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CCI exonerates food aggregator Swiggy from allegations of imposing unfair prices on customers -sans market definition
By way of order dated 19.06.20, the Competition Commission of India (“CCI/Commission”) has dismissed allegations of imposing unfair prices on customers and thereby abusing its dominant position by Bundl Technologies Pvt. Ltd (“Swiggy”).
Background & Allegations
Information before the CCI was filed by two advocates from New Delhi alleging that Swiggy is charging prices higher than the prices charged by the respective partner restaurants for the walk-in customers, without the knowledge of the customers. It was alleged that the customers ordering food online via the app/website of Swiggy end up paying higher prices than they would have paid by walking-in or ordering directly through phone from the restaurant.
The informants contended that in case of app-based food delivery, a customer has various options to select from nearby restaurants and make online payment or pay in delivery which is not the case with phone dialled delivery and therefore the relevant market should be ‘App based food delivery with restaurant search platform in India’.
As regards the dominance of Swiggy, the informant presented reports of kalagato.in, Red Seer and Outlook Business which revealed that Swiggy had the highest market share followed by Zomato. Apart from this, the platform of Swiggy claiming it to be the leading food ordering and delivery platform in India was also brought to the notice of the Commission.
Swiggy’ s submissions
Swiggy submitted that it only operates as an intermediary and the prices displayed on the platform are directly uploaded by its partner restaurants and the decision in pricing solely rests with the restaurants and Swiggy has no role (direct or indirect) to influence the prices on its platform. Further, it was submitted that Swiggy Merchant Terms of Use requires a partner restaurant to ensure that it maintains price parity of its products offered for sale on the platform as against its other sales channels including its self-operated retail locations. Moreover, as and when a complaint is received with regard to discrepancies between the prices listed on the platform and the restaurant menus, the same is escalated to the restaurant partners for action since Swiggy cannot control, alter or affect the prices of items listed on its platform.
As regards the issue of dominance, Swiggy denied being in a dominant position in the relevant market with Zomato as its nearest competitor. Swiggy contended that the market data reports cited by the informants were from 2018 in which Zomato was the market leader in the online food delivery business with 21 million orders per month as compared to Swiggy’s 20 million orders. Moreover, there have been significant developments in the online food delivery market for example- Zomato acquiring UberEATS, Ola acquiring Food Panda and Amazon planning to enter the Indian food retailing sector in the next 5 years. It was submitted that a higher market share of Swiggy with a comparable market share to its nearest competitor Zomato in such a dynamic market does not indicate Swiggy’s dominance.
With respect to the definition of the relevant market, Swiggy contended that the distinguishing factor of the food delivery business is the service of receiving a restaurant’s food without leaving the comfort of one’s home and not the ability to search for restaurants and merely the search function does not put the platform in a different relevant market as compared to other food delivery options. Therefore, Swiggy submitted that the relevant market should be ‘market for food delivery’.
CCI’s prima facie opinion
CCI noted that Swiggy had denied the allegation with reference to the contractual agreement it has entered into with various partner restaurant seeking them to maintain a uniform price of food items sold by such partners to customers when dealing with them directly or through Swiggy. The Commission further acknowledged that Swiggy takes up the complaints of price discrepancies received by it with the concerned partner restaurants and therefore the allegations against Swiggy does not appear to be substantiated.
Further, CCI noted that Swiggy’s role is limited to providing access to communication system over which information made available by third parties is transmitted or temporarily hosted. Commission also acknowledged Swiggy’s contention that it does not select or modify the information contained in the transmission made through the platform, and therefore, any discrepancy in the rates is solely attributable to restaurant partners.
Accordingly, the Commission , in the fact and circumstances of the case , did not deem it necessary to define the relevant market and being satisfied with the contentions of Swiggy that it has no role to play in the pricing of the products offered by restaurant partners on its platform, held that there was no prima facie case of contravention of Section 4 of the Act. This obviously means that the Commission also agreed with the Swiggy’ s contention that it was not dominant in the relevant market , which was left open.
However, the Commission observed that it would be apposite for Swiggy to give sufficient disclosures on its platform that it is not involved in fixation of price of the products of the restaurants on its platform.
Comment: This is another peculiar order wherein CCI decided to avoid defining the relevant market while assessing market power of Swiggy. CCI apparently agreed with the contention of the charged party that it could not have been dominant due to presence of equally strong competitors in the market for online sales and delivery of cooked food and possibility of multi homing . The CCI order shows evolution of jurisprudence on competition assessment of digital markets in India and reinforces the view that market definition is not an end in itself but merely an instrument and tool for determining market power and that this instrument may not be useful in the analysis of two or multi sided e-platform markets with a unique ecosystem in which companies do not compete merely on price . In my view, while assessing competition effects due to e-platforms less emphasis should be placed on analysis of market definition and more on theories of harm and identification of anti-competitive strategy.
Moreover, CCI’s reluctance to interfere in the food aggregators online markets could also have been perhaps due to the fact that the allegation pertained to unfair or excessive pricing , which , though an exploitative conduct , is considered generally as a weak antitrust violation and is sparingly inquired in a dynamic pricing model which is an essential feature of online markets .
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