The Competition Commission of India, the anti-competition watchdog of India, will be looking into digital wallets and ecommerce companies such as Paytm and MobiKwik regarding the practice of cashbacks, reports the Economic Times.
The report adds that the CCI is looking into the matter after receiving several complaints on such offers saying that they follow predatory pricing. It added that the CCI will be looking into cashback models used by payment platforms, ecommerce companies and several banks.
The move follows after industry body All India Online Vendor Association (AIOVA) alleged that Paytm is flouting the recent ecommerce norms laid down by the Department of Industrial Police and Promotion (DIPP). AIOVA alleged that Paytm was trying to influence pricing through cashback offers and that it was offered only to select sellers thus not providing a level playing field.
The recent FDI norms for ecommerce said that companies providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain a level playing field. In sense, cashbacks offered by companies can be considered as discounts as they indirectly influencence the sale price of goods and services.
However, tt does clearly mean that direct discounts on selling price will not be allowed – and so this probably puts an end to discounts disguised by ecommerce companies as marketing expenses.
Discounts as such are not a bad thing. They’re often used to clear out stock and they’re sometimes used to acquire customers. Often offline players too discount prices in clearance sales. The need, therefore, is to provide parity between offline and online players. On what basis will CCI decide whether it is a legitimate means of doing business or not?
The issue with online vendors seems to be that only select vendors are getting selected for cashback offers. This is an area that the CCI could look into. If two vendors are selling the same laptop, why would only one vendor be eligible for a cashback offer? The cashback offer should apply to all vendors selling the same product.