The National Restaurant Association of India (NRAI) has sounded the alarm over food delivery giants Zomato and Swiggy venturing into private-label food delivery via their quick-commerce platforms. The association, representing over 5 lakh restaurants across India, has accused these platforms of exploiting their dominant positions, raising questions about fair competition and ethical practices in the food delivery ecosystem.
Credits: Financial Express
Breach of Trust: NRAI’s Disappointment
Sagar Daryani, President of the NRAI, expressed strong disappointment with this move, calling it a “breach of trust.” According to Daryani, food aggregators had previously provided verbal assurances that they would not pursue private labelling. “This is not just a violation of those assurances but also a significant threat to the survival of restaurants nationwide,” he said.
The NRAI emphasized that Zomato and Swiggy’s strategy involves leveraging their dominant market positions and exclusive access to restaurant data to launch competing private-label products. Subsidiaries like Blinkit Bistro and Swiggy Cafe/Snacc are examples of these quick-commerce ventures.
Impact on Restaurants: Cannibalisation of Business
One of the NRAI’s primary concerns is the cannibalisation of business. Restaurants, which heavily depend on platforms like Zomato and Swiggy to reach customers, now face direct competition from these very platforms. By launching private-label products, Zomato and Swiggy not only compete with partner restaurants but also use data insights gathered from them to their advantage.
“This creates a severe conflict of interest,” the NRAI stated. Restaurants have no access to the customer data collected by these platforms, which further exacerbates the situation. The association argued that such practices undermine the principles of marketplace neutrality, which are essential for a fair business ecosystem.
Legal Concerns and Copyright Violations
The NRAI also raised legal concerns regarding the use of restaurant data. The association pointed out that the move could potentially violate the Copyright Act and other related laws. By using proprietary data from restaurants to develop and market their private-label food products, Zomato and Swiggy might be treading on legally murky grounds.
The NRAI plans to approach regulatory authorities and seek legal remedies to address this issue. “We are absolutely not okay with this development,” Daryani said, underscoring the association’s firm stance against these practices.
The Consumer Masking Problem
The NRAI also brought attention to the important problem of consumer masking. Zomato and Swiggy do not provide restaurants access to the client data they collect. This approach hinders restaurants’ ability to establish direct connections with their patrons, which is essential for expansion and client retention. The platforms, meanwhile, take use of this data and introduce goods that directly rival those of their partner eateries.
In addition to putting restaurants at a disadvantage, this imbalance in data access significantly shifts the competitive landscape in the aggregators’ favor.
Industry at Stake: Rs 5.69 Lakh Crore Restaurant Sector
India’s restaurant industry is valued at an estimated Rs 5.69 lakh crore and supports millions of jobs across the country. The NRAI stressed that unethical practices by food delivery platforms could have devastating consequences for the sector. “The ecosystem that these platforms claim to support is at risk of being decimated,” the association warned.
The NRAI called on customers, restaurants, and regulators to collaborate in ensuring ethical practices and a level playing field. “The survival of India’s vibrant restaurant culture depends on it,” the statement added.
What’s Next: NRAI’s Plan of Action
To counter these developments, the NRAI announced plans to:
Seek Legal Remedies: The association will approach courts to challenge the legality of private-label ventures by Zomato and Swiggy.
Engage Regulatory Authorities: The NRAI plans to bring this issue to the attention of regulatory bodies like the Competition Commission of India (CCI) to ensure fair competition.
Raise Public Awareness: By engaging with customers and stakeholders, the NRAI aims to highlight the implications of Zomato and Swiggy’s practices for the broader food ecosystem.
Credits: Deccan Herald
The Call for Ethical Practices
The NRAI’s resistance to private-label food delivery services offered by Zomato and Swiggy brings to light a larger problem in the digital economy: the distribution of power between platforms and their partners. It is more important than ever to ensure fairness and ethical conduct as these platforms expand their operations.
