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Competition Issues in Food delivery sector

Amey Jadhav


The Competition Act, 2002 (“The Act”) is based on the principles of fair play and equal opportunity. There are three substantive provisions of the Act, i.e. anti-competitive agreement, abuse of dominant position (AOD), and mergers and combinations out of which AOD is concerned with the unilateral conduct. Any behaviour or approach that distorts the ongoing competition in the marketplace subject to the dominance of the given entity in the delineated relevant market, would be considered anti-competitive. The Indian competition commission has looked into such concerns arising out of the operations of food delivery aggregators in earlier cases and have recently ordered a detailed DG investigation in a fresh matter.


The Indian food delivery sector is dominated by two entities, i.e. Zomato and Swiggy, where both the entities have been raising capital through multiple rounds of investment. The CCI has been monitoring food aggregators for price manipulation, extreme discounting, and various rebates offered to the consumers. Some of the other concerns which have been raised in the past include duopolistic designs, cheap pricing, and the capacity to recoup losses by the dominant entities which ultimately damages consumers by restricting their choices.

Legislative scheme

As far as section 4 of the Act is concerned, “dominant position” is a defined term under the Act. Section 19(4) of the Act further mentions factors which needs to be taken into account while determining dominance, including economic strength relative to competitors and market share. Once the dominance of the given entity in the given 'relevant market (RM)' is established, abuse of such dominance may be established as per the standards mentioned in section 4(2) of the Act. Under section 3(4) of the Act, i.e. vertical restraints, the Commission may look into any agreement for competition concerns with the condition that the burden of proof to prove a contravention would lie on itself. Section 19(3) of the Act lists various factors which may be taken into account by the CCI while assessing appreciable adverse effect on competition.

Market power

Once the legislative scheme of the Act is established, it may be relevant to look into the market power of the said two entities. One key factor which adds to the strength of Zomato and Swiggy is their ability to access huge sum of funds through multiple rounds of investment. The said access has, in fact, led to multiple allegations where the entities are accused to engage in ‘predatory pricing’ under the Act. As per conservative estimates, the companies have raised over $1 billion in recent times thereby allowing them to expand their operations in multiple cities. The strength is further augmented due to the prevailing COVID-19 conditions where there are various restrictions imposed to eat out thereby forcing more people to order food online. With the recent spree of acquisitions and renaming of its internal brands, one of the said entities has further consolidated its position. Small start–ups have almost ceased to exist.


Based on the algorithm adopted by such aggregators, it would be anyone’s guess that such entities control restaurant listings and have access to huge consumer data. Such control combined with the aggregation is sometimes used to promote their own kitchens thereby resulting into competition concerns. According to one study, food aggregators have greatly benefited from cloud kitchens (cooking spaces without a dine-in-option). These aggregator-run restaurants have an additional advantage over regular restaurants on the app in terms of access to customer data and preferred listing. The profit distribution structure is also opaque thereby further agitating the contours of the Act.

The Commission has looked into allegations of contravention of section 4 of the Act on multiple occasions in the past. In Matrimony.com Ltd. v. Google LLC , it was held that rigging search algorithms to favour its own products and services would amount to violation of the law. In a detailed order, the CCI found out that such a rigging lowered the complainant's ranking and hence harmed their business. The CCI further held that Google was directly manipulating consumers by directing their attention away from competitors' services. Google misused its dominating position to force other companies out of the market thereby violating section 4(2)(e) of the Act. Applying such a ratio, it may be deduced that the food aggregators' in-house kitchens may also be abusing their dominant position.

Recently, in their complaint to the CCI, the National Restaurants Association of India (NRAI) has alleged that the aggregators charge restaurants exorbitant fees, provide eateries preferred listing in exchange for fees, and participate in deep discounting (non-adherence to deep discount schemes means lower visibility for the restaurants). According to the NRAI, the deep-pocketed aggregators' tactics drove some eateries to shut their businesses. The CCI has looked into such allegations and has ordered an investigation into the matter for violation of provisions of the Act.

The access to unrestricted funding is important from yet another perspective in food delivery market where the concerned entities are able to make continuous losses. Cue may be taken from the Uber v. CCI case where the SC considered taxi aggregators offering lower rates while still making losses. In both the cases, allegations of ‘predatory pricing’ were made where aggregators are able to drive out competition by eliminating the existing players. Even though the Commission could not ultimately find a case of contravention in the taxi aggregator case, the facts and market dynamics in the food aggregator business may or may not be the same.


Operations of food delivery apps is at the heart of digital markets. With the ongoing pandemic, the popularity of meal delivery entities is going to further rise. As far as scrutinizing the conduct under the Act is concerned, the Commission should look into the ability of such entities to access huge rounds of funding which ultimately allows them to keep incurring losses for years thereby severely concentrating the market. The evolution of a specific entity into the market may also be looked into to unearth true nature and scope of its business practices. If the Commission is able to look into such aspects, it may allow the same to have a holistic look at the competition landscape in the given sector and appreciate the true pro and anti-competitive concerns arising out of the companies operating in food aggregator market.