On Thursday, the National Restaurant Association of India (NRAI) strongly criticized leading restaurant aggregators Zomato and Swiggy for entering the private-label food delivery market through their quick-commerce platforms. The NRAI’s opposition stems from what it perceives as an abuse of market dominance and a breach of trust with restaurant partners, raising legal and ethical concerns. Zomato and Swiggy, initially designed as marketplace platforms, are now venturing into the private-label food segment either directly or through their subsidiaries, such as Blinkit Bistro and Swiggy Cafe/SNACC. This development has triggered alarm bells among restaurant owners and the NRAI, as it could have serious implications for their business operations. The NRAI, which represents more than 500,000 restaurants in India, has voiced concerns over how these aggregators are using their dominant market positions and access to sensitive restaurant data to directly compete with the very businesses they once served.
The organization has also highlighted that such practices may contravene the Copyright Act and other legal provisions, suggesting that aggregators might be infringing upon the intellectual property rights of the restaurants by using proprietary data to launch their own competing products. The NRAI’s President, Sagar Daryani, who also serves as the CEO of Wow Momo!, expressed his strong disapproval of the move, stating that the aggregators had previously given verbal assurances that they would not venture into private-label food products. According to Daryani, this represents a breach of trust and an unethical business practice that undermines the integrity of the industry. He further emphasized the issue of consumer masking, where restaurants are not privy to the customer data collected by platforms like Zomato and Swiggy. This lack of transparency leaves restaurants at a disadvantage, as they are unable to understand their customers’ preferences or improve their service offerings based on the data.
By exploiting this data, Zomato and Swiggy not only gain insights into consumer behavior but also use this information to launch their own products, thereby creating a direct conflict of interest. The NRAI argues that this move by Zomato and Swiggy is a direct violation of marketplace neutrality and could have a detrimental impact on fair competition within the food delivery space. The organization pointed out that this could lead to a significant loss of business for restaurants, particularly those that depend on these platforms for customer reach. The introduction of private-label food items by the aggregators threatens the very existence of many smaller, independent restaurants, as they may not be able to compete with the larger companies’ economies of scale and marketing capabilities. The NRAI has pledged to seek legal remedies in response to this development, emphasizing that the restaurant industry must remain free from such monopolistic practices. In addition, the association has called on regulators to investigate this issue and ensure that ethical practices prevail in the competitive food delivery sector.
The restaurant industry in India is valued at an estimated Rs 5.69 lakh crore, and the NRAI argues that the actions of Zomato and Swiggy could have far-reaching consequences, not just for restaurant businesses, but for consumers and the broader market as well. The organization urges all stakeholders—including restaurants, customers, and regulatory authorities—to come together to maintain fair practices in the marketplace and prevent any actions that could undermine the growth and sustainability of the restaurant sector. As the food delivery space continues to evolve, the issue of private-label food products introduced by aggregators has sparked an important debate about competition, data usage, and the ethical responsibilities of platform operators. The outcome of this legal and regulatory challenge could have a significant impact on the future landscape of the food delivery industry in India, determining how aggregators and restaurants coexist and compete in the marketplace moving forward.
This dispute highlights a growing tension in the evolving relationship between digital platforms and traditional businesses, as more companies across various sectors increasingly rely on their data to drive growth. The result of this controversy will likely set important precedents for the tech and foodservice industries in India, balancing innovation with ethical business practices.
