Domino’s Pizza India franchise will consider taking some of its business away from popular food delivery apps, Zomato and SoftBank-backed Swiggy, if their commissions rise further, according to a letter seen by Reuters.
The disclosure was made by Jubilant FoodWorks, which runs the Domino’s and Dunkin’ Donuts chain in India, in a confidential filing with the Competition Commission of India (CCI) which is investigating alleged anti-competitive practices of Zomato and Swiggy.
Jubilant is India’s largest food services company, with more than 1,600 branded restaurant outlets – including 1,567 Domino’s and 28 Dunkin outlets.
The CCI ordered in April its probe into Zomato and Swiggy after an Indian restaurant group alleged preferential treatment, exorbitant commissions and other anti-competitive practices. The food delivery apps deny any wrongdoing.
After the CCI sought responses from Domino’s India franchise and several other restaurants as part of its investigation, Jubilant told the watchdog this month that 26-27 percent of its total business in India was generated from online platforms, including its own mobile application and website.
“In case of an increase in commission rates, Jubilant will consider shifting more of its businesses from online restaurant platforms to the in-house ordering system,” the company stated in its July 19 letter addressed to the CCI.
A spokesperson for Jubilant FoodWorks declined to comment, while the CCI did not immediately respond. Zomato, backed by China’s Ant Group, and Swiggy also did not respond.
With the rising use of smartphones and attractive discounts on offer, food delivery platforms have become increasingly popular in India. Jubilant’s warning comes as Zomato and Swiggy face accusations by many restaurants in India that their alleged practices hurt their business.
The CCI case was sparked by a complaint from the National Restaurant Association of India, which has more than 500,000 members, and alleges that commissions charged by Zomato and Swiggy in the 20 percent to 30 percent range were “unviable”.
A senior industry executive with direct knowledge said that Zomato’s and Swiggy’s commissions were a concern for Domino’s and many other restaurants.
“If commissions are increased further, they will lead to profit squeeze of businesses and will simply be passed on to consumers,” said the executive, who declined to be named.
Before the investigation was announced, Zomato told the CCI it negotiates and charges commissions from restaurants but they had no bearing on how listings appear on its app.
Swiggy stated that its commissions were determined by factors such as a restaurant’s popularity or the volume of orders, according to the watchdog’s initial order.
© Thomson Reuters 2022