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Proposed changes in online commerce encourage micro managing, may result in a new set of problems

Two parallel developments have the potential to significantly influence the operating conditions of e-commerce platforms. In Karnataka, Flipkart and Amazon have filed separate petitions challenging the high court’s recent decision to allow Competition Commission of India (CCI) to investigate them. The matter is presently being heard by the court. Separately, GoI this week introduced a draft of proposed amendments to e-commerce rules that aim to kill discounts and promote Indian merchandise.

Globally, regulators have to deal with a unique feature of e-commerce retail platforms. These platforms are both players and referees as they provide the marketplace and also compete directly with other sellers using it. Checking “self-preferencing” by platforms is the overarching regulatory goal. GoI tried to solve it by killing the conflict of interest. Marketplace e-commerce firms are allowed to be only a technology platform, without other commercial interests. However, both CCI and GoI are uncomfortable with deep discounts offered on the platforms. CCI says that an “asymmetry” of bargaining power between the platforms and numerous sellers can result in discriminatory discounts. In other words, it’s not keen on discounts that in its view don’t come from efficiency gains. GoI’s draft rules centre on the same issue.

However, its approach is problematic. There’s a level of unwarranted micromanaging, ostensibly to help domestic firms. Also, there is needless confusion about flash sales. The Indian consumer will be the loser here. The micromanaging comes in the form of getting the e-commerce platform to suggest domestic alternatives to imported goods or services. Regulating fair play here will be a nightmare. None of the complaints on flash sales are convincing. If there’s a competition issue here, it’s the CCI’s job to sort it as GoI has already tweaked rules to check conflicts of interest. These proposals will only create a new set of problems and possibly prop up some inefficient competitors.

 



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This piece appeared as an editorial opinion in the print edition of The Times of India.



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