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Deconstructing Mr. Piyush Goyal’s Statement on e-Commerce through the prism of Competition

CCLE Team
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"While the Hon'ble Commerce and Industry Minister highlighted the possibility of predatory pricing in the e-commerce sector, the legal framework under which it may be assessed remains uncertain."

The Commerce and Industry Minister of India, Mr. Piyush Goyal, recently said in an event that e-commerce’s rapid growth and ‘predatory pricing’ remains a matter of concern, rather than pride. He added that any investment which is being brought in India by conglomerates such as Amazon is less likely to result in the delivery of quality services, rather the same goes on to compensate for the losses reported in the balance sheet. He further said that e-commerce is eating into the share of the retail industry where, at least, 10 million stores in cities and 100 million stores across the country are likely to be impacted.

Background

The Hon'ble Minister made the statement during the launch of a report titled “Net Impact of E-commerce on Employment and Consumer Welfare in India”. The report concluded that the rise of e-commerce has led to the associated vendors generating 16 million jobs and the majority of them reporting an increase in sales and profits since they began selling online. This growth was even higher in tier-III cities where more than 70% of vendors observed this trend.

Legal framework

The term predatory pricing is defined under the Competition Act, 2002. As per explanation (b) to section 4 of the Act, predatory price is defined as the sale of goods or provision of services, at a price which is below the cost of production of the goods or provision of services, with a view to reduce competition or eliminate the competitors. It is important to note that even with an ostensibly clear definition of the term given, the jurisprudence on the same under Indian competition law is weak. Over a period of the last 15 years, the Competition Commission of India (CCI) has found only a single case of contravention as far as predatory pricing is concerned. Such lack of jurisprudence owes to multiple factors, primarily among them being the high legal standard which ought to be proved by the prosecutor to establish a violation. The Commission in a recent case did hypothesise the presence of ‘deep discounting’ to look into similar business practices, however, the legal position on the same is far from settled.

Another factor which requires consideration is the assessment of pro-competitive effects. The CCI on multiple occasions has held that it is to the credit of a few companies, that the e-commerce sector is developing in India. As such, no detailed inquiry is warranted at a nascent phase. Additionally, e-commerce gives additional facilities to consumers such as enhanced choices, door-step delivery, return and cash-on-delivery options in addition to employment generation. Last but not the least, the future potential of the market ought to be one of the weighting criteria when it comes to policy decision-making. Given that internet coverage is yet to be fully penetrated in the deeper pockets of the country, the subsequent potential in e-commerce remains yet to be realised.

The Indian competition authority is currently looking into alleged anti-competitive practices of Amazon in Delhi Vyapar Mahasangh vs. Flipkart & Anr. (2020) case. One of the core allegations put by the petitioner includes deep discounting by e-commerce companies. Based on the information available in public domain, the DG has found a case of contravention against Amazon, however the report is confidential in nature. The matter is currently pending before the CCI for adjudication. It remains yet to be seen whether the statement made by the Hon'ble Minister has an impact on the ongoing inquiry, and on what terms.