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Nov 9, 2024

CCI Probe Finds Zomato and Swiggy Breached Antitrust Laws

NewsDecode | Economy | Mains Paper 3: Indian Economy - Issues Related to Growth, Development, and Competition

 

For Students:

From the UPSC perspective, focus on competition laws, market monopolies, and antitrust regulations as they relate to digital markets and online platforms in India.


 

Why in the News?


  • The Competition Commission of India (CCI) has found that food delivery giants Zomato and Swiggy violated antitrust laws, raising concerns about market dominance and unfair trade practices in India’s digital economy.


 

Key Findings of the CCI Investigation


  • Unfair Pricing Policies: The investigation highlights instances where Zomato and Swiggy allegedly manipulated pricing mechanisms, impacting both consumers and restaurant partners.

  • Exclusivity Clauses: CCI’s probe reveals the use of exclusive tie-ups with restaurants, which may limit competition by restricting these restaurants from partnering with multiple platforms, impacting smaller competitors and new entrants.

  • Preferential Listings and Algorithmic Bias: Zomato and Swiggy reportedly prioritized certain restaurants in search rankings and visibility based on paid arrangements. This algorithmic bias could distort market access and limit consumer choices.

  • High Commission Rates: High commission fees charged to restaurant partners have also come under scrutiny, as these fees can increase food prices for consumers and reduce profit margins for restaurants, particularly small businesses.


 

Impact on Competition and the Digital Market


  • Anti-Competitive Practices: The findings emphasize the risk of anti-competitive behavior in the fast-growing digital economy, where platform companies can easily dominate through network effects and aggressive acquisition strategies.

  • Impact on Small Businesses: Unfair practices by dominant platforms can stifle the growth of small businesses and new entrants, limiting market diversity and consumer choice.

  • Consumer Welfare: By potentially driving up food prices and limiting options, these practices negatively affect consumer welfare, undermining the principles of a competitive free market.