Editorial: Do not choke e-commerce platforms

Photo; Mint
Photo; Mint

Summary

The Centre’s proposed rules for e-com platforms may have laudable goals, but would deprive our e-players of the strategic autonomy they need for real market rivalry to ultimately prevail

India began to open up its economy three decades ago, but efforts to shield local retailers from the might of global megacorps gave us a retail sector fraught with a thicket of rules. If Indian retailing has been transformed to an extent, credit the arrival of a disintermediary force in the internet, one that was making brick-and-mortar players pivot online even before covid pushed us to shop from home. With the web’s reach expanding rapidly, online retail is expected to grab a fast-widening slice of a pie placed at above $880 billion last year and projected at $1.3 trillion in 2024. Such a huge opportunity in a space given to winner-takes-all dynamics has set the stage for a grand e-com confrontation, with our two biggest business houses gearing up to take on a duopoly of US-based Amazon and Walmart-owned Flipkart, even as small stores fret about their bully power. The more fiercely e-com is contested, the tighter this sector’s straps seem to get. On Monday, the Centre put out proposals to tighten e-com regulations for consumer protection. Aimed mostly at giving small traders a better chance, these would place onerous restrictions and compliance burdens on all operators.

As a legacy of old curbs on foreign ownership, our e-com majors have had to operate as market platforms rather than online retailers. In 2018, the Centre sought to enforce this distinction by divesting foreign operators of inventory control; they were directed to give up ownership links with suppliers and thereby also the efficiency and quality checks of a captive supply chain. The latest proposals, which apply to all players, would reduce the strategic leeway and operational agency of such platforms even further, reducing them to service providers for others to hawk their wares. The proposed rule-book looks like a manual for micro-management. E-com firms must appoint resident officers to address grievances and monitor rule-compliance, and then be ready to share information sought by authorities within 72 hours. Among other things, for the sake of “free and fair competition", they must label all wares on their websites by country-of-origin, offer local alternatives, keep search results unbiased, not sell anything to anyone registered as a ‘seller’ with them, not conduct deep-discount flash sales of cherry-picked products, and not aid associated enterprises with any helpful data gleaned by their algorithms. As another measure to assure small enterprises an even field, they must also ensure that their logistical systems support all sellers in the same category equally. Some of these sound too vague and subjective to adopt. Even if clear criteria are specified for their adoption and they actually serve to curtail brand favouritism, thus fulfilling a wish-list of sundry traders chafing over being left out of the country’s online sales boom, they would leave e-com majors with too little autonomy to devise strategies of service differentiation for a competitive edge.

As it happens, this attempt to straitjacket e-com platforms coincides with an antitrust probe of ‘unfair practices’ ascribed to Amazon and Flipkart. The perception of e-com majors being bullies, however, does not seem very widely shared among their customers, few of whom complain of either insufficient rivalry or choice deprivation online. What e-com users are now at risk of suffering, though, is a hobbled industry. If all e-com websites are forced into a statist mould meant for generic market platforms, these companies could lose their ability to set themselves apart, outperform rivals and serve the market’s ultimate cause. Our pre-1991 licence raj showed us how over-regulation can stifle a market. Let’s stay wary of it.

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