CCP inquiring into online food delivery platform for monopoly

ISLAMABAD: The Competition Commission of Pakistan (CCP) has initiated an inquiry against online food delivery service platform Foodpanda for alleged use of dominance position.

According to CCP’s official announcement made here on Tuesday, the commission initiated an inquiry against the online food delivery service platform/aggregator, Foodpanda, to investigate its alleged abuse of dominant position and a possible violation of Sections 3 (Abuse of Dominant Position) and Section 4 (Prohibited Agreement) of the Competition Act, 2010, in the market of online food delivery platforms.

The inquiry committee will review and place before the commission its findings, whether the three-year exemption granted (for loyalty agreements) to Foodpanda in April 2019 is impeding competition in the light of concerns highlighted by various market players. The inquiry initiated under Section 37 of the Act, on the formal complaints filed by Foodpanda's competitors, M/s Cheetay Logistics Pakistan Limited on 4 May 2021, and the All Pakistan Restaurant Association (APRA) on 10 June 2021. Another complaint was also filed by another online food aggregator, Careem Networks Pakistan (Private) Limited, pertaining to the exemption granted in 2019.

The complainants’ main concern is that loyalty programs were initiated to allow monopoly and market dominance. Loyalty program is the secondary agreement over the ‘online service contract’ in which the restaurant exclusively uses Foodpanda's online food delivery service for one year to earn loyalty rebates. The rewarding deals offered to restaurants, according to the complainants, pave the way for excluding its business rivals through exclusive deals offered via online-app only.

Furthermore, the Foodpanda is accused of charging exploitative commissions during Covid-19 by increasing the rates without any consultation with stakeholders, as reliance on the app surged during pandemic.

The complainants also allege that there was no uniform commission mechanism and every restaurant is charged in a variable manner with multinational food chains being charged the lowest commissions. The restaurants, they lament, were forced to sign exclusive agreements enabling it to maintain its monopoly. Those contracting with Foodpanda (for order through Food Panda’s app), are restricted to offer Food Panda alone, with an exception to multinationals.

The CCP’s Cartel and Trade Abuse Department conducted a preliminary fact-finding exercise and found Foodpanda to have a dominant position in the market with an admitted volume of 100,000 per day food orders from different restaurants/ outlets/ food chains across Pakistan. The platform allegedly abused its dominant position to charge exorbitant commissions, offering fidelity rebates, discriminatory practices, setting out various discounts to exploit participants, and entering into exclusivity with parties through loyalty agreements, serving as barriers for the new entrants in the market of online food delivery platforms.

The inquiry committee is consulting all the relevant parties and seeking information for deliberating the matter objectively and will submits its findings before the commission for its decision. The CCP is mandated under the Competition Act to ensure free competition in all spheres of commercial and economic activity, to enhance economic efficiency and to protect consumers from anti-competitive behaviour including abuse of dominant position and prohibition of any agreements that may pave the way for monopoly over others.

Sources close to Food Panda, meanwhile, said that the complaints against them were of fictitious and nothing was wrong in their operations and services. They said that they would put a strong defence during the inquiry at the CCP and everything would become crystal clear.