CCI to give e-commerce firms advisory on discounts as trader protests grow

Commerce ministry has questioned Amazon and Flipkart
The Competition Commission of India (CCI) is planning a policy advisory for the e-commerce industry to address the all-round concern over deep discounting and predatory pricing across online platforms, a top official has said.      

Confirming that the CCI would issue a ‘“soft policy advisory’’, Chairperson Ashok Gupta told Business Standard, “nobody can deny that online is here to stay...Many sellers have benefitted from the platform and there are efficiency factors as well.’’ However, Gupta added that e-commerce firms should not distort the market.

This comes at a time when Commerce Minister Piyush Goyal has gone public on foreign majors including Amazon and Walmart-owned Flipkart being under the government scanner over allegations of predatory pricing, especially during the recent online festival sales. The minister, while pointing out that questionnaires had been sent to the firms, said strict action would be taken if they are found guilty.  

Online vs offline

Fearing severe disruption in their business, domestic traders have for long been at war with e-commerce firms, funded by marquee foreign investors.  However, the Confederation of All India Traders (CAIT), a domestic lobby group, upped the ante recently, knocking on the government door. It complained that multinational online firms were indulging in ‘’predatory pricing’’. 

On Friday, the group approached the CCI to express concerns against the e-commerce giants, citing ‘’anti-competitive and unethical business practices.”

In fact, Praveen Khandelwal, secretary general, CAIT, sent out a tweet, "Team CAIT hopes CCI will ensure fair competition and even level playing field."

To be sure, with the rising prominence of e-commerce, it has been getting significant attention at CCI of late. The watchdog had recently commissioned a study on challenges across the e-commerce industry, for instance. EY had prepared a report on the subject.

The Commission is concerned that online sellers are driving up their valuations by rapidly expanding the discount-hungry consumer base. The CCI is of the view that the model, while affecting the brick and mortar companies, might not be sustainable and serve long-term interests.

Meanwhile, the Department for Promotion of Industry and Internal Trade is working on an e-commerce policy, which is expected to offer clarity on regulatory issues for online firms across spectrum including Amazon, Flipkart, Uber, Ola and others. But, these firms may have to wait as the policy would possibly be delayed beyond the end of this year.

As for the CCI, it is studying the industry suggestions to understand the e-commerce landscape and whether the same parameters can govern the traditional and the online market.

The core issue

According to the market study, the contention of restaurants against online food sector players was that they followed a non-transparent algorithm and promoted their own cloud kitchens and charged arbitrary commissions. The online platforms, however, said that search ranking of restaurants was based on proximity and that they were bridging the supply-demand gap. They also said that restaurants participated in deals at their own discretion.

Issues in the hotel space were similar. They complained of unilateral increase in commission and pointed out that they were being forced to set unviable rates. Just like restaurants, hotels too are facing pricing pressure.

The CCI also studied the goods industry, notably mobile phones and accessories, where sellers raised issues ranging from preferential treatment for few to counterfeit products being sold online. This critical group in the new economy has reported to the CCI that if it fails to  participate in discounts offered by online platforms such as Amazon or Flipkart, the visibility of the goods and their ranking on the search engine are hit.

Under scrutiny 
  • E-commerce players face allegations of predatory pricing
  • Commerce ministry has questioned Amazon and Flipkart
  • DPIIT to announce policy for the sector
  • CCI to come up with an advisory for online players
  • Deep discounting biggest concern for CCI

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