Ecommerce Sector: Why India’s Ecommerce Sector Does Not Need A One-Time Regulatory Intervention
The not-so-rosy flip side includes the growing dissatisfaction of business users with e-commerce platforms and the regulatory confusion that defines Indian e-commerce today. These business users are the backbone of e-commerce, whether they are mobile sellers on Flipkart and Amazon, restaurants listed on Swiggy and
, or hotels on MakeMyTrip. Equally important is the regulatory clutter, as sooner or later its impact will be felt on the ecommerce ecosystem. The worst case is absolute monopoly / oligopoly. At the best of times, innovation thrives as multiple platforms compete not only for buyers, but also for sellers of goods and services.
So what takes away the best of times? Two words: regulatory inaction. The status quo is certainly not enough. For example, the Draft National Electronic Commerce Policy, 2019 and Consumer Protection (Electronic Commerce) Rules, 2020, focus on the welfare of consumers and do not significantly address any of the issues that arise between trading platforms. e-commerce and their business users (P2B issues).
The Foreign Direct Investment (FDI) policy, which examines P2B issues, is hardly ever enforced and its applicability is limited to foreign-funded platforms. The Intermediary Guidelines, 2021, promulgated under the Informatics Act, target social media intermediaries, news publishers and news aggregators, leaving most e-commerce outside its purview. application. That leaves us with the Competition Act, 2002, enforced by the Competition Commission of India (TCC).
First, any order made under the Competition Act applies only to the particular facts and to the parties to the case. Thus, in effect, setting the rules of the game would mean that several cases covering various factual scenarios would be brought before the ICC, then its appeal body, the National Company Law Appeal Tribunal (NCLAT), and finally the Supreme Court. . It is a very inefficient, expensive and time consuming way of governing e-commerce which is nimble and thriving because of speed and efficiency.
Ideas that click
A relatively new and maverick regulatory response is the Open Network for Digital Commerce (ONDC) project, which would be led by the Department for the Promotion of Industry and Internal Trade (DPIIT) under the Ministry of Trade and Commerce. Industry. Publicly available information on the ONDC project is sketchy, but it appears that various e-commerce services such as cataloging will be unbundled and standardized with the aim of simplifying e-commerce access for small business users.
Reservations on the ONDC project are threefold. First, existing e-commerce businesses score very well on the user interface, including cataloging, on-time delivery, and payments. So users won’t give up the convenience they offer overnight. Does ONDC want to undo years of property progress and innovation that have so far led to the incredible success of e-commerce?
Second, it cannot be reasonably expected that founders, investors, and shareholders of existing e-commerce companies will let their businesses in one of the world’s largest e-commerce markets be spoofed in this way. So, realistically, one can expect intense lobbying and delaying tactics before ONDC takes off in any meaningful way. At best, it will be a long-term, well-negotiated compromise.
Third, even broadly, interoperability is seen as a complementary solution that exists alongside the regulation of anti-competitive practices such as self-preference, unfair contract terms and deep discounts. For example, the US House Judiciary Committee passed a series of bills last year that did both – promote interoperability and restrict self-preference.
In summary, neither existing laws and regulatory tools nor the ONDC project are “substitutes” for designing a strong regulatory framework to govern existing online access control platforms. So what form should regulatory intervention take?
The December 2021 Vidhi Center for Legal Policy working paper, “Fair and Competitive e-Marketplaces (FACE): The Business Users’ Narrative” (bit.ly/3mWZHqY), recommends a two-part solution. The first step is to maximize the effective use of existing legal tools, including the Competition Law and FDI policy, and to build capacity.
Step 2 is to seriously start working on new ex ante regulatory tools that effectively define the playing field for gatekeeper e-commerce platforms.
Gatekeeper platforms can be identified on the basis of objective criteria, such as number of active users, volume of transactions, etc. Platforms that do not meet these criteria should not be subject to the same ex ante laws and be allowed to develop. Once identified, access control platforms should be required to follow a mandatory code of conduct appropriate to their business model.
Crack the code
Although formulating individual codes of conduct is resource intensive, it is a viable solution, as a handful of monitoring platforms would need to be covered, and given the diversity of business models and patterns of monetizing digital platforms, one size fits all the holistic approach simply won’t suffice.
As is evident, step 2 will require a lot of work and should start at the earliest. Step 1 is an interim solution, and serious consequences await us if we do not treat it like this.
