The NRAI argued that Zomato and Swiggy are falling under the rules by citing the platforms’ FDI funds and their recent moves to enter the grocery delivery market.
The National Restaurant Association of India (NRAI), which represents over 5 lakh restaurants across India, welcomed the proposed changes to the e-commerce rules and suggested some changes such as making the restaurant ranking guideline clearly visible, promotions through loyalty programs such as Zomato Gold and Swiggy Super and prevent the use of information collected on behalf of restaurants for the private benefit of the platforms.
background: The government proposed changes on June 21st that will give the existing consumer protection (e-commerce) regulations more teeth in 2020. The changes include, among other things, new rules against the misuse of FDI regulations, the establishment of a complaint procedure, new display and labeling criteria for foreign goods, the ban on flash sales, advertising restrictions, and liability for recidivism.
Read: Summary of Proposed Changes to Ecommerce Rules, 2020
Why is it important? In addition to platforms like Amazon and Flipkart, the proposed rules also cover online grocery delivery services like Zomato and Swiggy. While many stakeholders have provided feedback on the former, NRAI’s contributions offer a different look at the rules. The NRAI recently asked the India Competition Commission to investigate Zomato and Swiggy’s anti-competitive practices.
Which NRAI submitted?
Zomato, Swiggy fall under the rules: While the broad definition of e-commerce entities in the rules appears to cover grocery delivery platforms, this category is nowhere specifically mentioned in the rules. To avoid confusion as to whether or not they are covered, NRAI has argued that Zomato and Swiggy fall within the scope of the proposed rules for the following reasons:
- Since these platforms allow food to be bought and sold over a digital or electronic network, in particular by providing “a way to find, compare and order food in different restaurants”, they are “completely” subject to the rules.
- Since these platforms are funded by FDI, they have to act as e-commerce companies in the marketplace, falling under the rules proposed.
- These platforms are also finding their way into food and logistics delivery, “which makes them a clear marketplace model”.
- Food aggregators also fall under the Consumer Protection Act 2019 as service providers in the sense of the “electronic service provider”.
Blame those with significant market power, not just dominant companies: One of the proposed rules is that an e-commerce company that has a dominant position must not abuse that position. NRAI argued that gatekeepers, who are companies with significant and significant market power, “have the same potential to disrupt the market and ultimately harm the end user” in the dynamic digital marketplace as dominant companies. Against this background, the rule needs to be changed to the effect that “no e-commerce company that has significant market power in any market can cause an appreciable impairment of competition in the market”, according to NRAI.
“Swiggy and Zomato, for example, are the only two major e-commerce companies in the online food aggregator platform market with a cumulative market share of almost 100%. They are able to affect market dynamics by entering into unilateral agreements with restaurant partners that do not bring benefits to end users on an accrual basis. This is also a market reality that is currently taking place. However, they would keep their hands free for their abusive behavior as they may not, in the strict sense, be considered a dominant entity under Section 4 of the Act. ”- NRAI
The restaurant ranking policy must be made visible to consumers: The NRAI claims that food delivery platforms favor certain restaurants over others in search rankings by favoring restaurants that have agreements with the platform or that offer higher discounts or give higher commissions to the platforms Ranking Policy, Back-End Algorithm / Basis ” must be made visible on the website so that consumers can make careful choices.
Promotions through programs such as Zomato Gold and Swiggy Super may not be allowed: One of the proposed rules is that e-commerce companies are not allowed to use their name or brand to advertise goods sold on the platform, “in a way that suggests that those goods or services are related to the e-commerce entity of the market place in connection ”. Citing this rule, NRAI suggested that it should also apply to the promotions offered by grocery delivery platforms through programs such as Zomato Gold and Swiggy Super.
The information collected may not be used for private purposes: NRAI alleged that food aggregators like Zomato and Swiggy use the information collected on behalf of their restaurant partners to create private labels or to provide insight into selected restaurants with which they have agreements. With this in mind, NRAI has suggested that a rule be added stating that “the information will not be used for private purposes by these e-commerce companies or any other company that is in any way (directly or indirectly) affiliated allowed to). , by involvement (directly or through other group companies, control or otherwise). ”NRAI also stated that the information collected should not be used for the improper benefit of“ any person who has any involvement or control or affiliation, including but not limited to on their employees or relatives ”.
No substitute actions: One of the proposed rules is that “no marketplace e-commerce company may advertise a group of sellers to subsidize a sale on their platform”. NRAI argued that this should not only include advertising, but also “substitute promotions such as promoting exclusivity directly or indirectly through reduced commissions, better terms, etc.”.
The company should also be held liable together with the CCO: The rules stipulate that e-commerce platforms appoint a Chief Compliance Officer (CCO) who is responsible for compliance with the rules and is liable for non-compliance. NRAI argued that the company should also be held liable for any violation of the rules and that severe penalties must be put in place to address those violations.
Appoint an ombudsman who will decide on complaints: NRAI argued that food delivery platforms must appoint an ombudsman to resolve complaints from customers and restaurants.
Details of a differentiated treatment must be made clearly visible: NRAI argued that all details regarding preferential or differentiated treatment of sellers, such as: For example, the ranking of certain restaurants in the search ranking must be clearly visible on the search results page of the e-commerce platform so that consumers can identify them and make informed decisions.
also read (Feedback from other stakeholders)
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