Exclusive: India finds food delivery companies Zomato and Swiggy violated antitrust laws, documents show

NEW DELHI: An investigation by India’s antitrust regulator has found that SoftBank-backed food delivery giants Zomato and Swiggy violated competition laws because their business practices favor select restaurants listed on their platforms, documents show.

According to non-public documents prepared by the Competition Commission of India (CCI), Zomato entered into “exclusive contracts” with partners in exchange for lower commissions, while Swiggy guaranteed business growth to certain players if they listed exclusively on its platform.

Exclusive agreements between Swiggy, Zomato and their restaurant partners “prevent the market from becoming more competitive,” CCI’s investigative unit noted in its findings reviewed by Reuters on Friday.

The antitrust investigation into Swiggy and its arch-rival Zomato began in 2022 following a complaint by the National Restaurant Association of India about the impact on foodservice outlets of the platforms’ alleged anti-competitive practices.

CCI’s documents are not publicly available under its privacy rules and were shared with Swiggy, Zomato and the plaintiff restaurant group in March 2024. Their findings have not previously been reported.

Zomato declined to comment, while Swiggy and CCI did not respond to Reuters queries.

Zomato shares fell 3% after the Reuters report compared to previous trading.

The CCI case is mentioned as one of the “inherent risks” in Swiggy’s IPO prospectus, which states that “any violation of the provisions of the Competition Act may attract substantial monetary penalties.”

The CCI report noted that Swiggy told investigators that the ‘Swiggy Exclusive’ program was discontinued in 2023, but the company was “planning to launch a similar program (Swiggy Grow) in non-metro cities.”

Food delivery giants Swiggy and Zomato have changed the way Indians order food in recent years, with hundreds of thousands of outlets showing up on their apps only when using a smartphone and online orders growing rapidly.

Swiggy, which on Friday closes filings for a $1.4 billion IPO (India’s second-biggest this year), and Zomato in recent years have also pushed restaurants to maintain price parity, directly reducing competition in the market by preventing restaurants from offering lower prices for other goods. online platform, the Chamber of Commerce and Industry documents say.

Zomato was found to have imposed price limits and discounts on restaurant partners, and in some cases included “penalties” if the establishment did not comply with them.

Some of Swiggy’s restaurant partners were “threatened that their ratings would be downgraded if they did not maintain price parity,” the CCI investigation team noted.

The next and final stage of the CCI case is the decision of the CCI management, which is still considering the findings of the investigation to decide on any penalties or changes in the business practices of Swiggy and Zomato.

A decision could take several weeks, and companies still have the opportunity to challenge the findings of the CCI investigation.

Zomato, which listed in 2021, has seen its share price more than triple to around $27 billion on rising demand. Swiggy values ​​itself at $11.3 billion in its IPO.

Macquarie Capital estimates Swiggy’s food order volume will be $3.3 billion in 2024-25, about 25 percent lower than Zomato’s.

Both are now rapidly diversifying into fast-paced commerce, where groceries are delivered in as little as 10 minutes.

India’s largest retail distributor group has asked the antitrust regulator to probe the fast-commerce businesses of Zomato, Swiggy and another rival Zepto for alleged predatory pricing, Reuters reported last month.