CCI's MARKET STUDY ON E-COMMERCE : THE WAY FORWARD
This post has been authored by Dhwani Mainkar and Avineet Singh Chawla. Dhwani is a Course Instructor of the Law of Taxation and a Research Associate at Jindal Global Law School. Avineet is a practicing Advocate at the Punjab & Haryana High Court. Both hold an LL.M from the Queen Mary University of London.
The Ecommerce sector is by far the fastest growing segment in India owing to the boost of access to internet, relaxation in the FDI norms which enabled an entry of major international players in Indian markets, augmentation in the adoption of ever-evolving technology and innovative practices, increasing consumer demands, easy access to funding opportunities and inter alia the growth in the era of digitalized wallets.
The Competition Commission of India (CCI) released a detailed report enumerating a ‘Market Study on E-commerce in India’ on 8th January 2020[i] thereby addressing key concerns of a digitalized transaction in the country. The study commenced back then in April 2019 with the prime intention to study and appropriately understand the modus operandi of e-commerce in India along with its ramifications on markets and competition in the economy.
Considering that the revenue from the e-commerce sector in India is growing at an unprecedented rate of 51%,[ii] the challenges posed by this dynamic sector in the competition sphere in India are manifold. CCI highlighted that the e-commerce structure is plagued with certain inherent drawbacks which are predominantly detrimental in effectuating a healthy and agreeable atmosphere of fair competition in the economy and pose an obstacle in realising pro-competitive economy.[iii] These deficiencies include inter alia the characteristic of deep discounting which makes it impossible for the offline sector to viably compete with the e-commerce businesses.
The contractual terms of these digitalized sellers usually superficially impose unfair terms on the buyers thereby leaving them with limited bargaining opportunity. These contractual terms are unilaterally biased favouring largely the e-seller. The restraints on data collection are rampant and there is a sincere need to strike the right balance between legal pragmatism and the commercial realities of transparency. The report articulately highlights the major manipulation by digital trading forums essentially in their search results, provision of data and user review and rating mechanisms, wherein they manipulate price algorithms to display inflated review ratings.
The CCI strived to provide certain plausible solutions to the growing concerns of the e-commerce sphere. In its list of priorities, the CCI included ‘platform neutrality’ as its utmost important field to be addressed, wherein it suggested a pro-competition approach could be achieved only when there is an amelioration of credibility and transparency in search ranking, collection, use and data sharing, user review ratings, and reduction in asymmetrical dissemination of information.
The report endeavours to attain highest levels of ‘self-regulation’ in an attempt to reach the pedestal of fair competitive practises and thereby facilitate sustainable economic relations, simultaneously striving to lower the regulatory thresholds for bringing a particular stakeholder under the investigation net. In an attempt to curb the discriminatory and unfair terms being incorporated in ‘platform-to-business’ contract terms wherein the e-commerce platform operators usually enjoy a leveraged status, the CCI has put forth a mechanism to review the exclusionary conducts in the contracts entered into by the stakeholders.
The study emphasizes to categorically revise and redraw the contract terms with a reasonably rational approach towards pro-competition. The veracity and reliability of user review rating mechanisms should be augmented to prevent fraudulent strategies of unfair competition. Price parity clauses, which have a pre-requisite to dissuade the small-scale retailers from offering lower prices on other e-commerce portals & on their independent websites, were stated to be essentially distortive and discriminatory in nature.[iv] This structure is predominantly noticed in the hospitality, travel and food delivery engines. These activities have been condemned in the report as they clearly have a massive tendency of being culminated in to distortive unfair competition.
The CCI envisaged the need to spell out the policies and schemes of discount incorporated as the rampant deep discounts have a tendency to push prices below the cost levels. While from the perspective of the consumers, in order to lure the demand, it is imperative to incorporate some moderate discounting strategies, as the same cannot be completely done away with. Thus, as far as the deep counting mechanism is concerned, CCI has staunchly endeavoured to adopt a case-by-case review structure.
Thus, the overview of the report provided hereinabove strives to give a brief summary about the e-commerce landscape in India, the intricacies of the functionality of varied sectors vide these platforms and the requisites of changes that should be incorporated in order to curb the distortive practices and ensuring competition on merits. A proactive approach in adopting these plausible measures shall eradicate the bargaining power imbalance and prevalent asymmetrical graph in the information meted out.
The market study is a qualitative report, essentially been a first of its kind by the CCI, which has resultantly brought about a detailed analysis involving pragmatic research, group discussions among stakeholders and their written statements, personal meetings, questionnaire surveys and multiple stakeholder workshops.[v] The study has played a phenomenal role in accumulating essential and crucial insights about the key structures and activities of e-commerce in India, thereby signalling a shift in CCI’s priorities vis-à-vis online markets. Through this report, it is evident that until now, the e-commerce players were enjoying a relatively softer treatment from the regulatory and administrative authorities who considered them merely as a growing alternate distribution platform rather than a full-fledged established separate market. Further, the market study envisages in great detail, the Commission’s amply clear intentions of bringing the online markets under their aegis and this report shall serve as a stringent parameter to trigger high level investigations in matters pertaining e-transactions.
In this backdrop, it is pertinent to highlight the fact that the growth of the ecommerce sector and its popularity is indispensable as it caters to the ever-growing demand at merely the click of a button in this social media dominated age. E-commerce has an added advantage due to its location-based delivery models, acceptance of e-payments, variety of choices available to the consumer without the need to indulge in offline shopping and easy replacement guarantee. Thus, e-commerce sector is logistically viable in the times to come and it is extremely imperative to tap into the reliability and legality of these activities to regularize the prevalent drawbacks.[vi]
A strong synergy between the offline and online activities can be an efficient strategy for a long standing sustenance. In the times of this global pandemic in the form of the novel Coronavirus, the consumer has turned to an online portal even to procure essential supplies of groceries. It is quintessential for regulatory authorities like the CCI to ensure that that the practices adopted by the suppliers on these portals do not end up being distortive of the primary free-flowing market mechanisms of demand and supply. The emerging trends of the e-commerce business lead to a foreseeable future that if their activities are not kept in check, there is a likelihood of a proliferation of cartel-like business being conducted on these platforms.
[i] Market Study on E-commerce in India- Key Observations and Findings, CCI, 8th January, 2020, accessed at <https://www.cci.gov.in/sites/default/files/whats_newdocument/Market-study-on-e-Commerce-in-India.pdf> [ii] Indian Ecommerce Industry report, 2019 accessed at <https://www.ibef.org/industry/ecommerce.aspx> [iii] A. Gunasekaran, “E-commerce and its Impact on Operations Management,” International Journal of Production Economics, Vol.75, Issue.1, pp. 185-197, 2002. [iv] CCI’s study on E-commerce in India- Antitrust Issues and Recommendations, Khaitan & Co, 9th January, 2020, accessed at <https://www.khaitanco.com/thought-leaderships/CCIs-study-on-E-Commerce-in-India-Antitrust-Issues-and-Recommendations> [v] Competition Commission pitches for self-regulation of ecomm platforms, Economic Times, 9th January, 2020 Accessed at < https://economictimes.indiatimes.com/industry/services/retail/cci-recommends-transparency-about-discounts-to-e-commerce-players/articleshow/73159450.cms?from=mdr> [vi] E-Commerce : Role Of E-Commerce In Today's Business. International Journal of Computing and Corporate Research, A, Gupta, January, 2014(1).