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Small eateries say food delivery companies misusing dominant position

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NEW DELHI: About 500 small to midsized restaurant companies alleged “misuse of dominant position by food delivery companies including Swiggy, Zomato, Uber Eats and Food Panda,” signing an online petition addressed to the Competition Commission of India (CCI) and the Prime Minister’s Office (PMO) to this effect.

The accusations include the use of deep discounting, in-house kitchens and internal sourcing. “The companies have been continuously found to misuse their dominant position with the aim to wipe out small and medium enterprises,” said the petition, which ET has seen.

Zomato and Swiggy denied the accusations. Uber Eats and Food-Panda didn’t respond to queries.

“Unlike retail, FDI (foreign direct investment) restrictions are not applied on the restaurant sector or food service aggregators,” said Rahul Singh, president of the National Restaurant Association of India (NRAI), which represents over 5,000 brands. “Predatory practices will be examined by the CCI. As an association, we have a roundtable discussion next week with all four major food delivery aggregators to address deep discounting and the cloud kitchen issue which is adversely affecting the restaurant industry.” Singh is the promoter of The Beer Café, which runs 40 outlets.

The petition called on the CCI to “put an end to unsustainable pricing by these companies, prohibition of crossholdings of food services, delivery company to own or have a stake in any kitchen/restaurant, and appointing food regulators to ensure that a level playing field in not breached in the garb of cutthroat competition.”

Anurag Katriar, chief executive of deGustibus Hospitality, which runs restaurant brands Indigo, Tote on the Turf and Neem, said the sector is getting hit.

“Deep discounting by online food delivery platforms is impacting footfalls and diverting consumer traffic to these platforms,” he said. “Besides, the cost of doing business is escalating because commissions are directly getting impacted. These are hurting us in the long run.”

Such offers are meant to be incentives and are voluntary, said Zomato. “Discounts are merely a mechanism to encourage user participation and all our restaurant partners can choose to participate in a discounting campaign,” a Zomato spokesperson said.

The petition said Swiggy had started its own in-house kitchen, The Bowl Company, to “monopolise the market.”

“They (Swiggy) are unethically diverting customers to their own kitchen,” the petition said. “A client is required to pay huge tariffs to get their products listed on the platform; however, the first ad which is shown to an end-user on logging in is Swiggy’s in-house kitchen – The Bowl Company.” The petition said this amounts to “misusing the customer database.”

Swiggy denied that it sought to push users in any particular direction. “We do not practice diversion of traffic to any brand unethically,” a spokesperson said.“We doubled the number of restaurant partners on the platform to over 55,000. The commissions we charge are a function of the value we generate for our partner and are mutually agreed upon.”

The Bowl Company was established to fulfil a gap in the market. “With private brands, we aim to meet unmet consumer needs,” the Swiggy spokesperson said. “Single-use ordering was a gap in the market and hence we created The Bowl Company.” She said the listing of the brand is “similar to any other brand on the platform, and that it has led to numerous partners following the trend.”

The restauranteurs said Zomato had set up in-house company HyperPure, which sells vegetables, chicken and other meat. They alleged that it forces restaurants who want to list on the Zomato platform to purchase these items from Hyperpure, which is against the Competition Act.

Zomato denied this and said its aim was to provide fresh produce to restaurants.

food graph

“HyperPure is helping restaurants save efforts of sourcing food ingredients from an otherwise unorganised market,” the Zomato spokesperson said. We don’t constrain the restaurants on our platform to associate with HyperPure, doing so will be completely against our ethics.”

Thomas Fenn, founder of specialty restaurant Mahabelly, said: “We need to reach a middle ground on commissions and have more transparency in the system. The delivery platforms are very good for the restaurant sector but the consequence cannot be detrimental for business. As for the… in-house kitchens, it is a clear case of conflict of interest.”

Uber Eats is also offering unsustainable discounts on some menu items, the petition said. “The idea behind these organisations bringing in large war chest of funding by their foreign contributors is to close down small and medium-size restaurants. We favour foreign investments as long as it leads to innovation and growth in their respective sectors,” it said.

On the in-house kitchen issue, Bengaluru-based restaurant Art of Delight founder Ayaaz Hameed, said: “The concept is fine for us as long as the cuisine they (the in-house kitchens) offer are not directly competing with us.”

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