Government ramps up scrutiny on deep discounting

Draft e-com consumer protection rules released last week has provisions to limit deep discounting by platforms themselves

Published: 17th November 2019 08:08 AM  |   Last Updated: 17th November 2019 08:08 AM   |  A+A-

Express News Service

The extended battle between brick-and-mortar retailers and e-commerce majors over the issue of “deep discounting” and “predatory pricing” has escalated to the highest policy-making levels of the government, with both the regulator Competition Commission of India (CCI) and the Union commerce ministry now ramping up scrutiny into the issue. 

While the CCI has said that it will release an advisory to e-commerce players to increase transparency in their operations, even as it examines whether they have become large enough to be restrained from deep discounting practices, the commerce ministry led by Union minister Piyush Goyal has been more direct. 
Not only has Goyal warned e-commerce players against indulging in predatory pricing during meetings, the minister even referred to the issue during his address at the BRICS trade ministers meeting in Brasilia, Brazil, last week. “I would like to highlight the adverse impact of predatory pricing indulged by some e-commerce players, which adversely impact millions of small retailers,” he said. “It is important for e-commerce to follow the letter and spirit of the law”. 

The Centre has also made its stance on the issue clear with the draft e-commerce consumer protection rules released last week including provisions geared to limit deep discounting by the platforms themselves. According to the draft policy, on which the Centre is currently taking public feedback, an e-commerce entity will be mandated not to “directly or indirectly influence the price of the goods or services” and maintain a “level playing field”. 

The draft rules also propose that such entities should not adopt trade practices that are unfair or deceptive and “may influence transactional decisions of consumers” or make false reviews as consumers. 

While the draft rules have been met with approval from the Confederation of All India Traders’ (CAIT), the traders’ association is still planning to escalate protests over the issue. On Thursday, a release from the organisation said that multi-national companies and corporate retailers are “hand in glove” with e-commerce players and threatened a pan-India trader boycott. “These companies offer huge discounts to ecommerce firms and keep high prices for their own distributors and retailers,” said CAIT national president B C Bhartia. According to CAIT, it had also sent communication to more than 200 leading corporates across retail segments on whether they indulge in dual pricing. “These companies are giving various exclusive products to e-commerce companies and those products are not offered to offline market, which is a serious breach of fair market practices,’’ CAIT alleged. 

E-commerce players, however, have submitted to the Centre that they have no role in pricing or discounts, sources say. From the regulatory aspect, current anti-trust rules forbid a dominant player in a market from abusing its position by imposing an unfair and discriminatory price resulting in market access to rivals. Predatory pricing is defined as selling products at a price below the cost of production, aimed at eliminating competition. However, analysts say this allegation might not stick to e-com players as they still command a relatively small portion of India’s huge retail market.

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