FDI in e-commerce norms applicable to food aggregators

The government's clarification on foreign direct investment (FDI) in e-commerce will apply to the food aggregators/online food delivery platforms (OFDPs) just like they do to e-marketplace majors like Amazon India and Walmart-backed Flipkart, said a top executive of a quick service restaurant (QSR) chain. While Zomato, Swiggy, Foodpanda and Uber Eats have maintained silence on the press note's applicability on their respective operations citing ambiguity in the clauses, industry players are of the view that the policy is very clear and straight forward.

Not mincing words, Pratik Pota, chief executive officer and whole time director, Jubilant FoodWorks Ltd (JFL) – operator of Domino's Pizza and Dunkin' Donuts chains, said the food aggregators are covered under the ambit of this (FDI in e-commerce) policy.

“The assessment we have internally is very clear that the press note applies to e-commerce entities engaged in the business of selling goods and services. There is no ambiguity and the clauses being put down in the clarifications issued (by the government) are very straight forward. We have absolutely no doubt that food aggregators would be covered under the purview of the press note,” said Pota during an analyst call on Wednesday to discuss the QSR chain's December quarter results for fiscal 2019.

The National Restaurant Association of India (NRAI) has also internally studied the clarifications issued by the government and its relevance to the business of food aggregators/OFDPs. The apex body for restaurants, QSRs and food business operators in the country has interpreted the clauses in the FDI policy for e-commerce and is certain that food aggregators/OFDPs need to buck up and fall in line with the laws of the land.

According to NRAI, the food service industry has over the last few years seen the entry and growth of food aggregators across many markets. Players like Swiggy, Zomato, Food Panda and Uber Eats while providing marketplace access to sellers i.e, restaurants on their website/mobile application also provide other services such as delivery.

“They facilitate buying of food by consumers from these restaurants through their internet applications and are, therefore, unambiguously e-commerce entities and, therefore, come under the ambit of the e-commerce policy and the specific points contained in the recent Press Note 2 guidelines which come in force on February 01, 2019', said NRAI in a statement on Thursday.

The apex body asserted that there is a need to ensure the compliance of food aggregators with the policy. “Food aggregators are often engaged in unfair, discriminatory and predatory business practices which need to be controlled and regulated,” said NRAI.

Outlining the aspects that food aggregators need to comply with, NRAI said in a statement that being marketplace providers, they should not be allowed to participate in inventory-based models of cloud kitchens. Their suite of services needs to be unbundled and delivery cannot be made compulsory for participation in the marketplace.

The food service industry association also wants the data of buyers (on their respective) to be made available to restaurants. The NRAI has said that excessive and predatory discounts strategy adopted by OFDPs need to be regulated and restaurants cannot be forced to participate in them for marketplace presence.

“Food aggregators need to be transparent, upfront and consistent about the logic used in their search algorithms to ensure fair and non-discriminatory market place access. And no food aggregator can insist that restaurants are exclusive on their platform,” said NRAI.