E-TAIL AND INDIAN COMPETITION LAW: FAILING TO ADDRESS

THE ELEPHANT IN THE ROOM?

SAMMITH SHIVANANDA

LL.M IN INTERNATIONAL BUSINESS LAW

LONDON SCHOOL OF ECONOMICS AND POLITICAL SCIENCE

 TABLE OF CONTENTS

I. INTRODUCTION………………………………………………………………………1

II. LEGAL BACKGROUND………………………………………………………………..3

III. COMPETITION CASELAWS ON ISSUES OF E-TAILERS’ CONDUCT………………….4

IV. DEFINING THE RELEVANT PRODUCT MARKET IN CASES INVOLVING E-TAILERS...7

V. POTENTIAL ANTI-COMPETITIVE CONCERNS IN E-TAIL AS SEPARATE

PRODUCT MARKET………………………………………………………………….12

A. PREDATORY PRICING……………………………………………………………..13

B. NETWORK EFFECTS……………………………………………………………….16

C. JOINT VENTURES WITH WELL ESTABLISHED OFFLINE RETAILERS……………….20

D. HORIZONTAL PRICE FIXING……………………………………………………….22

VI. CONCLUSIONS………………………………………………………………………..24

BIBLIOGRAPHY…………………………………………………………………………..26

1
 I. INTRODUCTION

In Bangalore, a bustling South Indian metropolis aptly termed the Silicon Valley of India for
overseeing the bloom of the information technology industry in the early part of the
millennium, there is a huge flurry of activity; it is witnessing a second bloom, only this time,
the limelight is much brighter. Online retail, or e-tail, as it has become popular, has ushered
in a new industrial revolution in India by accounting for the largest percentage spike in
revenue share across all industrial sectors in the previous financial year.1 Constituting a
meagre 0.47% of the entire retail industry in India2, the e-tail industry may hardly come
across as creating a ripple, but with a Compound Annual Growth Rate (CAGR) of 56% from
2009-2014 and a market worth 6 billion USD in 2015, the e-tail industry is definitely making
waves.3 A whitepaper by a leading corporate advisory has forecasted Indian e-tail to be a 76
billion USD industry by 2021, approximately more than a twelvefold growth than its present
value. 4 It is no wonder that with such growth potential, has attracted the attention of venture
capitalists who have invested more than USD 3 billion into this industry in 2014 alone5,
whilst at the same time also attracting the ire of traditional brick-and-mortar retailers for
offering steep discounts on goods.6

The Competition Commission of India (here CCI) has already encountered allegations of
predatory pricing, exclusivity agreements and market foreclosure against e-tailers.7 Although
in all the aforementioned cases, the e-tailers came out unscathed, the decisions given by the

1
Motilal Oswal Securities Ltd, ‘E-Commerce: Just the Beginning of Multi-Year Explosive Growth’ (2014) 2 –
3 <http://www.motilaloswal.com/site/rreports/HTML/635513814725455509/index.htm> accessed 9 August
2015.
2
PricewaterhouseCoopers, ‘eCommerce in India- Accelerating Growth’ (2015) 8
<https://www.pwc.in/en_IN/in/assets/pdfs/publications/2015/ecommerce-in-india-accelerating-growth.pdf>
accessed 7 August 2015.
3
PricewaterhouseCoopers, ‘eCommerce in India- Accelerating Growth’ (2015) 5
<https://www.pwc.in/en_IN/in/assets/pdfs/publications/2015/ecommerce-in-india-accelerating-growth.pdf>
accessed 7 August 2015.
4
Technopak, ‘E-Tailing in India: Unlocking the Potential’ (2014) 4 <http://www.technopak.com/files/E-
tailing_in_India.pdf> accessed 9 August 2015.
5
PricewaterhouseCoopers, ‘eCommerce in India- Accelerating Growth’ (2015) 9
<https://www.pwc.in/en_IN/in/assets/pdfs/publications/2015/ecommerce-in-india-accelerating-growth.pdf>
accessed 7 August 2015.
6
Press Trust of India, ‘Traders Allege Predatory Pricing by Online Companies, May Stop Supply’ Economic
Times (17 September 2014).
7
Ashish Ahuja v. Snapdeal.com & anr., [2014] CCI 17. See also M/s Jasper Infotech Pvt Ltd (Snapdeal) v. M/s
Kaff Appliances, [2014] CCI 61 and Mohit Mangalani v Flipkart India Pvt Ltd and Ors [2014] CCI 80.
2
CCI are themselves are problematic in the sense that they leave much scope for ambiguity
and uncertainty. The object of this paper is to look into the issues of anticompetitive conduct
by e-tailers either addressed wrongly or left unaddressed by these orders, and also analyse
certain other conduct of leading e-tailers which have the potential to cause further
anticompetitive harm to the delicate dynamics of the nascent e-commerce revolution in India.

In order to assess the decisions of the CCI, this paper first lays out the relevant legal
provisions which deal with anti-competitive conduct under the Competition Act, 2002 in Part
II. Thereafter, the legal questions surrounding the cases pertaining to anti-competitive
conduct by e-tailers are presented in light of their factual matrix, and the decisions taken by
the CCI are detailed in Part III, along with the obscurities these decisions pose in the context
of wider competition enforcement activity by the Commission.

Further, in Part IV, the paper progresses to identify that the key problem in all these decisions
lies in the ‘relevant market’ definition adopted by the CCI. It is common knowledge that
identification of relevant market forms the cornerstone of any antitrust analysis.8 It is only by
defining the relevant market that market share can be determined which is so quintessential to
establish market dominance, which in turn is required to evaluate if the business practices of
a firm are anticompetitive.9 The paper points to the clear mistake of the CCI in defining the
relevant product market as regards e-tail, and then proposes a contrarian yet pragmatic
approach for defining the relevant product market for e-tail, which can be adopted by the CCI
in order to avoid the potential rise of e-tail monopolies or oligopolies.

On the basis of the market definition proposed in Part IV, the paper then proceeds to enlist
other potential anticompetitive problems that may emerge in the e-tail industry, which has not
been addressed by the CCI at present, in Part V.

Finally, in Part VI, the paper presents the conclusions as regards the lacuna left behind by the
decisions of the CCI, whilst also raising certain concerns on anticompetitive conduct that may
arise in the future and thus, underlines the need for a legal framework to regulate the e-tail

8
Jared Kagan, ‘Bricks, Mortar, and Google: Defining the Relevant Antitrust Market for Internet-Based
Companies’ (2011) 55 New York Law School Law Review 273.
9
Willem H Boshoff, ‘Why Define Markets in Competition Cases?’ (2013) 10 Stellenbosch Economic Working
Papers 2 – 3.
3
industry in order to ensure a competitive market, beneficial for both competition as well as
the consumers.

