E-com deep discounts a concern: CCI

Chennai: In the backdrop of increasing complaints about unfair practices against digital platforms like e-commerce, India’s competition watchdog has warned that any potentially anti-competitive unilateral conduct by the platforms with their sellers and service providers will receive enforcement attention. It wanted platforms to put in place a framework for transparency and define basic conditions for platform-to-business contracts.

Given the economics of digital platform markets, where the winner takes all or most, eliminating anti-competitive behaviour that further tilts the scales or deters entry assumes utmost importance, says the Competition Comm-ission of India.

“Hence, any potentially anti-competitive unilateral conduct of platforms or platforms’ vertical arrangements with sellers/service providers will receive enforcement attention,” the CCI said in a study released on Wednesday.

The study found that issues like lack of platform neutrality, unfair platform-to-business contract terms, exclusive contracts bet-ween online marketplace platforms and sellers/service providers, platform price parity restrictions and deep discounts may have a direct or indirect bearing on competition.

It said that the price points at which sellers sell the products on the marketplace platforms are in many instances lower than the cost price for the brick-and-mortar retailers. These retailers maintain that they either have to match the online discounts at a significant loss or the online market would be foreclosed for them.

This was pointed out to be a particularly pressing concern in the case of mobile phones, where online markets constitute around 40 per cent of the total sales in the country.

The study said platforms have to bring out transparent policies on discounts, including the basis of discount rates funded by platforms for different products/suppliers and the implications of participation/non-participation in discount schemes.

According to the findings, bargaining power imbalance and information asymmetry between e-commerce marketplace platforms and their business users are at the core of many issues. Thus, without a formal determination of violation of competition law, improving transparency in the platforms’ functioning can reduce information asymmetry.

The e-commerce marketplace platforms in goods, online travel assistance and food delivery platforms may devise means to govern certain aspects of their functioning and their commercial relations with the business users of the platforms. The platforms may put in place a framework for adequate transparency and define basic conditions for platform-to-business contracts, the CCI said.

Discounts are purportedly funded by platforms for consumer on-boarding. It is causing the service providers, i.e. hotels and restaurants, to lose control over the price of their products sold/distributed through online platforms, which also affects price and sales through other channels.

Discounting is a common business strategy but where the design of the discounting schemes is misaligned with the rational business practices of the service providers, the use of such discounts as a competitive strategy comes into question, the study said.