CCP launches inquiry against Foodpanda

Online food delivery service faces charges of abusing its position in market

ISLAMABAD:

The anti-trust watchdog on Wednesday announced the launch of a formal inquiry against Foodpanda - an online food delivery service - on charges of abusing its dominant position in the market that seems to be a barrier to new entrants.

The Competition Commission of Pakistan (CCP) has initiated an inquiry against the online food delivery service, Foodpanda, to investigate its alleged abuse of dominant position and entering into a prohibited agreement in violation of the Competition Act, according to a statement issued by the CCP.

Foodpanda is also accused of increasing its commission rates for delivering food during the pandemic period, which has also been seen as exploitative by the restaurants.

The CCP said that after receiving complaints, its Cartel and Trade Abuse Department conducted a preliminary fact-finding exercise and found that “Foodpanda seems to have a dominant position in the market of online food delivery platforms”.

The company receives about 100,000 food orders every day from different restaurants, outlets and food chains across Pakistan.

Cheetay Logistics Pakistan Limited, All Pakistan Restaurant Association (APRA) and Careem Networks Pakistan (Private) Limited have filed multiple complaints against Foodpanda, including against exemption granted to it by the CCP in 2019 from certain clauses of the law.

The CCP said that the inquiry committee would review and place before the commission its findings on whether the exemption granted for loyalty agreements to Foodpanda in April 2019 for the period of three years was impeding competition in any manner in light of the concerns highlighted by various market players.

The CCP has initiated the inquiry under Section 37 of the Act on formal complaints filed by Foodpanda’s competitors.

The complaints are against alleged abuse of dominant position, charging exorbitant commissions, offering fidelity rebates, discriminatory practices, setting out various discounts to exploit participants, and entering into exclusivity with parties through loyalty agreements. These concerns stretch the scope of abuse to being a barrier for new entrants in the market of online food delivery platforms, said the CCP.

The inquiry committee has already been working on the case, consulting all the concerned parties and seeking relevant information for deliberating on the matter objectively. Findings of the inquiry upon conclusion will be placed 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 such agreements that may distress the competition. The three competitors of Foodpanda have serious issues with loyalty agreements. Foodpanda enters exclusive agreements with restaurants under loyalty programme, otherwise it refuses to do business with them.

Loyalty programme is the secondary agreement over the “online service contract” in which a restaurant exclusively uses Foodpanda’s online food delivery service for a period of one year to get loyalty rebates.

Similarly, Foodpanda offers rewarding deals. The rewarding deals are offered to restaurants with the effect of excluding its business rivals including exclusive deals offered via online app only.

There is also allegation that Foodpanda charges exploitative commissions. Foodpanda is accused of charging exploitative commissions in the face of Covid-19. They increased the rates without any prior consultation with the stakeholders as the reliance on the app surged during the pandemic.

There is also allegation of variable commissions being charged from restaurants and other suppliers of food. Complainants allege that no uniform commission mechanism is used and every restaurant is charged in a variable manner with multinational food chains having the lowest commissions charged on them.

Restaurants are also forced to sign exclusive agreements with it so that it can maintain its monopoly, according to a CCP official. For restaurants contracting with Foodpanda (for the order placed through Foodpanda’s app), the delivery option is only restricted to Foodpanda with an exception to multinationals.

Published in The Express Tribune, July 8^th, 2021.

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