II. LEGAL BACKGROUND

In India, the Competition Act, 2002 is the legislation governing the conduct of firms as
regards anti-competitive conduct and ensuring the competitiveness of firms in the market10,
which also empowers the Competition Commission of India (CCI) to be the designated
authority for conducting inquiries and adjudicating on instances of anti-competitive conduct.
The enforcement actions of the CCI falls under two broad categories, namely that of anti-
competitive agreements11 and abuse of dominant position.12

Under the broad heading of anti-competitive agreements, enforcement actions are directed
against-

“…agreements in respect of production, supply, distribution, storage,

acquisition or control of goods or provision of services, which causes or is
likely to cause an appreciable adverse effect on competition within India.”13

Agreements relating to horizontal pricing, exclusive supply and/or distribution, bid rigging,
market sharing, tie-in arrangements, resale price maintenance, and refusals to deal are
broadly addressed under this provision. This provision of the Competition Act, 2002 is very
similar to Article 101(1) TFEU in the EU or Section 1 of the Sherman Act in the US, in the
sense that it relates to agreements entered into by firms which are restrictive by object or can
be prohibited under a per se rule.

As regards abuse of dominant position, enforcement actions are directed against individual
enterprises on any of the following counts, namely predatory pricing, conditional sale or
purchase, refusal to deal, limiting development or production, denial of market access, and

10
"An Act to provide, keeping in view of the economic development of the country, for the establishment of a
Commission to prevent practices having adverse effect on competition, to promote and sustain competition in
markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in
markets, in India, and for matters connected therewith or incidental thereto" Competition Act 2002 (Preamble).
11
ibid., s 3
12
ibid, s 4
13
Competition Act 2002, s 3
4
cross subsidisation.14 This provisions stands in equivalence to the Article 102(1) TFEU in the
EU or Section 2 of the Sherman Act in the US, for it places the conduct of individual
enterprises under the scanner to see whether the effect of such business practices causes an
appreciable adverse effect to competition within India.

In the backdrop of these legal provisions, the paper will now proceed to examine the
allegations of anticompetitive conduct brought against e-tailers in different cases, and also the
decisions delivered in these cases by the CCI so as to aid in analysing the key defects in the
approach taken by the CCI.

III. COMPETITION CASELAWS ON ISSUES OF E-TAILERS’ CONDUCT

With the quantum leap that the Indian e-tail industry has taken in terms of revenue share and
popularity, the largely unorganised and diverse traditional brick-and-mortar retailers in India
have felt threatened, and as a result have accused e-tailers of anti-competitive business
practices.15 However, thus far there have been only two instances where the CCI has been
asked to adjudicate on anti-competitive conduct by e-tailers, and one instance where the e-
tailer brought a complaint against a manufacturer. In the following paragraphs, each of these
cases are examined, by presenting their facts, the specificities of the anti-competitive
allegations raised, and the questions raised by the final decisions in these cases.

The first case of anti-competitive conduct that was filed against the e-tailers was against a
major e-tailer Snapdeal and memory and storage drive manufacturer San Disk Corporation.16
The complaint, which was brought by one Mr. Ashish Ahuja, an independent reseller of
memory and storage drives, accused both the aforementioned companies of colluding and
allowing only a certain specified set of distributors to sell Sandisk branded memory and
storage drives on the Snapdeal e-tail portal. The complaint was brought forth since the
complainant who had listed Sandisk memory and storage drives on Snapdeal found that his
listings were removed on the basis of communications received by Snapdeal from Sandisk
Corporation. The communication from Sandisk Corporation stated that product warranties
would be only extended to products which are sold by its exclusive distributors, which were
14
ibid, s 4
15
Raghavendra Kamath, Sheetal Agarwal and Mahesh Kulkarni, ‘Retailers Stumble as Traffic Heads to E-
Commerce Sites’ Business Standard (15 October 2014). See also Press Trust of India, ‘CCI Gets Complaint
against Flipkart, Other E-Retailers’ The Hindu (5 November 2014).
16
Ashish Ahuja v. Snapdeal.com & anr., [2014] CCI 17.
5
just four in number for the entire country of India, and specifically stated that such warranties
would not be extended to products bought from sellers sourcing them from the open market.
The complainant accused both the manufacturer and the e-tailer of both abusing their
dominant position in their respective markets, by imposing a restrictive condition as regards
pricing in order to be accorded exclusive distributorship. By this, the complainant implied
that such business practices amounted to denial of market access and resale price
maintenance, which are prohibited under Section 4 of the Competition Act, 2002. However,
the CCI did not find in favour of the complainant. This was the first case where the CCI had
the opportunity to define relevant market when an e-tailer was involved. Whereas the
geographic market was not under question since the reselling of these products were limited
to India, the question arose as to the product market. The CCI opined that,

“…online and offline sales of distribution are not two different relevant
markets but are merely different channels of distribution of the same
product”17

It was on the basis of this market definition that the CCI made the decision that there was no
abuse of dominant position since both the e-tailer and the manufacturer were not dominant as
regards the retail market, although they were dominant players online. Further, the CCI also
held that manufacturers can restrict the reselling of their products from exclusive distributors
in order to protect brand image and goodwill. However, this decision has to be read in the
light of another case which was decided subsequently where certain discrepancies emerge.

The second case involving e-tailers was filed by an e-tail major Snapdeal against Kaff
Appliances, a manufacturer of kitchen appliances.18 Snapdeal accused Kaff Appliances of
abusing its dominant position in the kitchen appliances market by imposing conditions on its
distributors to sell only at a specific Market Operating Price (MOP), which meant the
distributors could not sell the products below a specific price, thus amounting to resale price
maintenance19. The complaint was that Kaff Appliances published a public notice that it
would not honour warranties for Kaff products purchased online on Snapdeal, since the
online resellers sold the products at prices lower than the MOP. The CCI, in this case adopted

