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Is ONDC a good intervention model for digital markets in India? #NAMA

With claims of increased competitiveness, some see ONDC as a game-changer, while others raise concerns about accountability and market dominance

The end of 2022 marked the entry of the Open Network for Digital Commerce (ONDC) on the e-commerce scene. ONDC is a digital market project that allows sellers (be it sellers of retail products, food delivery services, or hotel booking services) to list their products across multiple digital marketplaces all through one platform. The platform claims to address the issue of limited competitiveness for new sellers. 

Some are hopeful about this claim. For instance, Rajnish Wahi, senior vice president at Snapdeal, suggests that ONDC can be a form of intervention in the digital market as opposed to creating regulations .“I think [this intervention] is very effective because instead of sort of whining from the side you’re actually jumping and saying we’ll do something about it,” he said during the “Regulating Marketplaces: E-commerce and App Stores” panel at MediaNama’s MarketsNama conference held on May 19, 2023.

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ONDC has been receiving a lot of attention, with some suggesting that its cheap prices and low commission fees could make it the Zomato and Swiggy killer. But with its growing popularity comes the big question: will this intervention actually work? 

Replacing an oligopolistic market with a controlled monopoly

Medianama’s founder, Nikhil Pahwa, brought up that ONDC is not publicly owned and that decisions like which platforms are going to be a part of the network and which ones aren’t cannot be checked through an RTI (as you can with government-run organizations). To this, Rajnish said that there are no perfect solutions, “the fact is that ONDC is born out of like a five-year complaint from smaller sellers and others saying that they are being excluded, right? Now, is it addressing their needs? I think it goes in that direction. It’s not a perfect start.”

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While ONDC does not come under RTI, Abir Roy, the co-founder of Sarvada Legal and a competition law expert, can still be held accountable through competition law which applies to government monopolies as well. 

ONDC can’t do away with economies of scale

Just like with other platforms, ONDC would also be more favorable to companies that have larger business operations, Aparajita Bharti from Quantum Consulting Hub shared. “I don’t think we can take economies of scale completely out of the equation from any market.” She brought in the example of UPI saying, “Paytm and GPay, even on an open protocol like UPI, they have a lot of market share because they have some kind of economies of scale. They had a first-mover advantage. They were able to fund discounts, refunds, et cetera.”

On a similar note, Rajnish believes that as ONDC grows and the platforms on it establish themselves, new ones may struggle to find a place. But despite that, he feels that the network isn’t necessarily bad. “I think in the world that we live in right now, it is enough competition. I don’t think it’s bad. I think it’s, you know, if the government wants to go to a certain intent of shaping the economy in a certain way, then such interventions, in my view, are appropriate,” he said. 

This post is released under a CC-BY-SA 4.0 license. Please feel free to republish on your site, with attribution and a link. Adaptation and rewriting, though allowed, should be true to the original.

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