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Brazil's antitrust watchdog prohibits iFood from signing exclusive contracts with restaurants

The antitrust body considered that iFood holds a dominant position and that the adoption of exclusivity clauses has a high potential to harm competition

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  • According to the Brazilian antitrust watchdog, the investigation began after a complaint made by rival Rappi last September;
  • The platform will be able to maintain exclusivity contracts already signed.

Brazil’s antitrust regulator, known as Cade, announced on Thursday that it prevented the country’s main food delivery app, iFood, from signing new exclusive contracts with restaurants through a preventive measure.

According to the Brazilian antitrust watchdog, the investigation began after a complaint made by rival Rappi last September, alleging that iFood makes large exclusive contracts with restaurants, harming competition.

READ ALSO: iFood to train and boost employability for 25,000 new tech professionals by 2025

The Brazilian Association of Bars and Restaurants (Abrasel, its Portuguese acronym) also filed a complaint against iFood in December, noting that after the pandemic, food ordering apps became more relevant sales channels for the sector, which were relying on the platform’s services and subject to signing exclusivity agreements.

Besides, according to Cade, another iFood rival, Uber Eats, asked for intervention as a third party interested in the process, also claiming that iFood’s exclusive agreements impose barriers to entry for competitors in the market.

READ ALSO: iFood cuts fees for its partner restaurants as Brazil faces the worst phase of the COVID-19 pandemic

The antitrust body considered that iFood holds a dominant position and that the adoption of exclusivity clauses has a high potential to harm competition. Besides, iFood would have prioritized considered strategic restaurants, and continued to do so, even after the beginning of the judicial process, according to Cade.

Besides being prohibited from entering into new exclusive contracts, iFood will also not be able to change current contracts to include this condition.
The platform will be able to maintain exclusivity contracts already signed, but after the end of the term, the exclusivity can only be renewed if the condition is of “interest of both parties”, and “as long as the company observes the limit of one-year duration,” added the antitrust body.

READ ALSO: From Disk Cook to the largest food-tech company in Latin America: iFood Brazil

The agency also warned that it may suspend the exclusive contracts if it believes that the measure is necessary to guarantee competition. In a press statement, iFood stressed Cade’s decision to maintain the current exclusivity contracts in force.

READ ALSO: iFood starts offering digital bank accounts for all its partner restaurants

“The preservation of contracts is an important measure to ensure legal certainty for the sector and allows iFood to continue supporting the growth of its exclusive partners, especially in such a challenging time,” said the company. “iFood is convinced that its commercial policies are legitimate and pro-competitive.”

(Translated by LABS)

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