Quick Commerce vs Kiranas: Burning Capital, Building Dominance

[ Vashmath Potluri and Shubhranshu are fourth year law students at NALSAR University of Law, Hyderabad.]

Introduction

In April 2025, the All India Consumer Protection and Distribution Forum (“AICPDF”) filed a representation before the Competition Commission of India (“CCI”), alleging that dominant quick commerce platforms such as Blinkit, Zepto, and Swiggy Instamart were engaging in exclusionary practices. The complaint followed growing concern over the rapid consolidation of the quick commerce sector, where these three companies account for over 91% of the quick commerce market share. At the same time, Zepto has scaled to more than 220 dark stores despite sustained financial losses. This was made possible by venture capital and foreign direct investment (“FDI”) that was being used to scale up by these platforms to construct fulfilment infrastructure instead of traditional brick-and-mortar to deliver orders ultra-fast with constant discounts that could not be afforded by traditional kirana stores, as alleged by the AICPDF.

This article argues that this allegation raises concerns of abuse of dominance under Section 4 of the Competition Act 2002 (“Act”) in two parts. First, it argues how infrastructural dominance is created through capital-led growth, exploiting the regulatory loopholes of the Indian FDI regime. Second, it argues that the continuing use of below-cost pricing, which has been made possible by capital infusion, constitutes an exclusionary burn-capital strategy by relying on global regulatory practices. Finally, it prescribes specific reforms, such as a compulsory disclosure of capital and coordinated action between competition and sectoral regulators to ensure that capital is scrutinized when used as a market foreclosure instrument.

Capital-Led Expansion and Infrastructural Asymmetry

Today’s quick commerce platforms no longer compete based on price or product variety, but instead, they compete on speed and hyperlocal reach. Their value proposition of 10-15-minute grocery delivery is made possible by a vast network of dark stores: small fulfilment centres integrated into the neighbourhoods and stocked on the basis of real-time demand analytics. As opposed to the more traditional e-commerce that scales city-wide or country-wide, quick commerce operates in a radius that can be as small as a few square kilometres. Dominance in such granular markets is not brought through conventional advertisement or marginal efficiencies, but through rapid physical infrastructure development and swift concentration of delivery zones pre-empting access to other competitors.

More importantly, this infrastructure is not built organically via operational surpluses or reinvested profits. It is engineered through sustained capital infusions, primarily from venture capital and FDI. These funds support high fixed costs, such as leasing retail-grade urban real estate, running 24x7 operations, and maintaining logistics pipelines capable of near-instant replenishment. Zepto, for instance, raised over $665 million between 2021 and 2024 and scaled to over 220 dark stores across 10 Indian cities, despite incurring a net loss of ₹1,272 crore in FY23. This growth was not calibrated to profitability but was geared towards speed and density, aiming to achieve infrastructural saturation before rivals could gain a foothold. Such capital-led expansion creates a hyperlocal moat that smaller players, especially kiranas operating on thin margins and without access to institutional funding, cannot realistically overcome.

This asymmetry acquires sharper legal significance in light of India’s FDI rules. Press Note 2 of 2018 restricts FDI in inventory-led multi-brand retail to 51 percent, subject to local sourcing requirements. Yet many quick commerce platforms claim to operate as  “marketplaces” eligible for 100 percent FDI, even while controlling inventory, operating dark stores, and managing last-mile logistics. This functional misclassification enables regulatory arbitrage because capital-rich platforms operate as de facto retailers while escaping the compliance burdens that constrain traditional domestic players. The need for a substance-over-form approach was underscored by the CCI in its investigation against MakeMyTrip and Goibibo, where it examined the platforms’ actual control over pricing, search visibility, and contractual terms with hotel partners, rather than relying solely on their self-identification as intermediaries. This reasoning was later upheld by the Delhi High Court and supports closer scrutiny of quick commerce platforms that operate as integrated retailers while claiming intermediary status, particularly under competition law and FDI regulations.

The implications become more visible when contrasted with kirana stores. These neighbourhood retailers typically survive on modest margins, serve walk-in customers, and lack access to venture capital or formal credit. Even when digitised via tools like WhatsApp, ONDC, or Dunzo, they cannot match the persistent discounting, free delivery, or ultra-fast fulfilment capabilities of platform-led players. A 2023 report by Datum Intelligence found that nearly 46 percent of quick commerce users had reduced purchases from kirana stores, and over 82 percent had shifted at least 25 percent of their kirana spending to quick commerce platforms. The study also noted a decline in kirana stores’ market share, from 95 percent in 2018 to 92.6 percent in 2023, projected to drop further to 88.9 percent by 2028. The competition, therefore, is not between like-for-like retailers. It is between capital-intensive infrastructure and cash-constrained incumbents.

