The Federation of Hotel & Restaurant Associations of India (FHRAI) has raised significant concerns regarding the entry of Zomato and Swiggy into the private label food delivery market. In their recent statement, the association pointed out issues including unfair competition, the potential misuse of restaurant data, and possible food safety hazards. It emphasised that these platforms are exploiting their market power to compete directly with the establishments they were intended to support. The FHRAI intends to discuss these matters with the Ministry of Commerce, advocating for regulatory measures to encourage fair practices within the food service industry.
Highlights
Concerns Over Data Misuse
Additionally, FHRAI highlighted increasing worries about the misuse of restaurant data by food delivery services and the resulting unfair advantage these platforms gain over restaurants. By tapping into data regarding customer preferences and sales patterns, Zomato and Swiggy can forge personalised offers that directly affect restaurant businesses. This situation not only jeopardises the livelihoods of small and medium-sized restaurants but also raises essential questions regarding data privacy and consent.
Statement from FHRAI’s Vice President
“By introducing and marketing their own food products, these companies (Swiggy and Zomato) compromise the fundamental principles of a marketplace model, establishing an imbalanced playing field that disproportionately impacts restaurants. It is particularly concerning that they are utilising years of proprietary data collected from restaurants on customer preferences, order histories, and sales trends to develop and promote their branded products,” stated Pradeep Shetty, Vice President of FHRAI. “Restaurants do not have access to this data, which makes competition increasingly difficult for them. This scenario cultivates a perilous environment for small and medium-sized enterprises while raising significant ethical and legal issues regarding the handling of sensitive data,” he elaborated.
Food Safety Standards Under Scrutiny
“Furthermore, there are serious questions about the food safety standards enforced on these private label products. While restaurants must adhere to strict safety regulations, there is a lack of transparency concerning whether equivalent standards are followed for products sold by these platforms. The absence of fairness and a level playing field intensifies the challenges faced by our members, making it hard for them to survive, let alone flourish, in this competitive environment. This situation not only threatens consumer trust but also endangers the reputation of the entire restaurant sector,” he continued.
Last month, the National Restaurant Association of India (NRAI) issued an advisory advising its members to be cautious of deep discounting strategies and the payment gateway tools provided by aggregator platforms for dine-in services. This advisory comes as food delivery giants like Zomato and Swiggy are aggressively working to expand their dine-in customer base. NRAI recommended that restaurants utilise aggregator payment platforms only if the payment gateway services are separated from other services offered and if they remain financially viable compared to alternative payment gateways.