17
ibid.
18
M/s Jasper Infotech Pvt Ltd (Snapdeal) v. M/s Kaff Appliances, [2014] CCI 61.
19
Tania Kishore Jaleel, ‘DYK: Difference between Marketing Operating Price and MRP’ Livemint (10
November 2014).
6
a contrarian approach than the one it had adopted in the San Disk case20, and held that Kaff
Appliances was abusing its dominant position by allowing only a limited number of
distributors to sell its products at a specified price, which was in direct violation of Section 4
of the Competition Act, 2002. Clearly, there seems to be a deviation in the position of the
CCI as regards exclusivity. Whereas in the San Disk case21, the CCI cited protection of brand
image and goodwill as reasons for exclusive distribution which did not amount to abuse of
dominant position, in the Kaff Appliances case22, the same arguments of preserving brand
integrity by qualitative pricing through exclusive distributors did not hold good, and
exclusive distributorship was deemed as anti-competitive under the Competition Act. The
difference in the approach of the CCI in these two similar cases gives rise to uncertainty as
regards exclusive distribution agreements. Presently, there is no legal framework in India as
regards exclusive distribution similar to European Commission’s Guidelines on Vertical
Restraints23 under which exclusive distribution agreements are not prohibited per se unless
they are imposed in order to penetrate new markets, avoid free-rider problem, or to achieve
economies of scale in distribution.24 Therefore, the only guidance for exclusive distribution
agreements in India would be through caselaws. The glaring lack of uniformity in the
decisions of the CCI would cause confusion in many more cases, and the number of
complaints being filed on exclusive distribution agreements may increase in the future. The
questions of uncertainty raised by the decisions of CCI does not culminate with this but
progresses to the next case involving e-tailers.

In the most recent case involving the e-tail industry, once again the issue of exclusivity
agreements foreclosing the market formed the core issue to be adjudicated upon.25 The
complaint was filed by a representative of traditional brick-and-mortar traders’ association,
against the four most dominant e-tailers, namely, Flipkart-Myntra, Amazon, Snapdeal, and
Jabong. The complaint stated that e-tailers were entering into exclusive arrangements for
release of certain products such as books of popular authors, mobile phones and tech
accessories, and through this were foreclosing the market for those specific products. CCI

20
Ashish Ahuja (n 16)
21
ibid.
22
ibid (n 18)
23
European Commission, Guidelines on Vertical Restraints [2010] OJ C2365
24
ibid, para 107
25
Mohit Mangalani v Flipkart India Pvt Ltd and Ors [2014] CCI 80.
7
held that the exclusive arrangements entered into by e-tailers were not with dominant players
in either the market for books, mobile phones or tech accessories, and also brought forth the
issue of substitutability of these products with similar products which were in abundance.
Although the CCI seems to have arrived at the right decision in this case as regards
exclusivity agreements for products seeking market entry, once again it based its decision on
an ambiguous definition of the relevant market. In fact, the CCI, in this case opined that it
was not taking a stand whether the ‘e-tail market was indeed a separate relevant product
market or a sub-segment of the market for distribution’26 This is once again in stark deviation
from the approach adopted in the San Disk case27 to define the relevant market where online
and offline markets were held to be the same product market but only different channels of
distribution. The approach adopted by the CCI in this case28 seems to showcase that the CCI
itself has doubts as regards the product market definition, and gives ample scope for
ambiguity which is certain to come up for adjudication again before the CCI, sooner or later.
Therefore, it is expedient that a practical solution be laid out to aid the CCI in defining the
relevant product market as regards e-tail industry, and the paper will endeavour to address
this issue in the following section.

IV. DEFINING THE RELEVANT PRODUCT MARKET IN CASES INVOLVING E-TAILERS

At the heart of any antitrust analysis, lies the definition of the relevant market. It is the
delineation of the relevant market which provides a guideline to analyse the conduct of the
market players involved, and if their conduct is anti-competitive in nature.29 The European
Commission has stated the relevance and importance of market definition as follows-

“Market definition is a tool whose purpose is to identify in a systematic way

the competitive constraints that the undertakings involved face. The objective
of defining a market in both its product and geographic dimension is to
identify those actual competitors of the undertakings involved that are

26
ibid.
27
Ashish Ahuja (n16)
28
Mohit Manglani (n25)
29
Dr S Chakravarthy, ‘Relevant Market in Competition Case Analyses’ 1 <http://circ.in/pdf/relevant_market-in-
competition-case-analyses.pdf> accessed 10 August 2015.
8
 capable of constraining their behaviour and of preventing them from
behaving independently of any effective competitive pressure.”30

However, the CCI has been criticised for adopting incorrect methodologies in arriving at
definition of relevant market.31 By overlooking demand-side substitutability, the CCI has
moved away from the standard approach towards market definition, whilst also has greatly
disregarded the universally accepted hypothetical monopolist or the Small but Significant
Non Transitory Increase in Price (SSNIP) test in aiding the definition of relevant market.32
The CCI’s trend of adopting a wrong method to arrive at the market definition seems to have
spilled over even in the cases involving e-tailers. As has been seen already, the decisions of
the CCI have clearly failed to address the growing concerns on the business practices of e-tail
players if such conduct is anti-competitive. Moreover, the uncertainty in market definition
brought forth by the CCI in the Mohit Manglani case33 would create problems for
enforcement actions in respect of e-tailers accused of indulging in anticompetitive conduct. In
the following paragraphs, this paper tries to address this problem, by suggesting a different
approach to market definition that can be adopted by the CCI as regards the e-tail market.

To delve deeply into the concept of market definition, one has to first endeavour to find the
definition of ‘relevant market’. In the Indian context, ‘relevant market’ means-

“the market which may be determined by the Commission with reference to

the relevant product market or the relevant geographic market or with
reference to both the markets”34

It is thus clear, that the relevant market has to be assessed from two different perspectives,
product and geographic. As regards e-tail industry, the relevant geographic market is not in
question, as all the business practices of e-tail firms are carried on within the boundaries of
India.35 The question that persists as regards relevant market is that of the relevant product
market. ‘Relevant product market’ is defined as-

30
European Commission, Notice on the Definition of Relevant Market for the purposes of Community
Competition Law [1997] OJ C372/03
31
Pradeep S Mehta and Natasha Nayak, ‘CCI Needs to Pull up Its Socks’ Financial Express (8 October 2012).
32
ibid.
33
Mohit Manglani (n25)
34
Competition Act 2002, s 2(r)
35
Ashish Ahuja (n16)
9
 “a market comprising all those products or services which are regarded as
interchangeable or substitutable by the consumer, by reason of characteristics
of the products or services, their prices and intended use”36

Furthermore, in order to determine the relevant product market several factors have to be
taken into consideration such as physical characteristics or end-use of goods, price of goods
or service, consumer preferences, exclusion of in-house production, existence of specialised
producers, and classification of industrial products.37 Using these parameters one has to frame
an opinion on whether e-tail creates an entirely new and different product market from the
traditional retail market or constitutes merely an additional distribution or marketing channel,
thus making it a constituent of the traditional retail market.

