The reported change in the interpretation of ‘relevant market’, brought in by the Competition Commission of India (CCI), is likely to have sweeping ramifications for ecommerce platforms when it comes to adherence to competition laws. The change has paved the way for antitrust probes against several digital platforms. It must be noted that at least a dozen digital platforms, including Amazon, Flipkart, Zomato, Swiggy are already being probed for alleged violation of competition rules.
Previously, the antitrust body combined offline and online markets when determining a digital player’s market dominance. For example, to assess the market share of ecommerce player that sells consumer goods , the CCI used to club its online and offline markets together. Considering the larger size of the offline market, most ecommerce firms ended up below the dominance threshold as they did not own brick-and-mortar stores.
With the latest change, CCI has started considering only the online segment as a ‘relevant market’ for these players, people aware of the matter told Economic Times.
“The interplay between online and offline markets has changed significantly in recent times, prompting this change from the CCI,” a person aware of the matter was quoted as saying.
One of the primary reasons being attributed to this change is that unlike earlier days, majority of consumers using online platforms are less inclined to visit physical stores. In case, one item is missing on one portal, the consumers would look for it on another app.
“Hence digital platforms are now standalone markets and should not be clubbed with offline stores,” the person told ET.
However, the fact remains online retail sale constitute a miniscule segment of the total retail sales in the country. According to a 2019 survey report by World Bank, online sales in India accounted for 1.6% of total retail sales. In 2020, a research report by Forrester estimated that share of online retail in India has grown to 3.6 per cent and projected it would further rise to 6 per cent by 2025. Still a very large part of Indian population prefer visting offline stores over online medium.
Experts believe India has not arrived at a stage where we need ex ante regulation of digital markets. Speaking with INC42.com, Charanya Lakshmikumaran, partner at Lakshmikumaran & Sridharan, said “Now, with bifurcating the online and offline markets, automatically, the players in the smaller market (here, the online segment) will assume greater market power, resulting in greater scrutiny under the Competition Act, 2002.”
Last month, the anti-trust watchdog has ordered a probe into food delivery apps Zomato and Swiggy over alleged unfair pricing practises. CCI has also launched probe into business practices of global giants Google, Apple and Twitter. Last year, CCI also revoked Amazon’s deal with Future Coupons and imposed Rs 202 crore penalty, stating that there was a failure to crucial details of its acquisition and notify Amazon’s strategic interest in Future Retail. Last week, Parliamentary Standing Committee on Finance also announced its plan to summon representatives of big tech companies over issues related to their competitive practices.