Akshay ChughArticle Submission
IIL The Legal Voice of India
CCI’s Market study on E-commerce: The way forward
By Akshay Chugh
2nd Year BBA LLB (Hons.) Student
Symbiosis Law School, Pune
Mail: akshaychugh500@gmail.com
Phone: (+91) 9826752022
Introduction
The Competition Commission of India (CCI) Released its report on Market Study on E-
Commerce in India on January 08, 2020. The study was commenced in April 2019 with the
objectives of studying market trends with a particular focus on emerging distribution methods
and strategies in response to E-commerce, understanding business practices and contractual
provisions in E-commerce concerning their implications on competition, identifying
impediments to competition with regards to E-commerce, and ascertaining enforcement and
advocacy priorities for the Commission in E-Commerce. It has helped gather useful insights and
information on the key features of E-commerce players, and the various aspects of commercial
arrangements between market participants involved in E-commerce. Besides, it also provides an
opportunity to learn from business enterprises on how they are responding to the advent of
digital trade and has helped gauge the key parameters of competition in digital commerce. 1
Expanding Trends of E-commerce
The study reports that India is the fastest-growing market for the E-commerce sector. Revenue
from the sector is expected to increase from USD 39 billion in 2017 to USD 120 billion in 2020,
growing at an annual rate of 51 percent, the highest in the world. 2 The mobile phone subscriber
base in India has increased from 904.51 million in March 2014 to 1173.75 million in September
2019. 3 At present, around 4757 E-commerce start-ups are active in India, the study reports.
Furthermore, the sales from online travel bookings in India is likely to reach USD 39.09 billion
by 2021. The food-tech industry in India is estimated to grow at a CAGR of more than 12%
between 2016 and 2021, driven by the growth in internet and smartphone penetration. 4
Emerging Importance of E-commerce
The study covered the goods most sold in India, namely mobile phones, electrical and electronic
appliances, lifestyle-related goods and grocery. The findings revealed that the share of online
distribution and its relative importance as a sales channel vis-à-vis the offline channels varies
significantly across products. In the case of mobile phones, online sales reportedly account for around 40% of total sales in India. Hotels in the budget and mid-market segments, as per the
study, now consider distribution through online travel agencies. In the foodservice category, 83%
of the respondent hotels have an online presence with online sales accounting for an average,
nearly 29% of its revenue. 5
Strategic Response to E-commerce
Businesses across areas and at different levels of supply chains were seen as outfitting to profit
the chances of web-based business while additionally preparing themselves to address the
orderly difficulties. The retailers surveyed were found to be exploring various ways to enter into
online platforms. The large retailers were found to have launched their own website. The smaller
ones used third-party platforms for the same. The new contracts between manufacturers and
distributors were found to have a newly added clause for online sales. On the services side,
‘cloud kitchens’ were observed as an important means for E-commerce in food. Also, Online
Travel Agencies (OTAs) were found to be prevalent in the tourism industry concerning E-
commerce.
Purpose of Online Market Platforms
According to the study, third party marketplace platforms have been responsible for 64% of
digital retail trade in India. The shift in retail from offline to online is a rapid escalation which
with the adaptation of networking and technology will not slow down. Also, the degree of
dependence of sellers/service providers on platforms was found to be a function inter alia of the
nature of the product in question, the size and resources of the seller/service provider and their
brand equity. The goods marketplaces reported to have taken multiple steps to improve sellers’
experience in the last two years. In the accommodation service category, the technology platform
of the OTAs is facilitating customization of services to guests/customers. In the food category,
marketplaces reported to have taken various initiatives to improve the restaurant experience. 6
Anti-Trust Issues Identified in the Industry
The following issues were found to exist in the surveyed industries. The issues were found to co-
exist in most of the cases.
Deep Discounts – Discounts can harm competition when used as an exclusionary device
by enterprises with market power. The concerns raised by sellers/service providers
concerning discounts offered on/by market platforms are:
a. Discounts are discriminatory
b. Discounts push prices to below cost levels in certain product categories and impair the
offline small retailer’s ability to compete.
c. Discounts imposed by platforms in the exercise of their superior bargaining power
adversely affects the business models of the service providers.
Exclusive Agreements – These are along the lines of platform-building where a product
will only be launched on a specific platform. These raise potential competition concerns
to foreclose competition to rivals or to restrict entry.
Platform Neutrality – The lack of platform neutrality allows for possible distortion of
competition, and the consumer choice may not reflect consumer preference with perfect
information. Also, the three elements which are susceptible to manipulation due to this
are search results, seller/service provider’s data and rating mechanisms.
Platform to Business Contracts – Unfair contract terms among online platforms and
manufacturers lead to unease and tension in platform-business relations.
Platform Parity Clauses – Platform parity clauses imposed by incumbent platforms may
serve as a barrier to entry by such low-cost platforms. A review of the anti-trust literature
on price parity clauses shows that these restrictions can give rise to competition concerns.
Recommended Transparency Measures for Self-Regulation
The Report states that the imbalance in bargaining power and information asymmetry may result
in market distortion. Accordingly, the measures are directly aimed at improving market
transparency in the e-commerce sector:
Search Ranking – The businesses should set out in the terms and conditions of the
platform, a general description of the main search ranking parameters, drafted in the
plaint and intelligible language and keep the description up to date.
Collection, Use and Sharing of Data – The collection of data by marketplace platforms
must be guided by a transparent policy that must provide for the detailed concerning the
use of data and sharing of data with third parties.
User Review and Rating Mechanism – Adequate transparency over user review and
rating mechanisms is necessary for ensuring information symmetry. Also, reviews only
for verified purchases should be permitted to prevent fraudulent ratings.
Revision in Contract Terms – The marketplace platforms are direct to notify retailers of
any proposed contractual changes in advance and provide reasonable time before the
implementation of changed contractual terms.
Discount Policy – The businesses should The marketplace platforms are direct to notify
retailers of any proposed contractual changes in advance and provide reasonable time
before the implementation of changed contractual terms.
Conclusion
The Competition Commission of India through this report has concluded that ensuring
competition on the merits to harness efficiencies for consumers, increasing transparency to create incentives for competition and to reduce information asymmetry, and fostering sustainable
business relationships between all stakeholders are its enforcement and advocacy priorities. The
insights from the study shall inform antitrust enforcements in the markets. Bargaining power
imbalance and information asymmetry between E-commerce marketplace platforms and their
business users are at the core of many issues that have come up in the study. Without a formal
determination of a violation of competition law, improving transparency over certain areas of the
platforms’ functioning can reduce information asymmetry and can have a positive influence on
competition outcomes. 7
1 Chronicle, Market Study on E-Commerce in India, CHRONICLE INDIA (Jan 9, 2020)
https://www.chronicleindia.in/current-news/346-market-study-on-e-commerce-in-india.
2 IEBF, Indian Ecommerce Industry Report, INDIA BRAND EQUALITY FOUNDATION, (Jan, 2020)
https://www.ibef.org/industry/ecommerce.aspx#login-box.
3 Ibid.
4 CCI, Market Study on E-Commerce in India, Competition Commission of India, (Jan 8, 2020)
https://www.cci.gov.in/sites/default/files/whats_newdocument/Market-study-on-e-Commerce-in-India.pdf.
5 Ibid.
6 Ibid.
7 CPI, India: CCI releases market study on e-commerce, COMPETITION POLICY INTERNATIONAL, (Jan 13,
2020) https://www.competitionpolicyinternational.com/india-cci-releases-market-study-on-e-commerce/.