In order to determine whether e-tail merely creates an additional sales channel, or an entirely
new economic market, the first question one must actually assess is how a consumer
perceives both the traditional brick-and-mortar retail and the e-tail channels.38 As a part of
this analysis, one has to delve into the nature of the products listed, if they are available in
both the channels, and if they are not, then if the product which is available only in one
channel, substitutable with another product available in another channel, and if the switching
costs between the two channels are so negligible that consumers would switch seamlessly
between them in search of better prices and services. This is where the assessment of demand
side-substitutability has to be made.39 An analysis of demand-side substitutability would
involve considering the firm whose conduct is in question as a hypothetical monopolist, and
then examining whether such a monopolist ‘would be prevented from setting prices above
competitive levels by buyers switching to other products.’40

Next, the ancillary services provided in each channel have to be considered from a
consumer’s point of view. Here, the analysis would first examine whether there are certain
needs of the consumer which are satisfied by the online channel but not by the traditional
channel, or vice versa, and if so, what are these advantages over one channel that the other

36
ibid, s 2(t)
37
ibid, s 19(7)
38
Priyanka Singh, ‘E-Commerce and Competition Law’ (Directed by KD Singh, Competition Commission of
India 2012) 28 – 29 <http://cci.gov.in/images/media/ResearchReports/E-
Commerce%20and%20Competition%20Law.pdf> accessed 5 August 2015.
39
ibid 31.
40
ibid 33.
10
channel presents that makes it non-substitutable.41 This would include an examination of
various services, which inter alia, include assisting the buyer in making choices, the variety
of products on display, complementary products, home delivery, and shopping at any given
time.42 It is a combination of the aforesaid analysis and the parameters provided for in the
Competition Act43, which helps one arrive at the right definition of the relevant market as
regards e-tail. Since the competition jurisprudence in India is lacking as regards the market
definition of e-tail, this paper will rely on foreign jurisprudence and related scholarly articles
to arrive at the right market definition for e-tail.

The landmark case before the European Commission on the issue of whether electronic
markets were separate from traditional brick-and-mortar channels came up in the
MyAircraft.com case.44 The Commission, in this case had to analyse “whether an electronic
marketplace offering airline equipment was part of a wider market for such equipment or if it
constituted a distinct relevant market for exchanges of airline equipment.”45 Although tending
towards defining the e-marketplace as a part of the wider market for airline equipment
because the market players considered so, the Commission left the definition open since the
players would not be dominant in any event. But, as a commentator puts it,

“…the decisive factor for the market definition criterion may often be the
provision, or not, of additional services, which would provide the basis for
distinguishing the offline and online world”46

The dynamics of these additional services is what separates the market for products available
online, and those available offline in brick-and-mortar outlets. This aspect seems to have
been overlooked by the CCI whilst defining the market in the San Disk case47 where the CCI
considered that consumers would switch markets easily owing to pricing, and therefore, an

41
Christophe Collard and Christophe Roquilly, ‘Closed Distribution Networks and E-Commerce: Antitrust
Issues’ (2002) 16 International Review of Law, Computers & Technology 81, 89.
42
Singh (n38) 29.
43
Competition Act 2002, s 19(7)
44
UTC/Honeywell/i2/My Aircraft.com (Case IV/M.1969) Commission Decision 4064/89/EEC [2000] OJ
C289/10
45
Joachim Lücking, ‘B2B E-Marketplaces: A New Challenge to Existing Competition Law Rules?’ in
University of Leicester (ed), Competition Law and the New Economy (2001).
46
Thenia D Dontoglou, ‘Competition@eCommerce.eu: An Appropriate European Approach to the Anti-
Competitive Implications in the Online World’ (2002) 24 Liverpool Law Review 213 – 214.
47
Ashish Ahuja (n16)
11
increase in the price of the product in one market would lead to the consumers switching to
the other market instantly, and therefore both these markets were merely different channels of
distribution of the same product. But perhaps if one closely looks at the economic analysis
into the substitutability of products available online and offline through the Circular City
model as enunciated by University of Missouri Economics professor Oksana Loginova48, it
becomes increasingly clear that the consumer valuations of the good ultimately shapes the
difference between the two markets. Lieber and Syverson in a different paper 49 summarise
her findings-

“…Consumers in her model differ in their valuations for the market

good, but do not realize their valuations until they either-

a) visit an offline retailer and inspect the good, or

b) purchase the good from an online retailer (no returns are allowed).

Under certain parameter restrictions, there is an equilibrium where both

channels are active and all consumers go to offline retailers and learn
their valuations. Upon realizing their utility from the good, they decide
either to immediately purchase the good from the offline retailer or to
go home and purchase the product from an online retailer while
incurring a waiting cost. This creates an equilibrium market
segmentation where consumers with low valuations buy from online
stores and high-valuation consumers buy immediately at the offline
outlet they visited. The segmentation lets offline retailers raise their
prices above what they would be in a market without an online
segment. The imperfect substitutability between online and offline
goods segments the market and allows firms to avoid head-on
competition.”50

From the above findings, it becomes increasingly clear that there is no substitutability
between the online and offline markets. Each of them seems to be a different market

48
Oksana Loginova, ‘Real and Virtual Competition’ (2009) 57 The Journal of Industrial Economics 319 – 342.
49
Ethan Lieber and Chad Syverson, ‘Online versus Offline Competition’ [2012] Oxford Handbooks Online 1-
43.
50
ibid 25-26
12
attracting different kinds of consumers, who expect different kind of services. Their valuation
of the good is not merely limited to the good, but becomes attached to a host of other
dynamics, at the heart of which lies the consumer’s capacity to pay for that good, and the
convenience sought by him. As a sum of these factors, a product which is available in both e-
tail portals and traditional brick-and-mortar outlets will start to fall under completely different
markets.

Furthermore, if one were to continue considering both e-tail and brick-and-mortar retail as
merely different channels of the same relevant product market, the fact that the online market
is crowding with the dominance of a few players51 would have been completely overlooked.
To prove market dominance, one would have to show that the e-tailer is dominant in an
online and offline aggregated market. Considering the e-tail market constitutes only a
fractional percentage of the entire retail market52, the rise of already dominant e-tailers would
go unchecked and thereby result in oligopolies being formed, which may further create
problems for competitiveness in the e-tail market.

Therefore, in light of the aforesaid reasons, this paper suggests that that e-tail be considered
as a separate relevant product market and not merely a different channel of distribution of the
retail market, to ensure that markets can function smoothly and any anti-competitive business
practices by dominant e-tailers be kept in check. On the basis of the above differentiation,
this paper will now proceed to examine the potential anti-competitive problems which may
arise when e-tail is considered as a distinct relevant product market.

