The Competition Commission of India (CCI) has recently unveiled findings in its antitrust investigations, that major e-commerce players have violated Indian competition laws (anti-trust laws) by offering exclusive launches, giving preference to select sellers, prioritising certain listings, etc.
Antitrust Framework Concerning E-Commerce in India
Competition Act, 2002 (Amended in 2023)
- Objectives:
- Promote competition in the market.
- Protect against anti-competitive practices and abuse of dominant positions.
- Regulate mergers, amalgamations, and acquisitions to prevent market monopolies.
Consumer Protection (E-Commerce) Rules, 2020
- Key Provisions:
- Level Playing Field: Mandates e-commerce entities to ensure fair treatment of all vendors.
- Non-Promotional Obligations: Prohibits the promotion of any specific product to maintain neutrality.
- Prevention of Deceptive Practices: Bans practices that could mislead consumers or influence their purchasing decisions unfairly.
Restrictions on Operation of E-Commerce Entities in India
- Restrictions on Exclusive Selling
- Prohibition: No seller is allowed to sell products exclusively on any single marketplace platform.
- Fair and Non-Discriminatory Services: All vendors must receive services such as fulfillment, logistics, warehousing, advertisement, payments, and financing on equal terms without discrimination.
- Restrictions on Purchases by Vendors
- Control Clause: Vendors purchasing 25% or more of their inventory from an e-commerce group company are deemed controlled by that company.
- Consequences: Such vendors are barred from selling on the controlling e-commerce platform to prevent monopolistic control.
Models for Offering E-Commerce Services
- Inventory Model
- Ownership: The e-commerce entity owns the inventory of goods and services.
- Sales Mechanism: Products are sold directly to customers by the platform.
- FDI Regulations: Foreign Direct Investment (FDI) is not permitted in this model to protect India’s unorganized retail sector, which cannot compete with large-scale discounts.
- Marketplace Model
- Functionality: The e-commerce entity acts as a facilitator, providing a technology platform that connects buyers and sellers.
- Ownership: Inventory remains with the sellers, not the platform.
- FDI Regulations: 100% FDI is allowed under the Automatic Route, promoting foreign investment and competition.
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Frequently Asked Question:
What laws regulate e-commerce in India?
The Competition Act, 2002, and Consumer Protection (E-Commerce) Rules, 2020 regulate e-commerce in India.
What are the key violations by e-commerce companies in the antitrust investigation?
Violations include offering exclusive launches, preferential seller treatment, and biased listings.
What is the marketplace model in e-commerce?
In the marketplace model, the platform connects buyers and sellers but does not own the inventory.
What restrictions apply to exclusive selling in e-commerce?
Sellers are prohibited from selling products exclusively on a single marketplace platform.
How does the Competition Act promote fair competition?
The Act prevents anti-competitive practices, ensures a level playing field, and regulates mergers to avoid monopolies.