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CASE COMMENTARY: ROHIT ARORA V ZOMATO PVT LTD BY: SHAREEKA H S & AMBIKA KUNWAR SISODIYA
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CASE COMMENTARY: ROHIT ARORA V ZOMATO PVT LTD
AUTHORED BY:
SHAREEKA H S
CO-AUTHOR:
AMBIKA KUNWAR SISODIYA
Ph.: 1. 8056467376
2. 8688862001
INSTITUTION:
School of Law, CHRIST Deemed to be University, Bengaluru.
QUALIFICATION:
1. LLM (Corporate Law)
2.LLM (Corporate
Law)
FACTS:
The Complainant has been a Zomato user since 2018. OP (Opposite Party) is
a corporation that operates a two-sided platform. OP (previously known as
Foodiebay.com) began providing restaurant search services in Delhi/NCR in 2008.
Foodiebay was rebranded Zomato in 2010, signalling a shift in its business
model. Zomato had become a prominent player in the restaurant and food portal
sector in India by 2011, and it had expanded abroad in 2012. The Complainant
claims that when Zomato entered
the food ordering business,
it had a competitive advantage. This advantage resulted from Zomato's collection of user data
from its restaurant discovery platform, which resulted in a zero-cost customer
acquisition. Zomato was able to swiftly build
a strong presence in the online meal ordering business by leveraging this data and insights into
consumer behaviour. As per the complainant ordering the food online and
delivering the food are different markets and are not relevant one. Zomato is said to have a dominant position
in the online meal ordering sector, which it expanded after owning UberEats in
January 2020. Zomato got into principal-to- principal agreements with eateries
to provide online meal ordering services. Zomato tred to show its dominance in
food delivery market also, since the delivery was initial done by the
restuarants. However, Zomato's 2017 acquisition of Runnr resulted in a quick
expansion of its meal delivery services through data-driven initiatives.
ISSUES:
1. Whether the provision of buying food online along with
the condition of delivery service amounts to Tie-in-arrangements?
2. Whether the Zomato Pvt Ltd is Abusing the Dominant
Position as per Competition Act, 2002?
PROVISIONS:
1.
Section 19(1)(a)
in the Competition Act, 2002
(a) receipt of a complaint, accompanied by such fee as may be determined by regulations, from any person, consumer
or their association or trade association; or[1]
2. Section 3(4) in
the Competition Act, 2002[2]
(4)
Any agreement
amongst enterprises or persons at different stages or levels of the production
chain in different markets, in respect of production, supply, distribution,
storage, sale or price of, or trade in goods or provision of services,
including—
(a)
tie-in arrangement;
(b)
exclusive supply agreement;
(c)
exclusive distribution
agreement;
(d)
refusal to deal;
(e)
resale price maintenance, shall be an agreement in
contravention of sub- section
(1) if such
agreement causes or is likely to cause an appreciable adverse effect on
competition in India. Explanation.—
(2) For the
purposes of this sub- section,—
(a)
“tie-in arrangements” includes any agreement requiring
a purchaser of goods, as a condition of such purchase, to purchase some other
goods;
(b)
“exclusive supply agreement” includes any agreement
restricting in any manner the purchaser in the course of his trade from
acquiring or otherwise dealing in any goods other than those of the seller or
any other person;
(c)
“exclusive distribution agreement” includes any agreement to limit, restrict or withhold
the output or supply of any goods or allocate any area or market for the disposal
or sale of the goods;
(d)
“refusal to deal” includes
any agreement which restricts, or is likely to restrict, by any method the persons or classes of persons to
whom goods are sold or from whom goods are bought;
3. Section 4 in the Competition Act, 2002
4. Abuse of dominant
position.—
(1) No enterprise shall abuse its dominant position.
(2) There shall
be an abuse of dominant
position under sub-section (1), if an enterprise,—
(a)
directly or
indirectly, imposes unfair or discriminatory—
(i)
condition in purchase or sale of goods
or services; or
(ii) price in
purchase or sale (including predatory price) of goods or service; or
Explanation.—For the purposes of this clause, the unfair or discriminatory condition in purchase or
sale of goods or services referred to in sub-clause (i) and unfair or
discriminatory price in purchase or sale of goods (including predatory price)
or service referred to in sub-clause (ii) shall not include such discriminatory
conditions or prices which may be adopted to meet the competition; or
(b)
limits or restricts—
(i)
production of
goods or provision of services
or market therefor; or
(ii) technical or scientific development relating to
goods or services to the prejudice of consumers; or
(c)
indulges in practice or practices resulting in denial of market access;
(d) makes
conclusion of contracts subject to acceptance by other parties of supplementary
obligations which, by their nature or according to commercial usage, have no
connection with the subject of such contracts; or
(e)
Uses its dominant position in one relevant market to
get into or safeguard a different relevant market.