V. POTENTIAL ANTI-COMPETITIVE CONCERNS IN E-TAIL AS SEPARATE PRODUCT

MARKET

When e-tail is conceived as a distinct product market on its own, there is also a danger that an
unregulated market would exhibit certain instances of anti-competitive conduct. The threat is
extremely realistic considering merely three e-tailers, namely, Flipkart, Amazon, and
Snapdeal dominate the e-tail landscape in India with a combined market share of 91%.53 In
the following paragraphs, this paper attempts to point out potential anti-competitive concerns
which may arise with respect to the e-tail market. First, this paper considers issues of

51
Digbijay Mishra, ‘Flipkart Has Biggest Piece of Indian E-Tail Pie’ Business Standard (21 March 2015).
52
PricewaterhouseCoopers (n2)
53
Mishra (n 51)
13
predatory pricing in sub-part A, followed by network effects which include lock-in, market
foreclosure, and barriers to entry in sub-part B, which shall then be followed with problems
of joint ventures with established offline retailers in sub-part C, and finally, the problem of
horizontal collusion due to repeat players in the investment market will be showcased in sub-
part D.

A. Predatory Pricing

One of the most well established anti-competitive practices which is observed commonly
across all sectors is that of predatory pricing. Predatory pricing, in the Indian context, means,

“…the sale of goods or provision of services, at a price which is below the

cost, as may be determined by regulations, of production of the goods or
provision of services, with a view to reduce competition to eliminate the
competitors”54

Steep discounts, cut throat pricing, and coupled offers have defined the e-tail landscape in
India so far.55 In order to establish predatory pricing in India, the pricing by a dominant firm
needs to pass three tests, namely, the cost test, the intent test, and the recoupment test.56 In the
following paragraphs, this paper would demonstrate how the present practices of e-tailers in
India already seem to satisfy these three tests, and hence are indulging in predatory pricing.

First, the cost test involves assessing if the firm is making short term incremental losses, and
whether such losses are being incurred by purposely foregoing profits to establish market
dominance.57 The three major e-tailers in India, by offering huge discounts across all the
products sold on their portals have already posted losses of around 10 billion INR 58, and as
industry experts predict, such price wars will continue for the next two or three years.59 In the
Financial Year 2014, the three major e-tailers, Flipkart, Amazon and Snapdeal have incurred

54
Competition Act 2002, Explanation (b) to Section 4(2)
55
Viveat Susan Pinto, ‘Durables Firms to Petition Govt over E-Commerce Discounts’ Business Standard (11
October 2014). Also see Asit Ranjan Mishra, ‘E-Commerce Firms May Be Brought under Consumer Protection,
Competition Laws’ Livemint (16 June 2015).
56
Jahnavi Mitra, ‘Predatory Pricing and Competition Law’ (Directed by Shiv Ram Bairwa, Competition
Commission of India 2012).
57
ibid
58
Sapna Agarwal, ‘Online Retailers’ Losses Total Rs1,000 Crore so Far’ Livemint (11 February 2015).
59
Anusha Soni, ‘Sustainability Issue with E-Tail Discounts’ Business Standard (12 August 2014).
14
losses of around 4 billion INR, 3.21 billion INR and 2.64 billion INR respectively.60 To
determine whether incremental losses are being made, the cost structure of the company
forms a pre-requisite. For every rupee of revenue spent, each of the three major e-tailers have
been incurring massive losses, with Flipkart losing INR 2.23, Amazon losing INR 1.90, and
Snapdeal incurring a loss of INR 1.72 for every rupee spent. 61 None of the aforementioned e-
tailers have posted a profit during the entire course of their existence. While the industry
standard of discounts is in the range of 10-15% off the maximum retail price, e-tailers offer
25-35% across all categories of products, and thus the selling rate on e-tail portals is much
lower than traditional brick-and-mortar retail outlets.62 Thus, it can be seen that these losses
are not just being made for market penetration, but also to establish a strong dominant
character in the e-tail market.

Secondly, the intent test analyses whether the low pricing behaviour of the dominant firm is
intended to modify the behaviour or rival firms, especially on entry or exit of the rival firms,
or their decision on sunk investments.63A detailed investigation into the funding of e-tailers
reveal that the only e-tailers who have survived are those who either are being repeatedly
funded or electronic channels of well-established offline brands.64 The intent is crystal clear
as each of the e-tailers seem to distinguish themselves only on the criterion of pricing by
65
offering heavy discounts, whilst ignoring innovation and service. The target of the e-tailers
through these discounts is in order to gain liquidity and become the preferred portal.66 It can
already be seen that with three e-tail firms occupying a major share of the e-tail market in
categories of goods such as fashion and electronics, the industry is already witnessing the exit

60
Deloitte and ASSOCHAM India, ‘Future of E-Commerce: Uncovering Innovation’ (Deloitte Touche
Tohmatsu India Pvt Ltd 2015) 12. Also see Sagar Malviya, ‘E-Tailers Race Ahead, but Hunt for Buyers Burns
Rs 1,000 Crore Hole in Flipkart, Amazon & Snapdeal’s Books’ Economic Times (3 November 2014).
61
Arun Prabhudesai, ‘Flipkart Vs Amazon Vs Snapdeal: Revenues & Losses Comparison’
<http://trak.in/tags/business/2014/11/06/flipkart-amazon-snapdeal-revenues-losses-comparison/> accessed 10
August 2015.
62
Pinto (n 55)
63
Mitra (n 56)
64
Soni (n 59)
65
India Knowledge@Wharton, ‘Have Global E-Tailers Missed the Bus in India?’ (2012)
<http://knowledge.wharton.upenn.edu/article/have-global-e-tailers-missed-the-bus-in-india/> accessed 8 August
2015.
66
Singh (n 38) 61.
15
of many e-tail firms, as well as experiencing hesitant investors in these sectors. 67Another
major development is that one can see that even previously established players and
competitors of the major e-tailers are exiting the industry owing to lack of funds required to
make sunk investments.68 Shapiro and Varian explain the exclusionary effect of such price-
cutting-

“…a credible threat of price cuts after entry may be enough to convince
would-be competitors that they will not be able to recover their sunk costs
and thus discourage them from entering the market in the first place…”69

Therefore, the steep discounts offered by the major e-tailers have already achieved two main
requisites for intent to predate, namely, pushing out the existing weakly funded competitors,
and also deterring newcomers.

