CCI can investigate digital commerce platforms' unfair deep discounts, exclusive agreements

In what could bring some cheer to offline sellers, the Competition Commission of India (CCI) has said that it can investigate unfair deep discounts and contract terms between e-commerce marketplaces and sellers.

The commission said that it could intervene, on a case-by-case basis, in matters where unfair conditions or price is imposed through contractual provisions by an enterprise that is dominant in the relevant market.

“The Commission, under section 3(4) of the Act, can evaluate such vertical agreements in a rule of reason framework to assess whether the disparity in discounts offered is used as a mechanism to induce exclusivity and whether the same leads to an appreciable adverse effect on competition," said the competition watchdog in a market study on India’s e-commerce.

The nine-month-long market study covering 16 online platforms and 164 businesses further outlined that any potentially anti-competitive unilateral conduct of platforms or platform's vertical arrangements with sellers or service providers will receive enforcement attention.

The CCI’s study comes at a time when e-commerce companies, as well as food-tech firms, have come under government scrutiny over complaints of unfair practices by offline retailers and restaurants, respectively.

In India, the e-commerce market is dominated by Amazon and Flipkart, whereas Swiggy and Zomato are leaders in the food delivery space.

It also recommended self-regulation and to have clear policies on discounts, explaining the basis of the discount rates funded by platforms, and the implications of such schemes.

Several experts and observers of the online commerce space hail the study saying that it will send a strong message. 

However, soon after the study was released, the trader's body or the CIAT's secretary Praveen Khandelwal opposed the self-regulation suggestion by the regulator and instead appealed for the formation of a government-backed body to regulate e-commerce.

In 2018, Flipkart and Amazon had to adjust their business models after the government published Press Note 2 making changes on FDI policy. Entrackr had also reported on how Amazon had scaled its private brand-focused accelerator program and made some partial changes in its search mechanism.