With the online food delivery scene being tense in recent months, a complaint against India’s leading online food delivery platform Swiggy provided a much-needed glimpse into the ordeal customers’ are going through.
Swiggy was accused of exercising unethical practices. The complaint, filed to the Competition Commission of India, accused the food delivery startup Swiggy of having a higher-priced menu on the website and app, in comparison to the actual restaurant pricing. The deeper implications of this accusation were the lack of transparency in Swiggy’s pricing strategies, as many customers remain unaware of such discrepancies.
The complaint further alleged that the brand charges a commission, inclusive of GST, from all its partner restaurants, on a per order basis. The focal point of this accusation, however, was in the way the percentage of commission was claimed to increase when delivery prices were higher.
Swiggy’s response to the complaint offered that the pricing of menu items is directly quoted by the restaurant partners on the platform. With this, Swiggy rejected having any bearings in setting the prices.
Yesterday CCI has delivered their verdict and given a clean chit to Swiggy, albeit with certain suggestions.
The CCI’s final verdict absolved the food delivery giant of the accusations, with suggestions to make the platform’s pricing protocol more transparent. Citing the difficulty of conducting further investigation into the matter and Swiggy’s past record for taking up pricing complaints, the order said:
“Having been satisfied with the averments of Swiggy that it has no role to play in the pricing of the products offered by the partners on the platform, the Commission finds that no prima facie case of contravention of the provisions of Section 4 of the Act is made out against Swiggy in the instant matter.”
However, the incident has triggered a debate once again.
Commissions are Becoming Controversial
An emerging row between partner restaurants and food aggregators has been emerging since early last year. In January 2019, restaurants joined forces to raise the issue of the misuse of dominance by food delivery services. In June, the #logout campaign against Zomato gained momentum, backed by the National Restaurant Association of India.
One of the main bones of contention in this conflict was the deep-discounting strategies delivery portals adopted (and still continue to adopt) to increase demand. These schemes lead partner restaurants to run into losses. To overcome this solution many restaurants partners on food delivery platforms have turned to something that is not being appreciated by customers at all.
All the food delivery platforms take a cut from their restaurant partners besides charging delivery fee from customers. This cut ranges anything between 15% – 21%. Ideally, such charges are born by the beneficiary and in the case of food delivery restaurant partners are the ones who must pay this cut to Swiggy from their profit. In contrast, restaurants partners are silently transferring their commission on customers.
In order to maintain profit margins, restaurants quote higher prices in the online mode to make up for the losses they incur due to the ever-increasing discount war and commissions. This essentially transfers the burden of bearing commissions onto customers, and is, thus, unethical.
As customers are left with no other choice but to bear commission that restaurants are supposed to pay to Swiggy for getting business, along with delivery, packaging charges and taxes, they end up paying nearly 30% – 40% premium on the food items delivered at their doorsteps.
Surprisingly, Swiggy, which is fully aware of the unethical practices employed by their restaurant partners, has decided to wash off their hands from any responsibility on the price of listed food items on their platform and has put the complete onus on restaurants partners.
However, CCI found it nothing wrong on Swiggy’s part and gave a clean chit to food delivery platform. Thus, taking this into consideration, the CCI’s ruling on the complaint against Swiggy seems unjust. Closing down possibilities of further investigations in the future, when the market is more stable, does little to favour customers and lets a massive corporate get away with a clean chit.
Not the end of the Road
2020 has been a rocky road from the start, with the restaurant business suffering immensely due to lockdowns and an economic impasse.
Swiggy, however, still seems to be the leading online food delivery portal for Indians.
With over 60% revenue share, the food delivery giant saw 200% YoY increase in the number of daily orders in FY19. It also raised $43 million in the first round of its new investment master plan.
Earlier this year, the company allegedly increased the commissions in regions with a mature consumer base. More recently, however, the NRAI opened up discussions with leading food delivery platforms, including Swiggy, to decrease the commissions they charge from restaurants in order to make the business model more sustainable for their partners.
