Swiggy and Zomato Found in Breach of Antitrust Laws, CCI Investigation Reveals Exclusive Contracts

In a significant development within India’s food delivery sector, the Competition Commission of India (CCI) has reportedly found that Swiggy Ltd. and Zomato Ltd., the two leading food delivery aggregators in the country, have breached antitrust laws by entering into exclusivity agreements with certain restaurants. This revelation, highlighted in an investigation document cited by Reuters, reveals how these agreements have limited market competitiveness, stifling fair competition.

Details of the CCI Investigation

• The investigation reportedly concluded that Swiggy offered growth incentives to restaurants exclusively listed on its platform, while Zomato reduced commission fees for clients who entered into "exclusivity contracts."
• According to the report, these practices prevent the food delivery market from developing competitive dynamics, restricting both new entrants and smaller players.
• The CCI's investigation unit stated: “These exclusivity pacts prevent the market from becoming more competitive.” This finding underscores the challenges within India’s rapidly evolving food delivery sector.

Complaint and Probe Initiation

• The investigation into Swiggy and Zomato was initiated in 2022 following a complaint lodged by the National Restaurant Association of India (NRAI).
• The NRAI argued that the exclusivity deals forced smaller restaurants to rely on one platform, resulting in higher fees and fewer options for growth.

Ongoing Review and Potential Penalties

• The CCI is currently reviewing its findings from the probe, with potential outcomes ranging from monetary penalties to possible changes in the business practices of Swiggy and Zomato.
• Reuters reported that the final decision is expected in the coming weeks, with the antitrust commission considering a range of enforcement actions, including the imposition of fines or directives to modify current operational policies.

Impact on Swiggy and Zomato’s Market Influence

• Both Swiggy and Zomato have transformed food delivery across India, listing thousands of restaurants on their platforms and significantly reshaping consumer dining habits.
• In fiscal year 2024, Swiggy reported a 36% rise in operating revenue, reaching Rs 11,247.3 crore, while Zomato saw a 71% revenue increase to Rs 12,961 crore.
• The probe findings could affect these companies’ operations, potentially requiring them to amend their exclusivity practices to foster fairer market conditions.

Confidentiality Norms and Limited Access to Probe Findings

• As per CCI's confidentiality norms, the findings from this investigation are not publicly accessible. The preliminary findings have been shared only with Swiggy, Zomato, and the complainant, NRAI.
• This confidentiality means the public remains largely unaware of the exact details of the CCI’s findings, though the investigation outcome could set a precedent for similar cases involving platform-based market dominance.

Market Dynamics and IPO Impact

• The findings emerge as Swiggy moves ahead with its initial public offering (IPO), valued at Rs 11,327 crore, one of the largest IPOs in India this year, and already subscribed more than 1.5 times.
• Market analysts anticipate that the CCI’s investigation outcome could influence Swiggy's IPO and impact investor sentiment, as concerns about antitrust issues are likely to factor into valuations and future growth projections.

Source: NDTV