Food delivery platforms mustn’t starve restaurants of their fair share

Right now, the platforms use the information collected to better target customers; restaurants want to be able to better rewards customers who order their meals regularly. (Representative image)

The spat between restaurants and food delivery apps has found its way to the Competition Commission of India (CCI). The National Restaurants Association of India (NRAI) has approached the competition regulator, under Section 3(iv) the CC Act, with half a dozen complaints. Essentially, the issue being highlighted is that a platform, with a big share of the market and, therefore, enjoying clout, should not be imposing onerous terms on the users of the platform. In other words, no entity should enter into vertical agreements that result in anti-competitive behaviour. To begin with, the NRAI claims food aggregators like Swiggy and Zomato are compelling restaurants to buy their entire bouquet of services—from discovery to delivery and everything in between. NRAI believes restaurants ought to be able to choose the services they want and pay for them accordingly. Indeed, bundling the services seems a tad unfair since many of the restaurants are small and may not require all of the services.

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Restaurants may also have a point when they say it is unfair the food delivery platforms retain all the data on customer preferences without sharing it with them. They point out the customers are ultimately theirs—since they order food cooked by them—and, consequently, they ought to be able to access the data. Right now, the platforms use the information collected to better target customers; restaurants want to be able to better rewards customers who order their meals regularly.

It would seem that it can’t hurt the platforms to share the customer data; it is highly unlikely these customers would order directly from the restaurants bypassing the app, and the platforms need not fear any loss of revenues. Also, each restaurant would get data relating to its customers; it is not as though the platforms are handing over the entire database to all restaurants. What restaurants are really miffed about are the high fees which they claim ranges between 20% and 25% of the value of the order. Moreover, they don’t see why they should be asked to fund discounts for special occasions without the platform coughing up a share; these can be as high as 60% of the order value though subject to a cap. Indeed, it does seem unfair the restaurants are being asked to fund the entire discount for any special events; these costs should be borne by the platforms. If it is really true, as NRAI spokespersons claim, that the visibility on the apps gets reduced if they refuse to participate in events, that is very unfair. It isn’t very hard to imagine the pain of the restaurateurs, many of whom are relatively small in terms of their operations, who say their margins are being crimped by the stiff charges and steep discounts they are forced to offer.

It could be argued that the restaurants aren’t compelled to become members of a platform. It is a voluntary decision, and they are free to deliver food on their own. Indeed, they have been able to remain in the business thanks to apps like Swiggy and Zomato. After all, the platforms have been built painstakingly and, at the end of the day, they are a running a business. They would argue that restaurants wanting to use the services should be willing to pay for it. The problem is that in a market that is more or less a duopoly—with UberEats having been swallowed up—platforms do have enormous clout. And such dominance can lead to smaller, weaker stakeholders being bulldozed. Some checks and balances are called for.

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