Thirdly, the recoupment test involves assessing if the dominant firm can recoup the short-
term losses that it is making through supra-normal profits in the long-term.70 As has already
been seen above, the Indian e-tail market is increasingly becoming crowded, and as a result
most of the weaker firms have been pushed out of the market by the dominant e-tailers. An
oligopoly-like situation is beginning to arise in the e-tail sector for many goods, mainly
fashion and electronics.71 By undercutting the competitors through heavy discounts, the
dominant e-tailers have achieved a minimum level of liquidity in the market. Since a level of
stability has been achieved by the e-tailers, their investors have now started to seek
transforming this dominance into visible profits, and this is already evident by the fact that
the discounts are being gradually reduced.72 Experts have predicted that discounts as a part of
the Gross Merchandise Value (GMV)73 will plummet by 700-basis-points in the coming five

67
Harsimran Julka and Payal Ganguly, ‘How Small E-Commerce Players Are Failing to Survive with Giants
like Snapdeal, Amazon and Flipkart’ Economic Times (6 December 2014).
68
Ashish K Mishra, ‘Indiaplaza.com: How an Indian E-Commerce Firm Ran out of Cash’ Livemint (21 July
2015).
69
Carl Shapiro and Hal R Varian, Information Rules: A Strategic Guide to the Network Economy (Harvard
Business School Press 1998) 274 – 275.
70
Singh (n 38) 60.
71
Julka and Ganguly (n 67)
72
Rasul Bailay, ‘Heavy Online Discounts Drying up: Praveen Sinha, Jabong’s Co-Founder’ Economic
Times (10 December 2014).
73
"GMV or gross merchandise value for e-commerce retail companies means sale price charged to the
customer multiplied by the number of items sold. For example, if a company sells 10 books at Rs 100, the GMV
16
years as investors will start expecting increased returns on their continued investment during
the initial boom phase.74 A hypothetical monopolist test would then suggest that since the
dominant players would have ousted competitors, they would be able to dictate the pricing
mechanism, and with virtually no competitors to challenge their dominance, they would be
able to increase prices substantially so as to earn supra-competitive profits to recoup the
losses made presently.

It is thus clear that the dominant e-tailers have adopted predatory pricing which, if
unchecked, can severely cripple the competitiveness of the e-tail industry, and ultimately,
would cause harm to the end consumers.

B. Network Effects

In industries such as e-tail, the growth of the industry is directly proportional to the number
of users who utilize it, either as manufacturers, distributors, resellers, or consumers. As the
number of users grow, so does the value of the industry. Such industries, as Shapiro and
Varian state, exhibit ‘network effects or network externalities’.75 They further explain the
growth dynamics of such network industries as follows-

“Technologies subject to strong network effects tend to exhibit long lead

times followed by explosive growth. The pattern results from positive
feedback: as the installed base of users grows, more and more users find
adoption worthwhile. Eventually, the product achieves critical mass and takes
over the market.”76

E-tailers are increasingly adopting strategies to attract more consumers, as the volume of
consumers would automatically result in the increase in volume of other users such as
manufacturers, and distributors who will begin to make use of such portals. Although
predatory pricing is a strong strategy to gain customer loyalty as seen above, it is alone not
capable of attracting the minimum liquidity needed to establish a dominant presence.

is Rs 1,000." ET Bureau, ‘All You Want to Know about Gross Merchandise Value’ Economic Times (7 April
2014).
74
Varun Sinha, ‘What Bubble? E-Tailers May Turn Profitable by 2020, Says UBS’ NDTV Profit (22 April
2015).
75
Shapiro and Varian (n 69) 13.
76
ibid
17
Coupled with it are strategies such as loyalty programs which enable price discrimination,
periodic subscriptions, and mass advertising.77 It is important for these e-tailers that they
continuously build liquidity, especially in the nascent stages of the market growth, and
liquidity can be built only through the constant interaction between the market participants at
either end of the spectrum. The costs of operations and development can be covered only
with higher transaction volumes, and to achieve such volumes, one needs to attract additional
participants into the market.78 The marginal cost of production can be offset only with
substantial participants in the marketplace. For this, constant engagement on online
discussion forums, social media sites, and feedbacks form a vital part of their strategy.79 This
engagement may be direct as in trade forums, online polls, etc., or indirect, such as reviews
written on e-tailer websites.80 As a combination of all these strategies, e-tailers achieve the
requisite volume needed for exercising their dominance over the market.

Indian e-tailers have already been using business strategies to retain customers through
repeated interactions, and by offering big brands, including imported brands which were
previously unavailable in India through brick-and-mortar retailers.81 Also, the concept of a
‘one-stop shop’ is gaining huge prominence amongst the working population, and therefore
big e-tailers who stock the most categories of goods are the preferred shopping destination for
them.82 Customer sensitivity is thus accorded primary importance, and the need to hold on to
existing customers becomes as equal a priority as attracting new customers, for otherwise, an
e-tailer having a reputation of customers exiting often would deter potential customers from
experimenting with a particular e-tail portal.

The effect of attaining such liquidity is best explained by Foer in his paper on the antitrust
implications of e-commerce networks in America during the early part of the millennium-

77
Singh (n 38) 11.
78
Federal Trade Commission Staff, ‘Entering the 21st Century: Competition Policy in the World of B2B
Electronic Marketplaces’ (2000) 31.
79
Editorial Staff, ‘Indian E-Commerce Social Media Battle: Flipkart Leads in Numbers, Snapdeal in
Engagement’ <http://trak.in/tags/business/2015/02/16/flipkart-snapdeal-social-media-battle/> accessed 10
August 2015.
80
Singh (n 38) 17.
81
Jeenam Jindal and others, ‘E-Commerce and Customer Loyalty in India’
<http://researchblog.iimk.ac.in/?p=414> accessed 9 August 2015.
82
ibid
18
 “…one characteristic of network industries having entry barrier implications
is the ubiquity of ‘lock-in,’ which means that once a consumer or business is
attached to the network, the costs to switch to a different network are so great
that for practical purposes any new competitor is foreclosed from this
customer. From an antitrust perspective, lock-in makes it less likely that a
new competitor will enter the market, even if it offers a superior product or
service. A first-mover thus has an advantage that may not only lead to total
domination of the market in the short-run, but the inability of a newcomer to
challenge the monopoly in the long-term.”83

In the early days of jostling for dominance, already big e-tailers can leapfrog one another and
undercut market power, and effortlessly add new product categories so as to force smaller
rivals with lesser products to exit, whilst also entrenching customer loyalty. 84 All of these
factors combined lead to a ‘tipping’ or ‘snowballing’ effect, where one or sometimes, a few
firms end up becoming dominant whilst the other players begin to fail.85 A ‘winner-takes-all’
situation arises, and whilst competition can seem to get fiercer, the marketplaces begins to
become less crowded which may lead to oligopolistic characteristics. Incumbents begin to
display exclusionary tactics with the use of “exclusivity clauses, most favoured nation (MFN)
clauses, in-access arrangements…and collaborative arrangements with potential competitors
which stifle their ability to fully compete against them.”86 Collaborative arrangements in the
form of affiliations could be used to place the customers under the illusion that they are
switching firms, whilst effectively, they are shopping within a network of firms who are
subsidiaries of the same parent company.

