Rappi accuses iFood of failing to comply with Cade’s measure that limits exclusivity

Rappi accused iFood of failing to comply with a 2021 precautionary measure by Cade (Administrative Council for Economic Defense) that prohibited the company from entering into new exclusivity contracts with bars and restaurants.

These contracts prevent an establishment that delivers food through iFood from registering with competing apps. They are mainly celebrated with well-known networks or with relevant locations in a specific city or region.

iFood denies the allegations and said, in a statement, that its “commercial policies comply with competition legislation and we fully comply with the terms of the preventive measure imposed by Cade in March 2021”. “iFood has always respected and will continue to respect the agency’s decisions,” he added.

“By claiming that its growth difficulties are the result of exclusive contracts signed with less than 8% of the restaurants that work with iFood, Rappi incites an untruth that does not reflect the reality of the problem”, continued the company.

For iFood, Rappi “tries, once again, to justify its low performance, lower ratings than iFood, high turnover of executives and lack of focus in holding others accountable, when it should invest in listening to partner deliverers, restaurants and customers to improve its products, services and performance”.

The injunction from the antitrust authority was taken in a lawsuit opened in 2020 in which Rappi and Abrasel (Brazilian Association of Bars and Restaurants) accuse iFood of anti-competitive practices with the aim of being a monopolist in the food delivery market.

Rappi alleges in a petition filed this Monday (22) that iFood circumvented the determination in three different ways.

The company would be including new establishments in existing contracts with other companies of the same economic group. These contracts, being older than Cade’s injunction, would have an exclusivity clause. Thus, a new contract would not be signed, which is what was prohibited by Cade.

Another way would be to reactivate contracts that have not been formally terminated. “As the contract did not have a discharge term signed, and it is the culture of the platforms not to make this termination, they are reactivating to include new contracts with exclusivity”, explained the head of legal at Rappi, Michele Volpe.

The third way would be through promotions. In this modality, iFood would allow the restaurant to register on any platform, but would limit promotions to its app.

This would happen from the determination of exclusivity in promotions or the application of non-linear discounts – in this case, the more sales are concentrated on iFood, the greater the promotion.

“This also harms consumers, who are left without options [no longo prazo]. With the monopoly, it is traditional that when it consolidates, it will stop doing these practices and the consumer will be very harmed”, he explained.

In the petition, Rappi asks Cade to determine the end of all exclusivity contracts already signed and without charging fines.

If the measure is not adopted by Cade, Rappi proposed an alternative that they consider the existential minimum for the proper functioning of the market.

This involves the end of exclusivity for large chains, which involves any company with more than three units in the same municipality or 15 in the country. In addition, the company also wants a ban on non-linear discounts.

“We believe that in the short term this would allow for healthier competition, which unfortunately the previous preventive measure, which has been repeatedly circumvented, did not achieve”, said Rappi’s legal officer.

For Volpe, the problem is that with exclusivity contracts, competition between the various delivery platforms takes place through content. “It should be for the level of service,” he pointed out.

A manifesto to that effect was signed by two sector associations – Abrasel and ABBT (Brazilian Association of Workers’ Benefit Companies), which also has another lawsuit against iFood at CADE — and eight companies in the sector.

“iFood’s success is due to the quality of our service, which can be attested in the vast majority of rankings and independent surveys on the market. Before any positioning, Rappi should try to be seen as the company with the best service, but not that’s what independent companies indicate”, countered iFood.