Denial of Market Access through Capital-Driven Exclusion

It is in this context that Section 4(2)(c) of the Act becomes relevant. This provision prohibits a dominant enterprise from engaging in practices that result in the denial of market access “in any manner.” Traditionally, this provision has been invoked to deal with overtly exclusionary conduct, such as delisting competitors, refusing access to distribution networks, or imposing exclusivity conditions. Nonetheless, in platform-based digital markets, this exclusion is no longer confined to contractual constraints. Instead, it increasingly arises from structural strategies that reshape competitive conditions through sustained capital deployment.

Quick commerce platforms illustrate this transformation. Their market power does not derive from superior efficiency or innovation, but from their ability to absorb sustained losses through deep capital reserves. In Q4 FY25 alone, Instamart reported adjusted EBITDA losses of ₹840 crore while simultaneously expanding its network by adding 316 new dark stores, pushing the total beyond 1,000 locations. This reflects a deliberate strategy of territorial expansion, prioritising market capture over immediate profitability. Similarly, Blinkit invested ₹370 crore in dark-store infrastructure over a six-month period and incurred approximately ₹100 crore in adjusted EBITDA losses. These figures point to a capital-intensive model where losses are not incidental, but integral to a long-term plan of saturating high-demand zones before smaller competitors can scale.

This approach reflects a burn capital strategy, a sustained form of loss-leading where platforms price below cost not as a temporary promotion but as a structural tactic to eliminate less-capitalised competitors. Such conduct was dealt with In Mcx Stock Exchange Ltd. & Ors vs National Stock Exchange Of India Ltd, The CCI held that zero-pricing of currency derivatives by NSE, which were cross-subsidised by the profits of other segments, was an abuse under Section 4(2)(c). The CCI observed that consumer-friendly pricing might itself be exclusionary in case it created conditions under which equally efficient competitors could not compete viably. This reasoning directly applies to the quick commerce industry, in which the below-cost pricing strategy is not related to efficiency alone, but rather serves to redefine the market by increasing entry and operational costs for smaller entities.

This reasoning is also supported by the global practice of regulatory practice. In Federal Trade Commission et al. v. Amazon.com, Inc., the FTC made the antitrust complaint against Amazon in 2023, stating that Amazon was using monopoly rents of services like Prime and advertising to vertically subsidise others, including grocery delivery. This enabled Amazon to undercut competitors and prevented entry into other vertical segments. The FTC argued that this kind of cross-subsidisation, which is supported by certain capital benefits, is anticompetitive, leading to unfair competition by changing the nature of costs involved and rendering entry by competitors economically impossible. These rulings highlight a broader principle: when capital is deployed by dominant firms to reshape market access, it must be subject to antitrust scrutiny.

Way Forward: Capital Transparency and Coordinated Oversight

To effectively address exclusionary conduct rooted in capital and infrastructure, competition enforcement in digital markets must evolve beyond traditional ex-post mechanisms and adopt forward-looking, ex-ante tools. Across jurisdictions, regulators are increasingly recognising that early transparency and structural oversight are necessary to prevent the entrenchment of market power. Article 11 of European Digital Markets Act (“DMA”) reflects this shift, requiring designated gatekeepers to submit annual compliance reports detailing changes in business conduct and structural arrangements. In parallel, the UK Competition and Markets Authority (“CMA”), during its investigation into Amazon’s fulfilment services, sought extensive disclosures regarding logistics and warehousing infrastructure to assess whether dominant players were leveraging such advantages to foreclose rivals. 

Drawing from these approaches, the CCI could implement a similar framework by exercising its procedural and investigative powers under Sections 36 of the Act, read with the CCI (General) Regulations, 2009. In markets such as quick commerce, where infrastructural scale and capital intensity form the basis of competitive advantage, the CCI could impose periodic disclosure obligations on dominant or systemically significant platforms. These disclosures should include (i) unit economics across fulfilment models and delivery zones, to identify instances where platforms operate at sustained losses in targeted areas, indicating strategic capital burn rather than genuine efficiency; (ii) the density and location of dark stores, which may signal exclusionary over-deployment rather than organic demand-driven expansion; and (iii) the source, scale, and deployment of capital inflows, especially venture capital and foreign direct investment, to distinguish between legitimate operational growth and competition-resistant financial insulation.

To ensure that capital regulation does not operate in isolation, the CCI should also coordinate with other policy bodies to close gaps in platform oversight. Section 21A of the Act empowers the CCI to make references to statutory authorities on matters affecting competition. This provision could be used to consult the Department for Promotion of Industry and Internal Trade (DPIIT) on the classification of e-commerce models under FDI policy. Such coordination is already encouraged under frameworks like the EU’s Joint Framework for Digital Regulation and the UK’s Digital Markets Taskforce. In India, the Digital Competition Law Committee has similarly endorsed joint regulatory mechanisms to address overlapping concerns in platform governance.

Taken together, these reforms recognise that capital and infrastructure are no longer neutral inputs in digital markets. They have become instruments of strategic exclusion, used not only to accelerate growth but also to foreclose competition. To remain effective, Indian competition law must evolve to treat capital not just as investment but as a potential vehicle for market foreclosure.