Such arrangements are usually done in cases where the restaurant owners decline to pay hefty commission rates to the delivery companies, which can vary between 15 to 35 per cent of the cost of the item.
Craving for a plate of spicy Chole Bhature from Kalkaji’s Gopal’s 56? You’ll have to shell out Rs 60. But wait, are you ordering from Zomato? Then you will have to loosen the purse strings a bit more as the popular snack is listed for Rs 80. The same goes for the famous special thali of Sant Sweets, which is priced at Rs 150 but is available on Swiggy for Rs 175.
These are just a few of the multiple instances where online food aggregators are inflating the original price of food items from outlets across the country in order to fill their coffers. The price inflation can range from Rs 5 to 50, or even more, depending on the size of the outlet.
The catch is that in most of the cases, the customers are not even aware that they are paying a premium for the item they have ordered.
Maybe a little Google check will help. On Zomato, the price of items on the original menu of such restaurants is lesser. But once the customer clicks on the order online tag of the website, the prices automatically rise.
According to people aware of the development, such arrangements are done in cases where the restaurant owners decline to pay hefty commission rates to the delivery companies, which can vary between 15 to 35 per cent of the cost of the item. The food aggregators then come up with the solution of inflated pricing, the differential of which goes into their pockets.
While on most of the occasions these include mostly restaurants selling items at a low ticket size value, there are instances where even larger brands have given in to the idea of allowing the aggregators to inflate their prices for online customers. Once they get the nod of restaurant owners, it gets easier for the likes of Swiggy and Zomato to hike prices.
Now the question is, what is wrong with this business model?
According to experts, since none of these items have a maximum retail price tag, it isn’t illegal to do so. However, it still comes under a grey area since inflating the price without keeping the customers in the loop amounts to unethical practice and cheating.
“It is not ethical to not show the customers what the actual price is. They should keep their customers informed, else it is cheating in fine line,” said an industry expert requesting anonymity. “There is a clarity that you cannot do discounting but there’s no clarity on the upper price which adds on to the confusion,” he added.
According to Atul Pandey, partner at Khaitan & Co, in case any food aggregator takes advantage of its dominant market presence to influence restaurants or kitchens to set high prices on the food products listed on its platform, regulators may have a prima facie case of abuse of market position against such food aggregators.
“An equally major concern in such cases is the impact of the norms issued in respect of FDI in e-commerce entities, which will be applicable to such food aggregators in case they have any FDI in them, in light of the broad definition of ‘e-commerce’ which also includes services. Accordingly, in case any food aggregator is supporting a particular vendor in running its kitchen and selling food on the food aggregator’s portal or directly or indirectly influence the sale price of goods or services, the same may come under DPIIT’s scanner also,” said Pandey.
Interestingly, these companies also charge tax, delivery fee and packaging cost, over and above the inflated pricing, as and when required.
Zomato, however, denied that it inflates the price of items from the original menu of restaurants. “We are committed to providing the best value to our users while ensuring steady growth for the restaurant community. We do not encourage our restaurant partners to increase prices; such a practice is against our principles of neutrality built over the past decade. We also have an internal checking mechanism to ensure prices are the same across their dine-in and food delivery menus,” a Zomato spokesperson told Moneycontrol.
Reacting to a query on the issue, Swiggy in a statement said, “As the leading food delivery platform in the country, Swiggy is committed to ensuring the best possible experience for its consumers. Swiggy does not recommend or encourage restaurants to increase their prices. The prices reflected on the platform are as communicated by the restaurants. As a marketplace, we do not enforce any pricing related decisions and instead encourage and guide our restaurant partners to follow consumer best practices.”
