Replying to CCI's study findings, AIOVA cries foul over e-commerce malpractices

The Competition Commission of India (CCI) is conducting a market survey on e-commerce in India to study the functioning of the industry and its implications for markets and competition in the country.

While the study is still on, the preliminary findings of the study were presented at a workshop held last months where all the relevant stakeholders were invited to deliberate on identified issues at the workshop. CCI had sought views of all stakeholders by September 30.

Replying to the initial findings of the sectoral study, the All India Online Vendors Association(AIOVA) has released comments touching several issues faced by the third-party sellers on these online marketplaces. The group consists of more than 3500 online sellers selling online and through e-commerce marketplaces.

The vendor's body also raised issues such as search rankings, discounts/deals, onboarding of sellers and the often talked about issues of these market places pushing their private labels and supporting “ Preferred sellers”

The statement piece describes the relationship between the e-commerce websites and the aforementioned preferred sellers “not at arm's length”.

They are given priority on activities such as emailers, cashbacks, EMI schemes, affiliate marketing and access to bundled services, in turn, influencing consumers’ decision making or visibility or sellers on the platform

The vendor body said that the commercial agreements entered between the sellers are opaque and often protected by non-disclosure agreements.

They allege that the financial statements of these preferred seller companies reflected platform fees ranging from 0%-9% of sales net of returns, whereas, for the third party sellers, the platforms charge fees ranging from 7% - 40% on Gross Sales. They quoted Case No. 20 / 2018 AIOVA vs Flipkart under which the commission requisitioned the data on the above facts.

Commenting on “Pricing and Discounts”, AIOVA claims that independent sellers are coerced into participating in deals by many through “off system methods and false promises.”

They state that the sellers are charged a fee to take part in these discount deals and the ones who refuse to do so are facing the problem of poor visibility on the marketplace.

Further, the statement calls out the e-commerce platform’s claim that private labels are sold by independent sellers in sectors with unfulfilled demand a “blatant lie”. The vendor body claims that supply is controlled by marketplaces on purpose and independent third-party sellers aren't allowed access to private labels.

Penning a sad state of the Algorithm used by the online marketplaces, the vendor body terms it as opaque and alleges system overrides and manual interventions. They requested a System audit to clarify these claims.

The statement also mentions a significant issue faced by the manufacturers: Counterfeit products.

AIOVA states that most marketplaces, including Snapdeal and Flipkart, have a robust due diligence system, but the market leader Amazon lacks a pre onboarding due-diligence mechanism.

The vendor body suggests that onboarding of any seller through GSTN shouldn't be allowed unless they are authorized sellers of the brand.

In its reply, AIOVA also lists out several issues not addressed by the market study which affect the third party independent sellers.

Difficulties like arbitrary Penalties and the practice of blacklisting sellers without dispute resolution options, lack of disclosure norms and complex tariff structures were mentioned.

Additionally, the vendor's body highlighted the problem of delayed reimbursements claiming the sellers are not being reimbursed as per RBI norms.

While some marketplaces have shut down without paying out vendors leaving them with only with long-drawn court cases, AIOVA claims that many preferred sellers are paid in advance.

This e-commerce study is 20th of its kind conducted by the CCI till date and final study report is expected to be published in the third quarter of 2019-20.