Did unexpected visitors simply ring the doorbell? or do you hate your PG’s lunch today? If not for this, you’re probably at home watching your favourite show and desiring a snack. To make your life easy, Zomoto, Swiggy and many other food delivery apps are at your disposal.

With the help of online meal delivery, people can order and receive their desired food items at their doorstep. It allows choosing from a plethora of cuisines and paying using a number of different methods. The user is also informed via the website/application of the anticipated food preparation and delivery time. These characteristics, together with delivery characteristics like simplicity, speed, and accuracy, are driving up demand for these services in India.

The online food delivery market in India has two big players, Zomato and Swiggy. There are other smaller players too, like Foodpanda, Justeat, TastyKhana, and FoodMingo.

In 2008, Foodiebay, which is now known as Zomato, was founded as a platform for discovery and reviews by Deepinder Goyal and Pankaj Chaddah. Today, Zomato is a leader in food technology with operations in 16 nations. Zomato has made history in the consumer internet sector by becoming India’s first-ever food tech brand to go public. As of December 25, 2022, Zomato’s market value was $5.5 billion, down 62% year to date.

On the other hand, Swiggy, India’s leading on-demand delivery platform, has been on a massive growth journey since its inception in Bengaluru in 2014 by Sriharsha Majety, Nandan Reddy and Rahul Jaimini. Swiggy has transformed food delivery services in India. It also developed into India’s fastest-growing company as it worked to transform the sector. In 4 years, it exceeded the unicorn valuation and is currently valued at more than $10 billion. Therefore, it is evident that Swiggy is now valued higher than its primary rival Zomato, which went public. With this, Swiggy has achieved the status of a decacorn, a term used to describe businesses with a valuation of over $10 billion.

According to restaurants, after they signed up with Swiggy and Zomato, orders increased by 20 to 30%. Because the market was still developing, corporations were more concerned with snatching up a piece of it than with maximising profits.

Small and medium-sized restaurants have recently accused food delivery services like Zomato, Swiggy, Foodpands, etc. of abusing their positions and displaying dominance in order to increase profits. This, in turn, has put a significant strain on small and medium-sized eateries. Responding to the miscreation, the restaurants filed an online petition, which was addressed to the Competition Commission of India (CCI) and the Prime Minister’s Office(PMO). Some of the significant concerns raised were related to deep discounting, cloud kitchens and in-house kitchens.

The Bowl Company, a company that Swiggy started as an in-house kitchen, was cited in the petition submitted by small-scale eateries. The establishments’ main issue was that Swiggy was attempting to attract all the consumer bases to itself by opening an in-house kitchen.

The petition filed by the small-scale restaurants cited that the in-house kitchen started by Swiggy – The Bowl Company, was trying to divert the consumer base towards itself. Additionally, Swiggy has implemented a number of other measures. For instance, The Bowl Company’s adverts are the first to appear when a user signs into Swiggy because it is their in-house kitchen. This, according to the petition, is consumer database abuse. Swiggy has refuted these claims and indicated that they do not seek to divert its customer base to its in-house kitchen, but rather that they endeavour to address the demands of customers whose needs have not yet been met. They have also stated that they work to close the gap in the market.

On the other hand, Zomato also has an internal kitchen called HyperPure that provides veggies, meat, chicken, and other items. Zomato is employing a strategy that violates the Competition Act by requiring other restaurants to buy these supplies from HyperPure. To its defence, Zomato has declared that its main goal is to simply supply restaurants with fresh goods. It has also been claimed that requiring restaurants to purchase HyperPure items would go against the moral code. However, Zomato has not imposed any obligations on any restaurants.

When it comes to the idea of deep discounting, which is used by online platforms to their advantage, customers are being lured away from restaurants and towards these platforms, which has resulted in lowering customer traffic in small-scale eateries. Small-scale restaurants’ running costs are rising as a result of the direct impact on commissions, which eventually hurts them. Once more defending themselves, the delivery apps said that providing discounts is a voluntary action and that its main objective is to increase consumer participation in terms of food product purchases. Additionally, they mentioned that eateries might also participate in the discounting promotion. However, in reality, the idea of significant discounts burdens small-scale eateries.

Nitin Chadha removed café, Madison & Pike in northern India from delivery apps Swiggy and Zomato in the middle of the coronavirus pandemic. After all, dine-in traffic had virtually halted, with takeout and delivery the only way left to make money.

But, fed up with ballooning commissions from the big so-called aggregators, Chadha had an alternative in mind. He turned to startup Thrive, which — along with rivals such as DotPe — provides tools to build websites, take online orders and deliver through staff sourced from third-party logistics firms.

In his justification, he mentioned the whopping increase in the commission from 12% in the first place to over 20 % by the end of 2019 and 25% by mid-2020. In stark contrast, Thrive and DotPe take a cut of around 5%, helping fuel a growing shift in the country’s massive restaurant sector as businesses increasingly look beyond Swiggy and Zomato.

Aggravating restaurants’ problems, the government also introduced a policy where platforms like Swiggy and Zomato will collect 5% Goods and Services Tax (GST) from customers instead of the restaurants they pick orders from.

This change in the GST tax rule impacted small restaurants, especially those whose annual turnover is less than Rs 20 lakh as these restaurants were not included in the GST net earlier.

For most restaurants now, there is an additional compliance load as they are required to maintain two separate accounts — one for their regular business and the second for the business done through Zomato or Swiggy.

It is clear from the analysis and knowledge of the small-scale restaurant problem that there is a gap between how small-scale restaurants operate and how food aggregators do, and that this gap must be bridged by finding a quick fix for the issue at hand. It is possible to conclude that the Competition Act of 2002 contains required provisions that would be helpful in imposing liability on the sector that unfairly exploits its position and abuses its power after considering the market’s economic environment and the terms of the law above. This would safeguard the independence of the operation of small-scale eateries in India and serve as a deterrent to similar incidents in the future. To accomplish this, the Competition Act of 2002’s rules must be strictly followed, and they must be implemented whenever necessary in all relevant contexts.

By Prashasti Jain