When e-commerce companies serve as both a marketplace and competitor on their own platforms, they have the incentive to leverage control over the platform in favour of their own vendors or private label products, much to the disadvantage of other sellers or service providers, found a recent study by the competition watchdog, Competition Commission of India (CCI).
Separately, CCI chairman Ashok Kumar Gupta has warned the e-commerce platforms of an investigation into charges of opaque behaviour and unfair practices such as exclusive tie-ups with certain sellers, if they do not refrain from such methods.
The CCI, in a study published on January 8, said that these platforms have a variety of mechanisms that they can use to act upon such an incentive, including their access to transaction data and ranking of search results.
India’s two biggest e-com players — Flikpart, along with fashion arm Myntra, and Amazon — own a dozen consumer good brands ranging from apparel to furniture, which are listed on their platforms. Further, they have multiple exclusive tie-ups with brands, especially smartphone-makers, as the sole seller of their particular model or the entire line-up. Even the food delivery platforms run their own cloud kitchens and list other restaurants, thus “creating an inherent conflict of interest between the platform’s role as intermediary on one hand and as a market participant on their own platform on the other.”
The CCI also felt that the amount of control available with the platforms help them to position their brands better.
“The intermediary role of the platform allows it to gather all such competitively relevant data such as prices, sold quantities and demand, inter alia, pertaining to each product, seller and geography. On the consumers’ side, this enables the platforms to better target product recommendations for users and improve the quality of the platforms. On the sellers’ side, this may allow them to use such data to introduce their own private labels, boost their own sales or that of their ‘preferred sellers’,” the CCI said.
Another issue the businesses using the e-commerce platforms have raised most stridently was the alleged exploitation of the superior bargaining position of these platforms, by imposing “unfair” contract terms.
“Platforms allegedly determine and revise the terms of engagement unilaterally, often causing harm to the business interest of the sellers or service providers. This has created an environment where the trust of businesses on these platforms is undermined and they cannot expect to have a sustainable relationship with them,” the CCI study observed.