Govt summons Zomato, Swiggy & others over deep discounting, predatory pricing

The policy menu for online food aggregators may get new entries – the Department for Promotion of Industry and Internal Trade (DPIIT) has summoned Swiggy, Zomato, Foodpanda and Uber Eats for a meeting on Thursday. This follows complaints from restaurants that food aggregators are engaging in “deep discounting” and “predatory pricing”.

Recently, the commerce and industry minister, Piyush Goyal, admonished global ecommerce players for “hurting” local kiranas and small retailers through their “predatory pricing” practices. He categorically stated that the government will not allow small retailers and kirana shops to be wiped out and that it is making all efforts to balance the interests of small businesses, retailers and ecommerce companies.

“The meeting has been called to resolve the issues of the restaurants. They have problems similar to those brick-and-mortar retailers had with ecommerce platforms,” said an official in the know of the details. He spoke off record.


At the Thursday meeting, representatives from various restaurant associations, including Federation of Hotel & Restaurant Associations of India and National Restaurant Association of India, will also be present.

‘Mutual Areas of Interest’
The department wants the two sides – restaurants and online players – to “discuss mutual areas of interest and develop viable solutions for equitable growth in the industry”, said another official.

“We are invited to the meeting chaired by DPIIT secretary, Ramesh Abhishek. This meeting will be attended by key stakeholders from food service industry tomorrow (Thursday) and is intended to address the issues and challenges faced by the industry,” said a spokesperson for Swiggy in an email response.

Mails sent to UberEats, Zomato, and Ola (Foodpanda) remained unanswered. The meeting comes almost two months after representatives of offline restaurants met the department to highlight the impact of food aggregators’ “deep discounting” and “predatory pricing” on their trade.

Another complaint is that aggregators have launched their own private labels that, restaurants allege, is eating into offline players’ business. Restaurants have also complained that consumer preference data available to food aggregators is being used by the latter to shape their private label menus.

Further, restaurants have claimed that aggregators were offering massive discounts on their own products, thereby forcing restaurants to drop prices to remain competitive.

Executives of two leading online food aggregators said the July 4 meeting will not be restricted to issues of discounts. These executives, who spoke to ET on the condition of anonymity, said they will present recommendations to the DPIIT on ways to boost the sector, which, they said, has already created “massive employment”. Aggregators will also present ideas on improving food safety, they said.

Around 500 restaurateurs had complained to the Competition Commission of India (CCI) early this year. “There are no foreign direct investment issues in this matter and it seems the government wants to understand their working model and how aggregators manage to give significant amount of discounts. An intervention may not be likely at the moment,” said Arvind Singhal, chairman, Technopak.

India’s food ordering sector has seen partial rationalisation in the past six months. Market leaders Swiggy and Zomato continue to burn large amounts of cash to compete with each other while cab aggregators Uber and Ola, which had thrown their hats into the space, cut spending drastically after burning through millions of dollars with little to show for it in terms of topline enhancement.

“Apart from small restaurants, large chains have also raised these issues with authorities… discounts doled out by these app-based players have led to as much as 30% reduction in their business,’’ said a person in the know of the matter.