Once the incumbent establishes a stronghold and weaker rivals are pushed out, the customers
become locked-in to the incumbent, who can then dictate market prices. The early adopters of
incumbent e-tail firms would be reluctant to experiment with newer players since they are
faced with a dilemma as to whether they should break free from the exclusivity agreements

83
Albert A Foer, ‘E-Commerce Meets Antitrust: A Primer’ (2001) 20 Journal of Public Policy & Marketing 51,
17.
84
JW Gurley, ‘How the Net Is Changing Competition’ [1999] Fortune (as cited in John Graubert and Jill
Coleman, ‘Consumer Protection and Antitrust Enforcement at the Speed of Light: The FTC Meets the Internet’
(1999) 25 Canada-United States Law Journal 278.)
85
Shapiro and Varian (n 69)
86
Foer (n 83); Also see Dr David Cousins, ‘Competition Aspects of E Commerce’ in Australian Competition
and Consumer Commission (ed), 30th Annual Conference of Economists (2001).
19
with incumbents and thereby lose out on the incentives that they are being offered presently,
or whether they should switch with the hope of better convenience.87

Although there are arguments that e-tail markets have lower entry costs, there are no
guarantees that switching costs will automatically be low too. In fact, there is strong evidence
that when the level of sophistication of lock-in effect is high, switching would not only
merely be financially less practical, but also technically, owing to the difference in the nature
of services offered for the customer.88 With a customer lock-in firmly secured, the e-tailer
would always be a potential threat to fresh entry into the marketplace. In industries displaying
network effects, there have always been high barriers to entry, and market foreclosure.89 The
new entrants face multiple problems such as infrastructure, investment costs, and most of all
diverting the consumers from the incumbent to their own sites, which is extremely difficult to
achieve once the incumbent has attained market power.90 Physical costs such as setting up the
website, the payment gateways, the warehousing, and logistics would be coupled with costs
for building customer loyalty.91 First mover advantages become evident as sunk investments
for new players would have to exceed that of existing dominating firms in order to be able to
reach a minimum threshold of liquidity. Like in other industries, there may be instances
where the dominant firm may try to oust a maverick newcomer through exclusionary
practices and predatory pricing in order to completely evade the threat of competition.92 Also,
on the exclusionary effect from these network externalities, Shapiro explains that-

“…by requiring users to enter into exclusivity contracts or membership rules,

an incumbent may successfully deter the entry of technically superior

87
Singh (n 38) 40.
88
FTC Staff Report (n 78) 23.
89
Shapiro and Varian (n 69)
90
Cousins (n 86) 5.
91
Singh (n 38) 40-41.
92
"It is fairly typical of predation cases that the predator picks off a specific target, usually a new entrant or
maverick. American is alleged to have picked off three low-cost competitors (Vanguard Airlines, Sun Jet
International, and Western Pacific) on the occasions when they tried to enter the Dallas-Fort Worth
International Airport. When Vanguard entered, it is alleged, American cut prices and added flights on nearly all
of Vanguard’s Dallas routes, including the one to Wichita. Two months later, Vanguard abandoned its routes
and soon after that American reduced its capacity on the Wichita route by 30% and raised the one-way fare by
more than 50%." Foer (n 80) 19 – 20.
20
 networks – which may be of particular concern to the long term development
of e-commerce.”93

The above observations prove that dominance in the e-tail market can be not just be attained
within a reasonably short period of time, but also can be enduring due to the network effects
it exhibits. The market structure is then permanently altered-a few firms can achieve
substantial market power sufficient to dictate the way the market functions, and this would be
dangerous for sustaining competitiveness in the market.

C. Joint Ventures with well-established offline retailers

An increasingly common strategy being adopted by e-tailers is entering into joint ventures
with popular offline brands so as to leverage their market share in the brick-and-mortar space
on to the online marketplace.94 This is a worrying trend since brand value forms an important
part of the consumer’s perception. Big brands entering into exclusive partnership agreements
with dominant e-tailers would foreclose the market for new entrants in the e-tail space
completely. Lieber and Syverson explain the spill over effects of established offline retailers
into the online segment as follows-

“…taking advantage of the new, lower entry costs, pure-play online sellers
enter first to compete with the brick-and-mortar incumbents. But the
complementarity between the online sales and distribution technology and the
offline technology gives offline incumbents incentive to expand into the
online channel. It also gives these firms an inherent advantage in the online
market, as they are able to leverage their offline assets to their gain. As a
result, many of the original online-only entrants are pushed out of the
industry. Thus a hump-shaped pattern is predicted in the number of pure-play
online firms in a product market, and a steady diffusion of former offline
firms into the online channel.”95

The threat of market closure becomes exacerbated not merely for pure-play online e-tailers,
but also for small retailers who are often found selling their goods on e-tail portals with

93
Carl Shapiro, ‘Exclusivity in Network Industries’ (1999) 7 George Mason Law Review 3.
94
Kala Vijayaraghavan and Sagar Malviya, ‘Brick-and-Mortar Retailers Ink Deals with E-Tailers like Flipkart
& Snapdeal’ Economic Times (12 August 2015).
95
Lieber and Syverson (n 49) 26-27.
21
marketplace models. As the big retailers who tie up with dominant e-tailers impose
exclusivity clauses, e-tailers with marketplace models would have to remove the listing of
competing resellers of the offline retailer. Whilst India’s biggest offline retailer Future Group
tied up with Amazon India as an exclusive online channel for its products96, Snapdeal has tied
up with one of India’s largest electronic retailer Tata Croma97, and Flipkart has tied up with
leading fashion outlet network Shopper’s Stop.98 Such exclusivity practices must be viewed
from the perspective of whether they leave sufficient trading space for other participants who
would be able to sustain alternative marketplaces which can effectively compete. 99 Critics
argue that such joint ventures create synergies100, but fail to gauge that the market foreclosure
caused by such joint ventures can, in the long term, negate the synergies gained in the short
term. The initial trends are clear indications of organised retail and dominant e-tail coming
together, thereby effectively forming an oligopoly with big rivals in the brick-and-mortar
space spilling over to the online space. It would then become easier for such dominant firms
to impose competitive restrains in the form of resale price maintenance (RPM), exclusive
supply clauses, and most favoured nation (MFN) clauses.

