The recent Uber case, and the issue that we chased a few months ago about warranties on goods sold online, means that we need to zoom out a little and look at the role of platforms, marketplaces and aggregators, and what they are responsible, accountable and liable for. It’s an area that we’ve struggled to figure out from a consumer protection perspective, but it’s also hard to ignore the positive impact that aggregators have had from a competition perspective. Three key points:
1. Digital Aggregators and marketplaces like Airbnb, Snapdeal, Flipkart, Amazon India (in its Indian avatar), JustDial, Getit, Near.in, Uber, Ola, Taxiforsure are good for consumers and competition: They aggregate buyers and sellers, and improve awareness & discovery for buyers, as well the ensuing competition between sellers for a buyer breaks neighborhood monopolies, leads to lowering of prices. Publicly available buyer feedback (ratings and comments) and forces sellers with similar products to improve their service.
These aggregators effectively disintermediate big sellers by, as a friend put it, capturing unused capacity. Why should only big retail stores be allowed to sell a larger variety consumer durables to customers, because of shelf space limitations? Why should renting a room be the exclusive mandate of hotels, or only those who’ve got licenses? The core ideas of platforms like Uber and Airbnb is that citizens can use their resources (like a car for ridesharing and rooms for renting), so that providing these services is not exclusive monopoly of deep pockets or government approvals.
Watch Airbnb founder Brian Chesky speak about starting very open (allowing more merchants in) initially, and then improving processes as the marketplace matured, at around 1hr 21min mark in the video below:
(hat tip: Amlan Mohanty)
2. When things get screwed up, who is accountable? No aggregator can be 100% sure of its vendors. With each screw-up, processes have to be improved. Sometimes, laws are broken by vendors. As they scale, so will the number of issues that surface. Aggregators can only have limited control, and most action will, as a friend explained to me yesterday, be post-facto. Airbnb simply cannot have the kind of control that a hotel can, over a user’s experience, and it’s the same with an Uber, Ola, Snapdeal, Flipkart or Amazon in India. Amazon has ‘Fulfilled by Amazon’ and Flipkart has ‘Flipkart Advantage’, but even that can go wrong. In comparison, if the employee of a hotel or a vendor screws up, then they’re clearly accountable.
But aren’t marketplaces and aggregators responsible? As consumers, we buy from the sites we trust because they’ve focused on building that trust. Uber emphasizes safety, and Amazon & Flipkart emphasize genuine products and timely delivery. If the product delivered is not genuine, or a brand refuses to honor warranty for a product advertised as genuine on a marketplace, who should be held accountable? Do we blame the marketplace, the vendor or the brand? Since Uber is a marketplace, is the driver an Uber cab driver, or a cab driver merely listed on Uber? How does a consumer distinguish between the two? Would you hold Justdial responsible for poor quality food ordered via its food ordering service?
Most marketplaces evolve their own processes for dealing with these issues, but I think it’s time we aired some more consumer issues, and forced marketplaces to institute strong consumer protection measures. Else, as in case of warranties, markeplaces will pass the buck to vendors, who will pass the buck on to the brands, who will arbitrarily honor warranties. Most brands that we got in touch with declined to comment on whether they’ll honor warranties. That’s HP, Sony, Nikon, Dell, Canon, LG, among others. I’m also reminded of telecom issues, where despite massive consumer fraud via wrongful activation of services by telecom operators, consumers had no-one to turn to.
Maybe it’s time that India got a consumer protection regulator, which can define processes and accountability in the value chain.
3. What about the liability of aggregators and marketplaces?
Legally, aggregators and marketplaces are mere intermediaries. Just as Snapdeal and Flipkart aggregates sellers for consumers, Google aggregates sellers for advertisers, these taxi booking apps aggregate taxis (sellers) for those looking for a cab. They make it easier for buyers and sellers to discover each other, facilitate a transaction, but hold no liability because they’re mere intermediaries.
Intermediaries, in the IT Act (2008), are defined as
any person who on behalf of another person receives, stores or transmits that record or provides any service with respect to that record and includes telecom service providers, network service providers, internet service providers, webhosting service providers, search engines, online payment sites, online-auction sites, online-market places and cyber cafes;’.
This is a provision which the Internet industry fought hard for, after Avnish Bajaj was arrested when a pornographic CD was sold on what was then Baazee.com (now ebay.in). The idea was that as a marketplace, Baazee was not in control of what sellers were selling on the platform, and liability should be limited: the owner of a market cannot be held responsible for what a shop sells.
Importantly, one could argue that since some taxi apps, including Ola and Uber, do not disclose details of sellers (cabs) to buyers before a purchase, they aren’t effectively marketplaces: a buyer doesn’t know the details of a cab being hired, and is not being given any information prior to the purchase, except perhaps distance of the cab from the pickup point, and the fare. Uber also gave the cab driver a company phone, tracked the cabs location, and the driver had to submit a character certificate, and hence Uber verified the driver. In these cases, there may be liability. It’s not very clear, and this is something that might be decided in court.
If it goes to court, all intermediaries had better take notice: it could impact their business significantly.
Update: Flipkart’s fullfilment service is called Flipkart Advantage, not Flipkart First. We’ve modified the article accordingly.