There is a particular kind of corporate retreat that comes dressed as a concession but is better understood as a strategic calculation. When Zomato — India’s largest food delivery platform, operating under parent company Eternal and valued at nearly $26 billion — quietly removed a “charges for price disparity” clause from its restaurant contracts this week, the company did not issue a press release. It did not hold a stakeholder briefing. It did not explain its reasoning. A company source confirmed the decision to Reuters, noting that the clause had been dropped “without explaining the rationale for the decision.”
That silence is telling. The price parity clause had sat in Zomato’s contracts for years. It had never been enforced. And yet its removal, confirmed by a Reuters review of publicly available Zomato policy for restaurants, has been welcomed by restaurateurs, scrutinised by competition lawyers, and read by analysts as an acknowledgement that the clause was always more legally exposed than the company was willing to concede publicly. Zomato’s decision to drop it is not simply a goodwill gesture to its restaurant partners. It is a company reading the regulatory landscape and moving before it is moved.
What the Clause Actually Said and Why It Mattered
The “charges for price disparity” clause gave Zomato the contractual right to fine restaurant partners if they offered lower prices for meals at their physical locations, through their own websites, or via other delivery channels, compared to the prices listed on the Zomato app. The fine was not nominal: Zomato’s contracts specified a penalty equal to three times the differential amount per order. For a restaurant charging 50 rupees less for a dine-in biryani than for its Zomato-listed price, the clause would theoretically have entitled Zomato to recover 150 rupees per order.
The enforcement mechanism was equally significant. Zomato’s contracts stated that it could use mystery shopping — secretive restaurant visits by unidentified inspectors — among other tactics to monitor whether restaurants were undercutting the app on price. The combination of a punitive penalty structure and a covert surveillance mechanism gave the clause a character that went well beyond a standard commercial term. It was, in competitive terms, a most-favoured-nation pricing clause: a requirement that Zomato always receive the most competitive price available to any customer, regardless of channel.
Most-favoured-nation clauses in platform contracts are among the most contested instruments in competition law globally. They have been scrutinised, challenged, and in several jurisdictions prohibited in contexts ranging from book publishing to hotel booking to insurance. The underlying concern is always the same: when a dominant platform requires price parity across all channels, it removes the ability of sellers to compete on price outside the platform, entrenching the platform’s position and suppressing the development of alternative channels.
Five lawyers and one former Indian antitrust official who reviewed the clause for Reuters reached a consistent verdict: it was prone to hurt competition and would have faced regulatory scrutiny. Rahul Goel, antitrust partner at AnantLaw, was specific about the analogy: “The clause has resemblance to those found to be in violation in India hotel booking business… though similar clauses have faced scrutiny world over, the company would have needed to provide an objective justification to defend it.”
The hotel booking precedent Goel cited is directly relevant. In 2022, India’s Competition Commission of India ordered MakeMyTrip and GoIbibo to remove clauses prohibiting hotels from offering lower rates to other booking agents — a decision that established a clear regulatory template for how India’s antitrust watchdog views platform-imposed price parity requirements. Zomato’s clause was structurally similar to those that the CCI had already ruled against in an analogous business context.
The CCI Investigation That Changed the Calculus
The MakeMyTrip precedent was not the only regulatory shadow hanging over Zomato’s price parity clause. In March 2024, the CCI’s Director-General concluded a detailed investigation into both Zomato and rival Swiggy — an investigation that began in 2022 following a complaint by the National Restaurant Association of India — and shared findings with the companies that identified multiple competition law violations. Those findings, while confidential under CCI regulations, were reported to include Zomato’s exclusivity contracts with certain restaurants that offered them lower commission rates, and pricing and discount restrictions with penal provisions for non-compliance.
The CCI has not yet issued a final decision in that investigation. The process requires Zomato and Swiggy to file responses before the commission rules on whether violations have occurred and what remedies to impose. Potential outcomes include substantial fines and mandatory changes to business operations. Swiggy disclosed the investigation as an “internal risk” in its IPO prospectus, warning that a breach of competition laws could attract severe penalties.
Against that backdrop — a pending CCI investigation specifically examining Zomato’s pricing and discount restrictions, an existing regulatory precedent from the hotel booking sector removing near-identical clauses, and five lawyers confirming the clause’s legal vulnerability — Zomato’s decision to remove the price parity clause without enforcement, and without explanation, becomes entirely legible. The company has removed a regulatory target before regulators had the opportunity to order it removed. The calculation is simple: a clause that was never enforced offered no operational benefit. A clause that would have invited a CCI enforcement action on top of an already open investigation offered substantial regulatory risk. The cost-benefit calculation favoured quiet removal.
What Restaurant Partners Actually Wanted
The National Restaurant Association of India, which represents over 500,000 restaurant outlets across the country, had been vocal in its opposition to the clause for some time. Sagar J. Daryani, the association’s president, told Reuters: “It’s our product and should be our pricing. We appreciate their assurance that price parity will no longer be enforced.”
That statement captures the core grievance that restaurant operators across India — and globally, wherever food delivery platforms have imposed similar restrictions — have articulated against platform pricing parity requirements. The economics of food delivery are structurally disadvantageous for restaurants. Platform commissions typically run between 15% and 30% of order value. Delivery fees, packaging requirements, and promotional spend add further costs. Many restaurants operate on menus priced specifically to absorb those platform costs — meaning their Zomato-listed prices are already higher than their dine-in prices, not because they are trying to undercut the platform, but because the economics of delivery require it.
For such restaurants, a clause requiring them to match platform prices across all channels — or face a threefold penalty — placed them in an impossible position. Either they raise their dine-in prices to match their Zomato prices, harming their competitiveness for walk-in customers, or they risk a fine every time a dine-in customer notices the price differential. The clause, even unenforced, created an ambient commercial pressure that constrained restaurant pricing decisions in ways that had nothing to do with Zomato’s service quality or platform value.
The Broader Picture: Platform Power in India’s $94 Billion Market
Zomato’s retreat is part of a broader pattern of tension between India’s food delivery platforms and the restaurant ecosystem they depend on. The country’s food services market, currently valued at $94 billion, is projected to reach $153 billion by 2031. The delivery segment, which Zomato and Swiggy dominate, has grown explosively — Zomato’s 24 million active consumers and 300,000 listed restaurants represent an ecosystem of significant economic consequence.
But that growth has been accompanied by sustained friction over the terms on which restaurants participate. Platform fees rose from 2 rupees per order in 2023 to 10 rupees in 2024 — a 400% increase that drew significant public attention when food bloggers and consumers began comparing the full cost of a delivery order against what the same meal cost in-restaurant. Commission structures, delivery charge policies, and packaging fee requirements have all been subjects of ongoing dispute between the platforms and restaurant associations.
The removal of the price parity clause does not resolve those disputes. It removes one contested contractual provision from Zomato’s restaurant agreements, reducing one specific vector of regulatory and commercial risk. The broader negotiation over what a fair commercial relationship between a dominant food delivery platform and the restaurants that populate it actually looks like — that conversation is far from concluded.
For Zomato, the clause’s removal was strategic more than generous. For restaurants, the removal of even an unenforced clause that constrained their pricing autonomy represents a genuine, if partial, commercial victory. For India’s competition regulators, it represents a market self-correction that their prior interventions in the hotel booking sector helped to catalyse.
The clause was dropped without explanation. The reasons for dropping it are not particularly mysterious.
Written by Shalin Soni, CMA specializing in financial analysis, global markets, and corporate strategy, with hands-on experience in financial planning and analytical decision-making.
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Source: Based on Reuters and publicly available information.