Representatives of leading tech-first start-ups are preparing to meet a critical Parliamentary Standing Committee on Finance today to present their side of their story. Chaired by BJP leader and former Union Minister Jayant Sinha, the meeting will take deep dive into various aspects of marketplace competition, including complaints received against prominent e-commerce players, online aggregators and industry stakeholders of digital gaming companies.
Sinha told PTI that executives from Zomato, Flipkart, Swiggy, Ola, Oyo and All India Gaming Association would be present at this session, where government officials will discuss their market conduct amid rising anti-competition complaints. Paytm founder Vijay Shekhar Sharma, Ola CFO Arun Kumar, Make My Trip Chairman and Chief Mentor Deep Kalra, Zomato CEO Deepinder Goyal, Oyo founder and Group CEO Ritesh Agarwal have confirmed to the panel to attend the meeting. Other industry leaders who will be present include Swiggy's Vice President and Group General Counsel Avantika Bajaj, Flipkart Group CEO Kalyan Krishna Murthy and All India Gaming Federation CEO Roland Landers.
All's Not Fair
For several months now, the industry body Confederation of Indian Traders (CAIT) has been firing salvos against ecommerce companies alleging predatory sales tactics that are pushing smaller companies out of business. Earlier this year, its National Secretary Praveen Khandelwal asked Finance Minister Nirmala Sitharaman to investigate the alleged predatory pricing tactics employed by Flipkart-owned ecommerce platform Shopsy.
He accused Shopsy of selling daily-use household products at throwaway prices, ranging from Rs 1 to Rs 5, to attract more customers. "How is a small trader expected to compete with such loss-making INR 1/INR 5 stores? How can there ever be a level playing field for small traders if foreign-owned ecommerce companies are allowed to get away with such blatant disregard for the laws of this country?" Khandelwal questioned in the letter.
Since 2014, the Competition Commission of India (CCI) has received numerous complaints against several ecommerce players, including Flipkart, for alleged unfair business practices. The loudest uproar was over Amazon and Flipkart's annual discount sale, where offline retailers voiced concerns about anti-competitive and monopolistic practices.
In January 2020, CAIT's affiliate, Delhi Vyapar Manch, alleged significant violations by e-commerce companies under various sections of the Competition Act. One of these allegations was that the online marketplaces were selling through entities that were their subsidiaries and were connected through common investors, directors or shareholders.
While ordering an investigation months before the pandemic struck, CCI said, "It needs to be investigated whether the alleged exclusive arrangements, deep-discounting and preferential listing by the online platforms are being used as an exclusionary tactic to foreclose competition and are resulting in an appreciable adverse effect on competition contravening the provisions of Section 3 (1) read with Section 3(4) of the Act."
A Slice Of The Competition's Pie
In April this year, the CCI ordered a probe into allegations of anti-competitive practices against food delivery companies Zomato Ltd and Bundl Technologies Pvt. Ltd, which runs the Swiggy app. This was after it received complaints from the National Restaurant Association of India (NRAI). The association alleged that the online aggregators were levying heavy commissions on restaurants, limiting the entry of new players.
NRAI also claimed that the food delivery platforms leveraged their monopolistic standing to bundle food ordering and delivery services, disallowing restaurants from using their delivery personnel. Moreover, customer details were not shared with restaurant partners, making them more dependent on the platforms for repeat orders.
The industry body, representing over 500,000 restaurants across India, also claimed that the two platforms imposed unilateral clauses in the agreement. After being dealt a hard blow due to the pandemic, most restauranteurs opted for these terms, even though it was not financially viable from a mid-and long-term perspective.
In The Long Run
Mumbai-based Meru Cabs has accused Ola of abusing its dominant position in the Bengaluru market by indulging in predatory pricing and violating the competition law. However, in 2017, the CCI rejected Meru's claims and held that Ola was not in a dominant position in Bengaluru. This decision was upheld by National Company Law Appellate Tribunal (NCLAT) in January 2022. Following this, Meru Cabs approach the Supreme Court with its appeal.
As more people relied on ride-hailing apps for their daily commute, complaints of surge pricing started doing the rounds. In 2018, the CCI conducted a probe into cab aggregators Ola and Uber over surge pricing. However, it later gave a clean chit to both the Softbank-backed start-ups.
The Competition Act, 2002 prohibits anti-competitive agreements and abuse of dominant position by enterprises. It regulates combinations (mergers, amalgamations and acquisitions) intending to ensure that there is no adverse effect on competition in India.
Businesses accused of anti-competitive practices, including abuse of their dominant positions, might soon be able to settle cases by negotiating with the CCI. That is if the Competition Amendment Bill, 2022, which will be tabled in the ongoing Parliament session, is cleared. This Bill attempts to change several provisions in the earlier Act to suit the needs of new-age markets and carry out essential changes in CCI's governing structure.