The hue and cry of E-competition

Introduction:

The wave of globalization brought on technology as one of its major flag bearers which created a parallel virtual world called cyberspace. Interestingly, this virtual world has had serious implications and ramifications in the world ‘offline’ i.e. the real world. The emergence of tabloids, smartphones, and the ‘Apple’ phenomenon has brought all the global goods and services at the fingertips of the global citizens through multifarious applications, websites and portals. Today, one’s existence on social media establishes one’s identity, so much so that the Government has been attempting to establish citizens’ legal existence through AADHAAR which seeks to become a universal identification source available online. Internet banking pertaining to cashless transactions, e-commerce including online education and dating services, establishment of smart-cities and Wi-Fi zones, basically an all-encompassing technological world has emerged which needs regulation via cyber laws, competition law, commercial laws, taxation and any other legal field incidental thereto. Interestingly, despite being a nascent legal regime by itself, out of all the above-mentioned legal fields, competition law is the only one that has rose to the novel challenges thus faced by having room to accommodate and innovate with a matching pace while the others are still evolving.

Challenges faced by competition law due to e-commerce:

1.Whether covered in ‘relevant market’?: Competition is to be regulated in relevant market according to the Competition Act, 2002. The issue here is whether e-commerce platforms are considered a sub-segment of relevant market or they constitute their own separate market. CCI has settled this question by holding that e-commerce platforms are covered in the definition of ‘relevant market’ as provided in the Act. It was decided in a landmark case Ashish Ahuja v. snapdeal.com[1].

Case facts:

• The complainant who sold SanDisk products amongst others alleged that Snapdeal.com had barred him from selling products through its online platform stating that only authorized dealers could sell SanDisk products on the portal.
•  It was averred by the complainant that the e-commerce website and the Indian Sales office of SanDisk Corporation (which is a leading supplier of the data storage card products in India) were colluding with each other, thus compelling him to become the authorized dealer for SanDisk and trying to stop him from offering competitive prices which were much below than what was offered in the market which was in violation of sections 3 and 4 of the Act as anti-competitive arrangement and abuse of dominance.

Competition outcome:

• The Commission held the relevant market in the present case as the market for portable small-sized consumer storage devices such as USB pen drives, SD Memory Cards and Micro SD Cards in India
• The Commission opined that the two markets-online and offline, are only different channels of distribution of the same product and are do not constitute as different relevant markets
• As far as Snapdeal.com was concerned, it is merely a web portal which enables the sellers and buyers to interact by providing a platform for the sellers to sell their products for a commission. Here it was also pointed out that the e-commerce market in India has a number of web portals like flipkart.com, Amazon, eBay, yebhi etc. which thrive on special discounts and deals. Hence no prima facie case was made out against Snapdeal.com or SanDisk for abuse of dominant position under section 4 of the Competition Act, 2002.

2.E-tail and exclusive agreements (Vertical restraints): These are anti-competitive arrangements where exclusive dealers or distributors are chosen while refusing to deal with other players in the market. This has been a major conflict in competition law and now emerging in e-commerce dealings. However, in various judgments CCI has held that there has to be sufficient evidence proving these arrangements to have adverse impact on competition, only then will they be disallowed. In a leading case, M/s Mohit Manglani & Others Versus M/S Flipkart Pvt Ltd  recently four major online retail players of the Indian e-commerce industry, namely, Flipkart, Jasper Infotech, Xerion Retail, Amazon and Vector E-commerce were alleged to be indulging in exclusive supply and distribution agreement for sale of products.

Case facts

• Chetan Bhagat’s novel Half girlfriend was exclusively launched on Flipkart which was alleged to be exclusive supply agreement.
• It was averred that due to such practices, the consumer is left with no choice in regards to terms of purchase and price of the goods and services as the buyer/consumer can either accept the terms and conditions in a totality of the e-portal or opt not to buy the product
• It was alleged that each e-portal i.e., each of the OPs has 100% market share for the product in which it is exclusively dealing and therefore, leads to dominance. 
• It was contended that the relevant market in such a case has to be defined in the context of a particular product in question and the dominance is also seen accordingly.

Competition outcome:

• The CCI ordered that the exclusive marketing arrangements between e-portals and manufacturers/suppliers do not create any entry barriers in the market, as the manufacturers/suppliers are free to sell their products on their own websites as well as the physical market. Mobile phones, tablets, books, camera etc., are neither alleged nor seem to be trodden by monopoly or dominance. 
• Further, it does not appear that because of these exclusive agreements any of the existing players in the retail market are getting adversely affected, rather with new e-portals entering into the market, competition seems to be growing.
• This order has benefited the e-tail market immensely and CCI recognizes its impact and contribution in the Global economy without putting unnecessary restrictions on it unless it proves to be distorting competition. CCI always gave a proper definition of relevant market in this case. CCI has repeatedly held that consumers always have an option to go offline.

3.Online sales and discounts (predatory pricing): It means selling a product which undercuts the cost to reduce or eliminate competition. Recently cases have been instituted before the CCI against players like Flipkart, Snapdeal, Amazon, Jabong and Myntra for indulging in predatory pricing. However, CCI has rejected such claims at a prima- facie level as none of these entities were found to be dominant in the retail market. For a claim of predatory pricing to succeed against the e-tailers, they must be found to be dominant in the market space in which they are operating. However, since CCI in its previous orders have recognized that online market is only a distribution channel rather than a relevant market in itself, the dominance of any e-tailer is reduced to a minuscule. The assessment of dominance is linked to CCI‘s refusal to demarcate online market as a distinct market for goods/service transactions. It has been held that discounting is not abusive or monopolistic. However, predatory pricing does distort competition in the long run, and must be very carefully scrutinized. The trend seems to be in the favor of e-commerce thereby limiting the scope of offline markets yet not distorting competition somehow, rather strengthening it.

Conclusion:

E-market comes with a mixed bag of advantages and potential disadvantages in terms of competition. On one hand, it strengthens the competition by reducing prices, expanding choices, being easily accessible to one and all, more efficient distribution; on the other hand it can lead to price obfuscation, easier collusion, vertical restraints. However, competition law policy is well equipped to deal with these challenges as it has kept e-tail on the same footing as brick and mortar businesses. The opening up of e-portals has also been an answer to e-portal giant Google by reducing its dominance in cyberspace.