Zomato, an India-based food delivery startup, is reportedly being investigated by regulators for its purchase of Uber Eats India, which could be seen as violating the nation’s anti-competitive rules, sources told MoneyControl.com.
In March, as reported here, Uber sold its food delivery operation in India to Zomato for $206 million, according to a regulatory filing by the ridesharing firm. The report also noted Zomato’s biggest competitor is Swiggy, known as India’s No. 1 food delivery business, per industry estimates.
The news service said the Competition Commission of India (CCI) is looking at two aspects of the deal to see if the acquisition will lead to less competition and whether the two companies should have notified regulators about the transaction.
A Zomato spokesman confirmed to the news service that CCI contacted the food delivery company and the regulator’s questions concerned basic information and clarifications about the transaction.
“We believe this is customary to any merger and acquisition transaction in India,” the spokesperson said. “We have received similar information requests in the past on other transactions we have undertaken. We have responded to CCI accordingly.”
The transaction net Uber $154 million, which it has reported as other income, according to filings with the U.S. Securities and Exchange Commission (SEC).
If the CCI concludes the companies should have given it a heads-up about a merger, it can impose a penalty from 1 percent of the total deal or its assets, whichever is higher, the report said.
Uber Eats India had revenues of $20 million and reported a loss of $61 million for the three months ending on Sept. 30, Uber said in a filing with SEC.
One of MoneyControl’s sources said the purchase of Uber Eats India is not a simple sale because the deal included Uber buying a stake in Zomato.
“It is a very complex deal,” said the source, who is aware of competition laws and the CCI probe.