this has led to numerous partner restaurants (pan-India) following the trend- giving more choice to our consumers. The listing of the brand is similar to any other brand on the platform. Aided by machine learning, the app personalises the list of restaurants that users can view, based on their past orders, searches, preferences and interactions with the app.
To ensure supply of quality brands for consumers and more business for our restaurant partners, Swiggy launched the Swiggy Access initiative in 2017. Through Access, Swiggy is enabling restaurant partners to expand to newer neighbourhoods, get more brand visibility and a larger consumer base at a fraction of the expense. Swiggy is investing heavily to open hundreds of Access pods that will house thousands of restaurant partners and bridge gaps in supply at scale. With Access, restaurants have not only expanded to more areas in a city but in many cases new cities to cater to an entirely new set of consumers. In just one year since launch, over 75 quality restaurants across metros have expanded their operations through Swiggy Access. This includes numerous small and medium restaurants. Overall, 70% of our partners have opened in second access locations, reinforcing their trust in the benefits of the Access initiative.