Explanation.—For the purposes of this section,
the expression—
(a)
“dominant position”
means a position of strength,
enjoyed by an enterprise, in the relevant market, in India, which
enables it to—
(i) operate independently of competitive forces prevailing in the relevant market; or
(ii) affect its competitors or consumers or the relevant
market in its favour;
(b)
“predatory price” means the sale of goods or provision
of services, at a price which is below the cost, as may be determined by
regulations, of production of the goods or provision of services, with a view to reduce
competition or eliminate the competitors.[3]
COMPLAINANT’S CONTENTION:
The
complainant stated that initially the food was delivered by the restaurants
itself, now the delivery service provided by the Zomato is seen as a tie-in
arrangement.
The
Complainant's charges against Zomato include a variety of practises that are
viewed as abusive behaviour, which could be attributed to Zomato's dominant position in the online food ordering and
delivery business. Here's a rundown of the allegations:
·
Allegations Regarding
Food Delivery Fees and Terms:
Raising
Food Delivery Fees: According to the Complainant, Zomato has raised food
delivery fees or delivery rates above competitive levels. This could result in
higher consumer costs and anti-competitive behaviour.
Charging
Unfair and Discriminatory Delivery Fees: According to the Complainant, Zomato
charges unfair and discriminatory delivery fees by changing algorithms. This
implies that Zomato's pricing policies may be discriminatory and controlled.
Imposing
Unfair Conditions on Customers: According to the text, Zomato imposes a variety
of unfair conditions on customers. The nature of these situations is not
specified, but they are suggested to be harmful to users.
·
Accusations Against
Food Delivery Services:
Vertical
Restriction of businesses: According to the Complainant, Zomato is vertically
restricting businesses from delivering meals itself. This may limit the
independence and competitive options of restaurants.
Restricting
Food Delivery from Unfavourable Restaurants: It is said that Zomato prohibits
food delivery from undesirable restaurants by failing to assign delivery
executives. This practise has the potential to stifle competition and customer
choice.
·
Zomato's Market
Entry Strategy Allegations:
Using
Dominance to Gain Access to the Food Delivery Market: As per the Complainant, Zomato
used its strong
position in the online food ordering sector
to obtain the online delivery
business also. This means that Zomato's dominance enabled it to force establishments to use its delivery services.
Supporting
occurrences: The Complainant cites three specific occurrences to back up these claims.
Order cancellation procedures, food spills upon delivery, and non-refund of money upon order
cancellation are all examples of these situations. According to the
Complainant, these occurrences demonstrate Zomato's abusive behaviour.
RESPONDENT’S CONTENTION:
Zomato responded to the Complainant's charges by presenting its
perspective and reasoning for its actions in response to the three
individual instances. The following is
a summary of Zomato's response:
·
The first incident was an unauthorised cancellation.
The Complainant, according to Zomato, placed an order on the platform and
then called the delivery partner
directly, giving specific directions about reaching him on a landline number
rather than the reported mobile number when delivering the food.
When such instructions are given through Zomato's platform, customer
support personnel guarantee that they reach the delivery partner. However, in
this case, the Complainant immediately communicated instructions to the
delivery partner, creating a one-of-a-kind circumstance. According to Zomato,
providing the Complaint a full refund would have been unjust
because the delivery
partner had already invested
time, energy, and fuel in picking up and transporting the food.
·
Second incident - Food Spillage:
Zomato's answer to the second event includes a claim that its customer
care executive instructed the Complainant to choose the spilled item,
but the Complainant did not file a complaint.
In accordance with Zomato, the Complainant's activities reflect a desire
for a speedy reimbursement. When it became clear that a reimbursement would not
be granted, the Complainant dropped the complaint. According to Zomato, this
indicates a lack of genuine care for the tragedy.
According to Zomato, if the spill was genuine, the Complainant should
have raised the issue with the
customer service staff and provided photographic confirmation of the leak.
·
Third
Incident - No Money Refund: Zomato denies the Complainant's assertion that the order
was cancelled "within 30-40 seconds." According
to Zomato, the Complainant placed the order
at 11:09 a.m. and requested cancellation two minutes later, at 11:11 a.m.
