Financial Insights

Zomato and Swiggy to face an investigation

Foodtech companies Zomato and Swiggy are all set to undergo an investigation over the concerns of platform neutrality from the National Restaurant Association of India (NRAI).

It was the observation of the Competition Commission of India (CCI) that private labels and cloud kitchens could negatively impact the companies’ neutrality and independence, since it amounted to a conflict of interest, & therefore required a detailed investigation.

“…the Commission is of the view that prima facie a conflict of interest situation has arisen in the present case, both with regard to Swiggy as well as Zomato, because of the presence of commercial interest in the downstream market, which may come in the way of them acting as neutral platforms,” the CCI said, directing its investigative arm to submit an investigation report in 60 days.

Moreover, the NRAI has observed that the commission charged on the restaurants was around the level of 20-30%, the commission for cloud kitchen being as high as 37%, which is “exorbitant”.

Prohibition of delivering their own orders, deep discounting on private labels and purposely keeping favoured brands higher on the search results are some of the other accusations faced by the 2 food tech giants, who account for 95% market share together. The NRAI approached the CCI while accusing the companies of such discriminatory practices.

Zomato’s shares are down 2.5% since the news & are currently trading around Rs 84 per share as the scrip was trading low for the past few weeks. Swiggy has been eyeing an opportunity to launch its IPO but this investigation might impede the process.

Highlight by Aman Agarwal.

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