NRAI V. SWIGGY & ZOMATO: ANALYSING THE ALLEGATIONS OF ANTI -COMPETITIVE PRACTICES
In July 2021, The National Restaurant Association of India (“NRAI”) filed a report against the online food delivery platforms Zomato and Swiggy to the Competition Commission of India (“CCI”).
The report submitted by NRAI accused these platforms of several violations of anti-competition laws, including deep discounting policies, masking data, violation of platform neutrality, and bundling of services. Furthermore, it was claimed that when the demand for these platforms increased during the pandemic, the exploitation of anti-competitive rules by these online food suppliers only escalated. However, this is not the first time the NRAI has made such claims. In 2019, NRAI filed a complaint with the Competition Commission of India against Zomato and Swiggy for mishandling their leading titles.
ABUSE OF DOMINANT POSITION
According to NRAI, Swiggy and Zomato are violating the principle of platform neutrality by promoting the restaurants which provide heavy discounts thus, depriving other restaurants of profits. This practice restricts the access to markets to these restaurants, attracting Section 4(2) of the Competition Act, 2002. Recently, the CCI in Re: Federation of Hotel & Restaurant Associations of India & Anr. v. MakeMyTrip India Pvt. Ltd. (MMT) &Ors., held Make My Trip liable for engaging in anti-competitive practices by entering into an agreement with OYO hotels and delisting Treebo & FabHotels from its platforms. However, the accusations m by NRAI can only be successful if they can prove that the enterprise is dominant in the relevant market. The need to prove this has been reiterated in many cases. One such case is Bharti Airtel Ltd. v. Reliance Industries Ltd. In this case, Bharti Airtel had filed a complaint against Reliance Jio alleging it to be engaging in predatory pricing through the services it offered to the user, in contravention of Section 4(2)(a)(ii) of the Competition Act, 2002. The CCI ruled in favour of Reliance Jio and determined that it does not have a dominant position in the relevant market. The rationale behind the judgement was that according to market data, Reliance Jio does not hold a market share of more than 7% in each of India's 22 telecom circles, and the industry is crowded with firms with equal financial and technological skills (such as Vodafone, Idea, Tata, MTNL, and others). There was enough choice in the market, and customers were not overly reliant on a single service provider. Furthermore, it was also needed to prove that the enterprise is abusing its dominant position.
The NRAI, in its report, also alleged that Swiggy and Zomato are charging exorbitant commissions ranging from 20%-30% from the restaurants, which comes under the purview of abuse of dominant position. In 2019, a similar case of Prachi Agarwal &Anr. v. SwiggyBundl Technologies Pvt. Ltd. (2020) came before the CCI. In this case, it was alleged that Swiggy charged exorbitant commission from the partner restaurant. Furthermore, it was also alleged that Swiggy charged high delivery charges ranging from Rs 20 to Rs 100. However, the commission rejected all the charges levelled against Swiggy. It ruled that Swiggy is just an intermediary according to Section 79 of the Information Technology Act, 2001 and it had no role in deciding the prices of the menu by the restaurants. However, due to the onset of the pandemic, the service of dining in restaurants is has been reduced considerably. It has forced more and more restaurants to go online and get listed on these online food vending platforms. The present circumstances have increased the bargaining powers of these online food vendors.
THE ALLEGATION OF DEEP DISCOUNTING
Another allegation that levelled by the NRAI was the allegation of deep discounting. Deep discounting refers to the practice where an enterprise sells its goods at a heavy discount to get competitive advantage in the market. Deep discounting by the E- commerce platforms were not per se recognized as anti-competitive. In the case of Re: Mohit Manglani and M/s Flipkart India, the CCI held that the exclusive agreements between the enterprise and the online platforms are not anti-competitive in nature. However, the stance of CCI changed somewhat in the case of Re: Delhi VyaparMahasangh and Flipkart Internet Pvt Ltd &Ors. (“Delhi VyaparMahasangh and Flipkart Internet Pvt Ltd”), where the CCI launched a probe against Flipkart on the account of preferential treatment and deep discounting. In the case of M/s. Transparent Energy Systems Pvt. Ltd. v. TECPRO Systems Ltd, the CCI made its stance clear on predatory pricing and laid down three conditions regarding predatory pricing if the firm is dominant in the market.
● The average variable cost of the product/service should be more than the price of the product/ service.
● It is done to oust the Competitors from the market.
● After the elimination of competition, the enterprise raises its prices to recover its losses.
It is generally seen through the jurisprudence that to prove the allegation of predatory pricing, the enterprise should be dominant in the relevant market. However, the recent judgement in the case of Uber India Systems Pvt LTD v. CCI by the Supreme Court of India seems to be an anomaly from its precedents. The Court overlooked the market share of Uber and ordered the probe against Uber for predatory pricing. The court said that Uber is bearing a loss of Rs 204 per ride and using its financial backing to bear such a loss putting its competitors in a disadvantageous position. This judgement seems to be a threat to Swiggy and Zomato, which has again followed the path of deep discounting. In 2019, Swiggy and Zomato stopped giving heavy discounts as they incurred losses of 260 crore every month due to this. However, due to the rise of online food orders amid pandemics, these online vendors are again offering mass discounts even up to 60% on their orders.
It is not the first time that these e-commerce platforms are accused of abuse of dominance and deep discounting by the offline market associations. The recent case of Delhi VyaparMahasangh and Flipkart Internet Pvt Ltd & Ors. is one of the many cases regarding this. With the growth of technology and the increasing trend of online shopping, the bargaining power of these e-commerce platforms has increased substantially which may result in engaging in anti-competitive practices by these platforms. Recently, the chairman of CCI also expressed his concern towards it and said that unchecked dominance in the digital market is a cause of concern. Furthermore, he emphasized on increasing the investigations in these digital markets to keep these anti-competitive practices in check to avoid harm in the market.