FHRAI raises concerns over Zomato, Swiggy’s private food delivery and alleged data misuse

The Federation of Hotel & Restaurant Associations of India (FHRAI) has expressed significant concerns regarding Zomato and Swiggy’s foray into the private label food delivery business. The association highlighted issues such as unfair competition, alleged misuse of restaurant data, and potential food safety risks in a statement.

It asserted that these platforms were leveraging their market dominance to compete directly with the businesses they were originally intended to support. The association said it plans to meet with the Ministry of Commerce to advocate for regulatory intervention and promote fair practices in the food service sector.

Additionally, FHRAI also highlighted growing concerns around the misuse of restaurant data by food delivery platforms and the unfair competitive edge these platforms gain over restaurants. By leveraging data from restaurants, such as customer preferences and sales trends, Zomato and Swiggy can create personalised deals that directly impact the restaurant’s business. This not only threatens the livelihoods of small and medium-sized restaurants but also raises questions about data privacy and consent.

“By introducing and selling their own food products, they (Swiggy and Zomato) undermine the very essence of a marketplace model, creating an uneven playing field that disproportionately harms restaurants. What is particularly alarming is the use of years' worth of proprietary data collected from restaurants on customer preferences, order history, and sales trends to develop and promote their own branded products," said Pradeep Shetty, Vice President of FHRAI.

"Restaurants are excluded from access to this data, making it even more challenging for them to compete. This creates a dangerous environment for small and medium-sized enterprises and raises significant ethical and legal concerns around the misuse of sensitive data,” he added.

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“Additionally, there are serious questions surrounding the food safety standards applied to these private label products. While restaurants are subject to stringent safety regulations, there is no transparency regarding whether the same standards are being enforced for products sold by these platforms. The lack of fairness and a level playing field exacerbates the challenges faced by our members, making it difficult for them to survive, let alone thrive, in this competitive landscape. This not only risks consumer trust but also threatens the reputation of the entire restaurant industry.” he further added.

Last month, The National Restaurant Association of India had issued an advisory cautioning its members over deep discounting and payment gateway tools offered by aggregator platforms for dine-in operations.

The advisory comes when food delivery giants including Zomato and Swiggy are aggressively focusing on expanding their dine-in customer base.

NRAI urged restaurants to use aggregator payment platforms only if the payment gateway services are unbundled from the other services that it offers; and makes financial sense as a payment gateway independently compared to other payment gateways.