The legal position post passage of the Competition (Amendment) Act, 2023 would be key. The silver lining may be availing of the commitment and settlement procedure.

Factual background of the case

The National Restaurant Association of India (NRAI) filed a case against Zomato and Swiggy for using their market position to the detriment of restaurant partners and foreclosing competition in the market. The Association alleged that both the companies have above 70% market share in North India and South Indian region respectively and have indulged in practices such as bundling of services, data masking, granting preferential treatment to selected partners, imposition of pay parity and charging high commission rates which are in violation of competition law.

Prima facie order passed by the CCI

The Competition Commission of India (CCI) after following the due process passed a prima facie order under section 26(1) of the Competition Act holding both the platforms in violation of the law and ordered a detailed DG investigation into the matter. The Commission did a brief analysis of the allegations as levelled by the Informant and suggested that the companies are in prima facie violation on three counts, i.e. platform neutrality, pay parity clauses and one-sided terms and conditions as imposed in the restaurant partner contract. The DG was directed to submit an investigation report within 60 days.

DG report

As per media reports, the DG has held Zomato and Swiggy in violation of competition law. The DG draws its powers under section 16 of the Competition Act and ought to conduct investigation as per the procedure laid down in section 26 read with section 41 of the Act. If the media reports are correct, the DG has taken around 30 months to complete the investigation in this matter which is higher by around 19 months than the median time taken by it to complete such a process. If the DG has, indeed, observed contravention, the CCI may well agree with the same and pass a contravention order against both the companies under section 27 of the Act imposing appropriate penalty. The CCI could further set aside the investigation, or order further inquiry as it may deem fit into the matter based on the proceedings before itself. There is limited information available as the CCI does not make access to the DG report public and even the non-confidential version of it is made available only to the parties involved.

Possible outcome

Nothing is settled as of yet. The affected parties reserve all the rights which could be utilised to contend the findings and observations as made in the investigation report. The DG investigation ought to be independent of the CCI. The legal position, however, post passage of the Competition (Amendment) Act, 2023 has changed. Under the amended section 16 of the Competition Act, it is now the CCI which appoints the Director General to conduct investigation into the matter - a power hitherto reserved for the central government. This would imply that the investigation report would be much more consequential now. The parties simply need to be better prepared on both, theoretical and empirical, grounds to escape the finding of contravention. The silver lining in the process is introduction of commitment and settlement procedure which is a mid-way for all the parties involved in the dispute, including the CCI, to save exhaustion of resources. A lot will, however, depend on the strength of the case presented before the CCI. The evidence collected by the DG, methodology adopted, a focus on principles of natural justice and willingness of the CCI to invoke its punitive powers should the parties observe final proceedings would also play a key role. Only time would be able to answer.