E-Commerce Firms Aren’t Transparent On Discounts, Ranking, Data Collection, Says Competition Commission

India’s competition watchdog wants e-commerce firms in the nation to exercise self-regulation and maintain transparency.

The Competition Commission of India said companies like Amazon.com Inc., Flipkart, Swiggy, Zomato and Oyo must regulate themselves on aspects such as search-ranking, data collection, discounting and revision of contract terms with sellers.

The suggestions, among others, found place in the watchdog’s report titled ‘Market Study on E-Commerce in India’, that aims to understand the functioning of e-commerce and its implication on markets and competition.

The study, which was initiated in April 2019, comes amid concerns raised by traders’ associations from various sectors, including Confederation of All India Traders, National Restaurant Association of India and the Federation of Hotel & Restaurant Associations of India—all of whom had complained about the business practices of digital upstarts in their respective sectors.

Here Are Some Of The Study’s Key Findings:

Deep Discounting
The study said that in e-commerce platforms across sectors, discounting was the key factor influencing competition.

In the case of online retailers, while the platforms have denied their involvement in pricing, CCI said the concerns were raised on alleged below-cost pricing in many product categories. In categories such as smartphones and electronic/electrical appliances, the price points are so low that it impairs the ability of brick and mortar players to compete in the market, the report said.

And while lower prices benefit consumers, the increasing focus on discounts poses risk to competition on non-price aspects such as quality and innovation that may also hurt consumer interest in the medium to long run, the CCI said.

Contract Terms
The commission also found that online platforms exercised “superior bargaining position” by imposing “unfair” contract terms on sellers.

There’s no standard contract made available to all business users by a platform, and they are customised, the study said. Service providers, especially in the food and hospitality sectors, alleged the unfair terms such as deep-discounting in contracts suited the interest of the platforms and undermined the business model of the providers, the study said.

The CCI has recommended that e-commerce platforms notify the businesses of any proposed changes in terms and conditions and only bring them into effect after a reasonable notice period.

Data Collection, Usage
The study suggested a “clear and transparent” policy on the data that’s collected on the platforms and shared with third-party entities.

A lack of transparency has led to possible distortion of competition on the platforms, it said. “The concern regarding platform neutrality emanates from situations where the online platforms serve as both a marketplace and a competitor on that marketplace.”

The CCI has suggested that online platforms must make information available on search-ranking criteria, review and rating mechanisms. “A general description of the main search ranking parameters (must be) set out in the platforms’ terms and conditions, drafted in plain and intelligible language and keep that description up to date.”

The commission said it might examine issues on a case-by-case basis under relevant provisions of the Competition Act.