In January 2020, the CCI launched an investigation against both Amazon and Flipkart for allegedly violating FDI regulations.
Union Commerce and Industry Minister Piyush Goyal came down heavily on e-commerce companies and said that these entities have repeatedly indulged in anti-competitive practices such as predatory pricing, thus putting the fate of over 60 million ‘mom-and-pop stores’ in the country, where over 100 million people work, at risk.
Goyal said this while responding to a question on allegations of anti-competitive behaviour against e-commerce entities, related investigations into these entities in the European Union, and India’s stand in this scenario, at a Stanford India Policy and Economics Club engagement.
“I mean to my mind if they have nothing to hide; if they are doing honest business practices, why don’t they respond to the Competition Commission of India? The fact that they are trying to evade that probably only justifies that they are probably indulging in predatory pricing, they are trying to influence market behaviour, their algorithms are trying to influence customer choice — and these are not permitted in India. So, very clearly, their irregular practices are the cause of their discomfort if any; they should have submitted to the requirements of the Indian law,” Goyal said.
Walmart-owned Flipkart and Amazon have been embroiled in a tussle with the CCI since January 2020 when the independent body launched an investigation into the two e-commerce entities for allegedly violating FDI regulations and hurting small sellers by promoting preferred sellers.
A complete timeline of events can be found here.
Acting on these numerous complaints and taking cognisance of the ongoing proceedings with the CCI, the Indian government proposed amendments to the existing Consumer Protection (E-Commerce Rules), 2020, which gives more powers to the government to address FDI regulations, display and labelling criteria for foreign goods, and so on. It also lays down rules similar to the new Information Technology Rules 2021 such as the establishment of a grievance redressal mechanism.
On the proposed e-commerce rules, Goyal said, “We have recently come out with some rules for e-commerce companeis or market place models, and they are applicable to all — not just applicable to American companies. Even Indian companies have to follow the rules of the game as set out for everybody. They are the rules for saving consumer interests. So, I think it would be good that all companies follow the law of the land and do not use muscle or money power to try and hurt indian interests.”
Here is a complete transcript of what Union Commerce and Industry Minister Piyush Goyal had to say regarding big e-commerce companies, their alleged anti-competitive practices, and the danger it poses to small retailers —
The Indian market is big and we welcome all players should come and participate in this big market. But clearly, we have to have them working within the rules and laws of the country. Unfortunately, many of these large e-commerce companies have come into India and very blatantly flouted the laws of the land in more ways than one.
I have had several engagements with these large companies but they clearly — the American ones — and I can see a little bit of arrogance in their ability to finance large amounts of money in the initial stages to try and capture the Indian market; or larger part of the Indian market, particularly in certain markets to the detriment of our mom and pop stores
I think it’s very unfair that just because they are large and have a large pool of capital, low-cost capital at that, they should be allowed to get away with hurting domestic interests especially consumer interests.
I remember I had made a comment that had become quite a matter of debate. When at one engagement, a large e-commerce player had spoken about investing 1 billion dollars in India and made a song and dance about it. The song and dance was being made for investing a billion dollars, but that company incurred a loss of billion dollars in the previous two years. So all they were doing was where they were just funding their losses, which prompted me to say that they were not doing us a favour or that it was not generosity to India that they are investing. They jolly well had to invest because they use the money to do predatory pricing, to subsidised the product, and capture a larger share of the market to the detriment of the smaller retailer and shops
When questioned about it they keep fobbing off, they keep delaying to give you information. And when the people complained to the Competition Commission of India, they immediately started forum shopping in the law courts of India — trying to go to one court, you lose in that court, you go to another court — I mean to my mind, if they have nothing to hide if they are doing honest business practices, why don’t they respond to the CCI?
The fact that they are trying to evade that probably only justifies that they are probably indulging in predatory pricing; they are trying to influence market behaviour; their algorithms are trying to influence customer choice — and these are not permitted in India. So, very clearly, their irregular practices are the cause of their discomfort if any; they should have submitted to the requirements of the Indian law.
Today, the US is working on antitrust laws on e-commerce; today the UK’s competition watchdog has opened an investigation into big tech, mainly a couple of American companies. Luxembourg’s data protection agency the CNPD has drafted a decision sanctioning companies’ privacy practices and proposing a fine that all the other European Union countries are considering imposing.
Clearly, the world is waking up to the realities of the large tech and big e-commerce companies. I think in America today the mom and pop stores are history. I suspect you will not find too many of them in the whole country. We, in India, have nearly 60 million mom-and-pop stores spread across the country in small and big towns and villages.
The strength of money power and tech and their ability to sustain for a long period of time does pose a risk to nearly 100 million people who are engaged in one form or the other through the small retail stores across the country. Therefore when these large companies talk about providing a million jobs or providing support to 100,000 small manufacturers, I think they conveniently forget to say what will be the job losses, because of their influence. So you can create a million jobs, but if that comes at a cost of 10 million other jobs, clearly it is to the detriment of India.
I think some of you going forward may work for these companies, you will at that point in time realise that many of these practices are certainly anti-consumer interests.
We have recently come out with some rules for e-commerce companies or marketplace models, they are applicable to all. Not just applicable to American companies. Even Indian companies have to follow the rules of the game as set out for everybody. They are the rules for saving consumer interests. So I think, it would be good that all companies follow the law of the land and do not muscle or money power to try and hurt Indian interests.
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