Restaurant Body To Sue Zomato, Swiggy For Private Labelling

The National Restaurant Association of India will be pursuing a legal action against Zomato and Swiggy, alleging attempts to monopolise the food delivery market. The move comes in response to their foray into 10-minute delivery through separate apps like Blinkit Bistro and Swiggy Snacc, which marks a shift from their roles as marketplace platforms to direct sellers.

"Their strategy cannibalises the business of restaurants that rely on these platforms," NRAI President Sagar Daryani told NDTV Profit. "So, we are absolutely not okay with Zomato and Swiggy engaging in private labelling or selling food directly,” he said, adding that the apex industry body is “seriously considering" taking legal action and filing complaints with regulatory authorities including the Competition Commission of India for potential violation of intellectual property rights under the Copyright Act.

This follows an ongoing case that NRAI has filed with the antitrust regulator, accusing both platforms of anti-competitive practices.

Daryani's comments reflect a growing apprehension among restaurateurs who fear that these delivery giants are leveraging their data to create their own products, thereby diminishing the market for restaurants.

“They have access to all our data, which they do not share with us. For us, there is complete consumer masking. We have no reason to believe they are not migrating our customers to the products they sell as private labels on their apps, whether it’s data from a tea brand, biryani or momo,” Daryani said, accusing the delivery giants of "monetising restaurant data" and engaging in "unfair competition" that threatens the viability of thousands of the very restaurants they claim to support. The association represents 5 lakh restaurants.

Daryani, also cofounder and CEO of Wow Momo restaurant chain, pointed out that Swiggy and Zomato had previously assured the restaurants verbally that they would not enter the food business directly.

Private labels or goods sold by companies under their own brand names offer companies fatter margins than selling third-party brands. They are typically priced lower than established brands.

The launch of private labels isn't new for platforms such as Zomato and Swiggy. Swiggy's grocery vertical Instamart sells various private labels like Supreme Harvest and Truly Good Food. Zomato’s Blinkit, on the other hand, had a stint with private labels that accounted for 50% of its gross merchandise value until it stopped selling them in 2021.

Daryani said that while quick commerce in food delivery had the potential to grow, aggregators must work with restaurants to enable quick delivery.

“Quick commerce in food is here to stay, grow and add more zing to the food delivery space," he said. "People want more convenience, and this will give an edge to restaurants that can adapt to it. We fully support it… As long as these aggregators work with restaurants and enable them to go quick, we’re fine with it.”

Bistro and Snacc have begun piloting their delivery services, but an official launch has yet to happen.