Companies constantly complain about the anti-competitive behavior of e-commerce platforms. The accusations leveled against them are fairly typical: large discounts, self-preference, manipulation in the ranking of searches, misuse of consumer data. While the claims may not be true all the time, e-commerce platforms are still prone to competition law violations, risking a massive fine from the Bangladesh Competition Commission (CCB).
CCB met with major e-commerce platforms in Bangladesh: BoomBoom, BabyneedsBD, Aladiner Prodip, Daraz Bangladesh Ltd., Priyoshop.com Ltd., Chaldal Ltd., Redex and many more on September 21, 2021. The goal of the meeting was to inform these platforms of the various practices underway in the digital market that risk infringing competition law.
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In such a situation, it is important that e-commerce platforms be cautious of anti-competitive behavior and hire lawyers to verify their offers on the platforms before launching them. This article describes some of the most common anti-competitive disruptive behavior and / or actions of e-commerce platforms under Bangladesh’s competition law regime.
Businesses and e-commerce platforms use cheaper price offers to enter and capture a market. Initially, the rate of cheaper products or services seems pro-consumer. However, as soon as companies drive out all competitors in the market, they exploit their monopoly in the market by raising the price of products and / or services. This is where competition law comes in.
The Competition Law of 2012, in accordance with Section 16 (2) (a), prohibits the sale of goods or the provision of services at a price below the cost of producing the goods or providing services to reduce or eliminate competition in the relevant market. Article 20 (a) (ii) of the law also provides that the Commission can sanction an electronic commerce platform for predatory pricing with a fine of up to 10% of the average turnover of 03 (last three) years. Thus, the caveat for e-commerce platforms and the business entities therein is to ensure that the selling price of the products or services is not lower than the cost of production.
In particular, the availability of products or services at a lower price cannot always be considered predatory pricing. Because the cheaper price of products can also result from the exemption of sellers from marketing costs, and greater market access in the digital platform. However, the e-commerce platform giants enjoy such a large sales volume that they can sometimes, for a limited time, offer big discounts where the price of the product is lower than the apparent cost of manufacture. Such large discounts can be akin to predatory pricing when they are intended to drive competitors away from the market. The Competition Commission of India, in its latest e-commerce industry study titled “India E-Commerce Market Study,” found that large discounts are seriously problematic and should be watched with caution. The CCB has been lazy in monitoring the e-commerce sector. The recent catastrophe in the e-commerce sector with the “Evaly scam” is a starting point for the CCB. It is expected that with the recent recruitment of staff, the CCB will step up its energy and closely monitor e-commerce platforms to ensure a competitive online marketplace.
E-commerce platforms can play the role of both market and competitor in that market. These dual characteristics of these platforms have both advantages and disadvantages. These e-commerce platforms control three important characteristics of a possible sale and purchase of a product or service: search results, seller / service provider data, and user review. As a result, platform products could benefit from increased visibility and consumer choice may not reflect consumer preferences. But a transparent business ecosystem should have facilitated a pro-competitive marketplace for sellers.
Ecommerce platforms generate huge revenue with their SEO services by placing certain products of specific companies higher in search results. Big companies don’t mind paying such subscription fees to get their product listed above everyone else. In practice, we see that large companies buy all the top positions for all products and that small and medium-sized companies are left behind. Therefore, these small and medium enterprises fail to compete in the market. This is where the CCB is empowered to intervene and regulate the business ecosystem by ensuring the transparency of the system through specific directives and orientations. The Competition Act empowered the CCB to prevent e-commerce platforms from distorting the market through abuse of market dominance under section 16 (2).
E-commerce platforms in their contracts with suppliers often include a price parity clause. A price parity clause requires the supplier not to offer products or services at a lower price or on better terms on other ecommerce platforms or sometimes even on their own websites. Examples of such clauses are typically found in online travel agency markets, online food ordering apps, and delivery markets. These parity clauses may be subject to control by the CCB if they adversely affect competition.
From a business perspective, sellers may have different incentives to receive from different platforms to deliver products at different prices. An established ecommerce platform may not be willing to charge less than a newly created ecommerce platform and, therefore, the vendor may wish to reap the rewards of economies of scale and network effects. . Due to a broad parity clause, end users might have to pay higher prices. Again, subsection 15 (1) of the Competition Act prohibits such exclusive supply and distribution agreements where they adversely affect competition. If the electronic commerce platform is dominant in the market, such a clause can also be pursued under Article 16 of the Competition Act.
The author is Lecturer, Department of Law, Bangladesh Professional University, and Consultant, as & Associates.