Zomato claims that, despite the time difference, the Complainant received a
complete reimbursement for the order. According to Zomato, the Complainant purposefully and fraudulently failed to divulge this fact.
In summary, Zomato's response to these situations seeks to present a
different viewpoint on the actions and decisions taken in each case. Zomato
believes that its actions were justified and appropriate under the
circumstances, and it refutes the Complainant's assertions by providing more
data and timings. These comments are most likely part of Zomato's
defence against the Complainant's charges
of abusive and anticompetitive behaviour.
COMPETITION COMMISION OF INDIA’S DECISION:
CCI ruled that, in relation to the
three specific instances of abuse described by the Complainant, Zomato
attempted to disprove all three with evidence on record, which was not
substantively contested by the Complainant, and thus the Commission discovered
no evidence of abuse made out against Zomato.
The Commission noted that the
Complainant had determined two distinct relevant markets, which Zomato had
challenged: online meal ordering services provided by food aggregator applications in India and food delivery services
in India. Based on the
available evidence and the facts of the case, the Commission concluded there is
no prima facie case of Act violation against the OP, and the evidence filed is
directed to be closed immediately.
ANALYSIS:
The claims
presented by the Complainant against Zomato, specifically focused on
occurrences relating to food delivery, food spills, and order cancellations.
The CCI determined that the Complainant's complaints were principally based on these specific
occurrences, but observed that Zomato's evidence contradicted the assertions,
and the Complainant did not substantively rebut these facts in their rejoinder.
The
possibilities of Abuse of Dominant position is characterised as: Sets unjust or
discriminating conditions, either directly or indirectly: condition in the
purchase or sale of goods or services
or price in the purchase or sale of goods or services (including predatory
pricing)limits or restricts: production of goods, provision of services, or market access
as a result; or technical or scientific development relating to goods or
services to the detriment of consumers; or engages in practise or practises
resulting in denial of market access in any way; or makes contract conclusion
subject to acceptance by other
parties of supplementary obligations that, by their nature or nature of their
obligations, have no link with the subject of such contracts or utilises its dominating position in one relevant
market to enter or protect another relevant market, according to commercial
usage.[4]
As a
result, there is found no instances of abuse of power in accordance with
Section 4 of the Competition Act.
Food spilling, delivery allegations does not amounts to abuse of dominant
power.
Concerning
the charge of a tie-in arrangement including meal delivery, the CCI referenced
prior observations in a similar case against Zomato and Swiggy, emphasising
that bundling delivery with food ordering was consistent with consumer
expectations and provided a composite service. A tie-in arrangement, as defined
by competition law, is a circumstance in which a seller of a good or a provider
of a service sells his good or provides his service on the condition that
another good or service be acquired in conjunction with the purchase of the
first mentioned commodity or service.
The
integrated service catered to consumer needs by allowing for simple ordering and delivery. The CCI observed that the
competition between these online food platforms was primarily focused on
packages, with delivery time and quality being critical factors, and that
bundling did not pose competition concerns. The Complainant failed to provide evidence to support their
contention that such bundling was anticompetitive. The allegations passed by
the Respondents seems to be fair and reasonable, and also food spilling,
delivery and cancellation was done in a reasonable situation it doesn’t amounts
to an abuse of dominant position under my opinion.
CONCLUSION:
The
Competition Commission of India decided that the claims of misuse against
Zomato were unsubstantiated. The specific occurrences raised by the Complainant
were properly handled by Zomato's answers, and the Commission concluded that there
was no prima facie allegation of a violation of the Competition Act. As a
result, the matter was closed, and Zomato was not prosecuted.
[1] Section 19(1)(a) in the Competition Act, 2002
[2] Section 3(4) in the Competition Act, 2002
[3] Section 4 in the Competition Act, 2002
[4] Position of dominance - the abuses
and recourses ,2023, Lawrbit. https://www.lawrbit.com/article/position-of-dominance-the-abuses-and-recourses/
Article Information
CASE COMMENTARY: ROHIT ARORA V ZOMATO PVT LTD BY: SHAREEKA H S & AMBIKA KUNWAR SISODIYA
Authors: SHAREEKA H S, AMBIKA KUNWAR SISODIYA
- Journal IJLRA
- ISSN 2582-6433
- Published 2023/12/30
- Issue 7
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International Journal for Legal Research and Analysis
- Abbreviation IJLRA
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