Still awaiting final decision from CCI: Zomato, Swiggy on antitrust allegations for food delivery biz
The CCI investigation was initiated after the National Restaurant Association of India had complained back in 2021 on unfair practices by food delivery firms Swiggy and Zomato.
IPO-bound Swiggy and its listed peer Zomato on Monday said no final decision has been taken by the CCI on the alleged violation of competition laws
“Swiggy is yet to receive the confidential details of the findings from the CCI for filing a response to the Director General's finding,” the company said in a press note.
Based on the Competition Commission of India (CCI) request, "the Director General investigated certain aspects of the conduct of our business, and its inquiry and report of March 2024 is a preliminary step in an ongoing investigation and not a final decision," Swiggy further clarified.
“We will continue to work closely with the Commission to explain why all our practices are in compliance with the Competition Act, and that they do not have any adverse effect on competition in India,” Zomato stated in an exchange filing.
In a research note, JP Morgan said, "While the outcome of the CCI case remains uncertain, we expect punitive action to be in the quantum of a fine (like $27 million charged to MakeMyTrip) along with some changes in behaviour."
"Impact of potential regulatory action by CCI likely limited if successful," it said.
It said that competition and regulatory landscape is a headwind for Zomato, and it is bullish on its overweight stance on the basis of company's diversified bets, including its quick commerce business rather than core food delivery segment.
The development comes after media reports said Swiggy and Zomato's business practices were reportedly being in violation of competition laws, according to findings by the CCI.
The Reuters report cited non-public documents prepared by CCI, which stated that Zomato entered into "exclusivity contracts" with partners in return for lower commissions, while Swiggy promised business growth to certain players if they listed exclusively on its platform.
Zomato was found to have imposed pricing and discount restrictions on restaurant partners, with penalties for non-compliance, while Swiggy threatened to lower the rankings of partners who didn't maintain price parity.
The CCI investigation into the food delivery players was initiated in April 2022 after the National Restaurant Association of India (NRAI) complained about the impact of alleged anti-competitive practices by the platforms on food outlets.
"NRAI has been consistently raising the issue of anti-competitive and predatory practices of the food delivery aggregators for last few years, and today, we are glad to read in the news that supposedly CCI has found some merits in our contention," Sagar Daryani, the President of NRAI, had said.
NRAI had petitioned the High Court in November 2024 to request CCI to grant access to the investigation report in its entirety. It had received the redacted version of the report in March this year.
The final decision on the CCI findings hasn’t been taken yet, but Deepinder Goyal-led Zomato and Sriharsha Majety-led Swiggy have the option of contesting the investigation findings with CCI.
Shares of Zomato opened 1.44% higher today, trading at Rs 252 apiece during mid-day. While, Swiggy, which plans to list on domestic bourses on November 13 saw its IPO subscribed 3.59 times, driven by strong bids from QIBs even as bids from HNIs seemed muted.
(The copy was updated with additional information.)
Edited by Suman Singh