Competition Law and E-Commerce

The online platform of business organization provides tangible benefits to the consumers, especially by increasing transparency, expanding the range of products on offer, reducing logistical and display costs. It is important that CCI acts efficiently in order to ensure that consumers don’t lose their trust in online markets, so that such online trade can flourish more. But it is difficult to maintain a balancing check on them. Read along to know more regarding the same!

Today, the purpose of the internet has expanded. It was introduced as an informational tool but now with the passage of time has become a place for business activities. It has had a profound effect on the way a business organization operates. It has changed their way of communicating with others, production, delivery, and other services. The companies moving into e-commerce have touched new heights. The new online arrangements are attractive because it makes business more efficient, resulting in cost-saving passes to consumers.

Scenario in India

Today a consumer can purchase a compact disc, a couch, or a new car without leaving his house or dealing with traffic and sales people. In India the e-commerce sector is increased with the time due to the easy availability of internet these days. With the increase in urban culture the orientation of consumers towards this market is increasing. 

Conflicting issues between E-Commerce and Competition law

The online platform of business organization provides tangible benefits to the consumers, especially by increasing transparency, expanding the range of products on offer, reducing logistical and display costs. It is important that CCI acts efficiently in order to ensure that consumers don’t lose their trust in online markets, so that such online trade can flourish more. But it is difficult to maintain a balancing check on both.

Vertical restraints in E-commerce

 When the manufacturer uses a selective distribution system then it can result in the interest of the public or into anti-competitive agreements. The consequences of these agreements is

  • The risk of facilitating collusion
  • The risk of softening competition 

It arises when the manufacturers refuse/restrict to deal with online platforms/distribution verticals.[1]

Resale Price Maintenance

It is a practice of fixing of the resale price of goods through an agreement, arrangement or understanding to the effect that the price to be charged on the resale by the purchaser shall be the price stipulated by the original seller. Through which consumer may end up paying more than necessary for an item.[2] An original seller may do so if he do not want to sell below a certain price or not to offer discounts which leads to appreciable adverse effect on Competition in India.[3] It also includes putting a floor price which allows the seller to sell the goods at a lower price.

Also Read  Enlargement of Jurisdiction of High Courts in Respect Of Tribunals

Parity Agreement

These are the agreements between seller and E-trade Platform where the seller undertakes not to charge on that platform a price higher that is higher than the price that he charges on other platforms. These agreements soften the competition and reduce the incentives for on-line retailers to lower their commission rates. These agreements leads to a variety of problems to the hotels, as in the Hotel Booking Platform case of Europe the main hotel union filed complaint against the Booking.com, Expedia and HRS that the parity agreements between them are anti-competitive and prohibited under article-101 of TFEU[4] and national equivalents.

Exclusive Distribution

It is another common restriction imposed on retailers by the manufacturers to limit the scope of their on-line offerings when distribution is organized through a selective distribution network. The exclusive deals by manufacturers thereby refusing to deal with other players in the market has remained a prevalent conflict under the competition laws. An example for the same is that several mobile brands are available on online retail platform only.

In the situation a product is only available on a single online retail platform, and then it will totally effect the competition in the market as the price for the product will be determined solely by the seller which will make buyer to pay more than the normal amount.

Competition law regulating E-commerce

It is important to understand that the competition laws are applicable or are enough for the E-Commerce trade platform. E-Commerce is an emerging market therefore it is difficult to understand whether there are any hidden consumer risks in e-commerce.

The Indian E-commerce market has developed into cutting edge competitive market place bustling with new entrants like Jabong, Snapdeal etc. The sec-19(3) of the Competition act numbers various factors which can lead to appreciable adverse effect on the competition of an agreement. The Indian Policy makers focuses on whether the agreement leads to foreclosure of the competition due to creation of entry barriers, whether there is any benefit to the consumers or whether it leads to improvements in production and distribution technique. In most of the cases CCI had failed to find the appreciable adverse effect on the competition in the cases filed before it and also mentioned that the exclusive agreement can’t be treated as  an entry barrier in a market where the products are competing with each other.

Also Read  Animal Protection Laws: Standing For Their Rights

Till now there is no substantial issues involving the pure e-commerce services have yet come to the CCI’s attention. However there are some issues and features which are prevalent in the market and hence required to be considered by CCI. These are:

  • A variety of users on online platform
  • Online price information can facilitate the collusion
  • Online vertical agreements may be harmful
  • The market may be in favour of small number of large e-commerce platforms.

While deciding the cases CCI must conduct E-Commerce sector enquiry. The competition authorities must analyse the unique nature of E-commerce, its trends in transactions, market structure and future prospects with a view to actively tackle the anti-competitive conduct. Authorities must also consider the consumer perspective and how a potentially anti-competitive restraint might affect the online market rather than just considering the normal known restraints.

Conclusion

Like any other market the online retail platform is also filled with features and issues. The online platform can also have Resale Price Maintenance, Vertical Restraints, Parity agreements and Exclusive distribution contract which may harm the competition in the area. Till now there is no such boom in this sector, therefore the quality of the legal provisions in respect of these agreements in the online market cannot be calculated. Till now CCI has not noted any major issue which can arise in this sector, therefore they must train themselves by understanding the US Antitrust laws and EU regarding the E-commerce. The Indian authorities must also find the differences in the normal market and online market and must conduct its assessment accordingly.

Also read The Implications a Democratic System of Governance has on the Rule of Law


[1]Paolo Buccirossi, “Vertical Restraints on E-Commerce and Selective Distribution” 11 JCLE 747 (2015)

[2]Man Mohan Sharma,” Do online markets affect competition” International Law Office” (Nov.14,2014)

Also Read  Racial Profiling in India: Special Reference to the Northeastern States

http://www.international lawoffice.com/Newsletters/Competition-Antitrust/India/Vaish-Associates-Advocates/Do-online-markets-affect-competition.

[3] Competition Act,2002, No. 12, Acts of Parliament, 2003, s.4(e).

[4] Treaties on the Functioning of European Union