CCI says platform fees and delivery charges charged by Zomato not ‘abuse of dominance’

The Competition Commission of India (CCI) has found that the platform fee, delivery charges and restaurant commissions collected by Zomato do not constitute an abuse of dominance and are not anti-competitive practices. They are charges for legitimate and differentiated services being provided, it said.

The order was in response to an application by one R. Suresh, who alleged that Eternal (previously called Zomato) was charging an inflated price for food on its food-delivery platform as a result of its platform fees, delivery charges, and the commission it charges restaurants. 

Allegations of abuse of dominance

According to Mr. Suresh, he paid ₹198 for a plate of ghee pongal when he ordered it on Zomato from a restaurant named Sree Ariya Bhavan. However, when he went to the restaurant himself, he was charged ₹105 for the same dish.

He further informed the CCI that the higher price on the delivery platform was due to a ₹43 delivery partner fee, ₹14.90 platform fee and ₹16.6 as Goods and Services Tax. He further said that the base price of the dish was also higher on the platform, at ₹123.5, than the ₹100 the restaurant charged him in person, before taxes. 

“Upon enquiry, the restaurant management informed that approximately 33% commission is deducted by Zomato from restaurants, compelling restaurants to artificially inflate prices on the platform,” the CCI order read. “The restaurants are also compelled to incur advertisement and promotional visibility expenses to maintain competitiveness on the platform.”    

As per the CCI, Mr. Suresh alleged that Eternal is “abusing its dominant position” in the online food delivery market “by imposing unfair and discriminatory conditions” upon consumers and restaurant partners. He further said that this conduct has caused “appreciable adverse effect” on competition. 

CCI finds no abuse

The CCI, however, did not agree with Mr. Suresh. 

“With respect to excessive price charged by the Opposite Party [Eternal] in comparison to the concerned restaurant partner, the Commission is of prima facie view that the same may not be considered as abusive as selling food items through online platforms includes other services like platform services, delivery services etc,” the CCI’s order said.

It added that such platforms, being multi-sided in nature, charge platform fees from consumers to provide online food services, and delivery fees for delivering food items through third-party or their own delivery mechanism. 

They also charge a commission from restaurant partners for selling their food items through the platform. 

“Since commission is paid by restaurants, they may shift it to consumers by adding it to the menu price of the food,” the CCI noted. “A consumer who is not able to go to the restaurant to have food may avail services of online food platforms by paying additional charges including delivery charges, platform fee, etc.”  

“The business model of selling food items through a restaurant and online food delivery services are different,” it added. “So, the price of a food product varies in both the models.”