Another worrying cause of concern as regards joint ventures between offline players and
online players is the issue of financing, which once again raises barriers to entry. Big offline
retailers have warehousing capacity, and stock in abundance, and therefore the online e-tailers
need not expend on such resources which would require huge investments. There is heavy
supply chain integration that takes place with the offline retailers, which would not be
possible for rival e-tail platforms without such partnerships. This effectively minimises costs
for the dominant e-tailers, whilst raising the costs for smaller e-tailers who would then have to
face the prospect of making sunk costs which could act as a market foreclosing agent and also
as a substantial barrier to entry.101

A final concern as regards tie-up between online and offline retailers is the issue of access to
finance. As a commentator explains-

96
Nivedita Bhattacharjee, ‘Biyani’s Future Group Ties up with Amazon India’ Reuters India (13 October 2014).
97
Raghavendra Kamath, ‘Now, Croma Ties up with Snapdeal’ Business Standard (16 September 2014).
98
Vijayaraghavan and Malviya (n 94)
99
FTC Staff Report (n 78) 32.
100
Lieber and Syverson (n 49) 23.
101
Singh (n 38) 40-41.
22
 “Access to finance may currently be becoming an issue for Internet start-ups,
given the reduced expectations of the market for this sector. This is likely to
hit pure-play e-commerce operators harder than mix-play operators who have
established expertise and a track record in traditional commerce.”102

It thus becomes obvious that dominant e-tailers tie up with dominant traditional retailers while
the smaller firms are not considered worthy for partnership in both the channels. This gives
rise to prolonged as well as unchallenged dominance across sectors which poses a serious
threat to marketplace competition.

With joint venture agreements between online and offline players increasing, there is a
lurking threat that they could lead to mega conglomerates which could monopolize the
market, and effectively stifle competition.

D. Horizontal Price Fixing

Horizontal price fixing and collusion amongst dominant firms has always been a burning
issue in competition law. The e-tail sector is not alien to such doubts being raised, and rightly
so. With search costs being greatly reduced, the e-tail sector exhibits a strong characteristic of
price transparency. This is because online portals can be used as an effective instrument to
gather information about pricing behaviour and discounting by rival firms on the one hand,
and on the other, about shopping behaviour and buying preferences. 103 With no secrecy in
pricing, each of the dominant players would then offer similar prices, and although it may
seem competitive in the early stages, as time progresses, one can observe a gradual upward
shift in pricing by one dominant e-tailer would automatically lead to increase in pricing by
another dominant player. Although there is no single leader, each dominant firm tries to
mirror the other as regards pricing so as to avoid losses whilst at the same time retaining
customer loyalty. There is ‘tacit’ collusion, where rival firms make adjustments towards the
others’ behaviour without the need for an explicit agreement.104

The potential for collusion between dominant e-tailers is explained by Lieber and Syverson as
follows-

102
ibid, 42-43.
103
Sandra M Jones, ‘Internet Poised to Become Bigger Force in Retail’ Chicago Tribune (6 January 2010).
104
Singh (n 38) 53.
23
 “A more direct mechanism through which online sales channels support
collusion is that the very transparency that makes it easier for consumers to
compare products can also make it easier for colluding firms to monitor each
other’s behaviour. This makes cheating harder… Online markets are often
characterized by easy access to firms’ prices. If it is hard for firms to offer
secret discounts because of market convention, technological constraints, or
legal strictures, this easy access fosters a powerful monitoring device for
colluders.”105

Price transparency alone is not a substantial factor for collusion. Marketplaces co-owned by
market participants can act as bigger factor in adopting collusive strategies. A perusal of
investors in Indian e-tail showcase the repeat players in investment market, with same private
equity funds investing in rival e-tail portals. For instance, investors such as Kalaari Capital
and Premji Invest have substantial investment stakes in two dominant rival e-tailers Snapdeal,
and Myntra, which is a subsidiary of Flipkart.106 However, much of the data about investors in
Indian e-tail is not in public domain, but as marketplaces such as Covisint, Flower Trade
Network and Metalsite have shown in the US, there may be opportunistic use of strategic
trade information by rivals which could result in collusion.107 Collusion may not only be
limited to pricing decisions, but also co-ordinating non-pricing decisions such as supply
decisions, which can affect the competitiveness of a marketplace. It may be argued that
confidentiality agreements would be in place as regards the investors and their members on
the Board of the e-tail firms. But board members from the same investor groups, even having
the slightest informal exchanges about pricing levels can effectively aid in tacit collusive
strategies.108

Repeat investors in the marketplace is a visible phenomenon, and therefore, there is a credible
threat of cartelization even in the present dynamics of e-tail market in India.

105
Lieber and Syverson (n 49) 22-23.
106
PricewaterhouseCoopers (n 2) 9.
107
Andrew Pressey and John K Ashton, ‘Competition Policy Implications of Electronic Business-to-Business
Marketplaces: Issues for Marketers’ SSRN Electronic Journal
<http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1011120> accessed 7 August 2015.
108
Singh (n 38) 53.
24
 VI. Conclusions

In the era of dot com boom in India, the e-tail industry has emerged as a torchbearer for other
industries and has taken rapid strides amidst prevailing hostile economic conditions.109
However, the business practices adopted by the e-tailers have given rise to a host of
anticompetitive concerns, which have been ill-addressed by the Competition Commission of
India in the cases that have come before it. This has raised many questions as to whether
Competition Law in India is adequately equipped to handle the raising anticompetitive
concerns posed by the conduct of e-tailers. This paper has tried to address these questions by
pointing out a foundational flaw in the reasoning behind the decisions of the CCI, that of
relevant product market, and has proposed that e-tail be considered a distinct relevant product
market in order to sustain competitiveness in the marketplace. Thereafter, this paper has
shown that when e-tail is considered as a separate product market, several anticompetitive
issues arise, such as predatory pricing, network externalities which include lock-in effects and
barriers to entry, market foreclosure due to joint ventures with established offline retailers,
and finally, the problem of horizontal price fixing owing to collusion between rival firms. In
each of these instances, the paper has also presented factual and statistical evidence of these
anticompetitive practices already visible amongst dominant Indian e-tailers.

The anticompetitive issues presented by e-tailers in India is not a new phenomenon in global
antitrust jurisprudence. It is similar to the antitrust issues presented during the early
millennium bloom of e-commerce industries in the United States. As Professor Dontoglou
explains, there are three phases in any e-commerce boom which is a superset of the e-tail
boom-

“Phase One is the ‘vanguard phase’, a period for the technology supporters
and bold and enthusiastic pioneers to invest and enter into a challenging,
though risky field, that of eCommerce. The creation of new markets and the
penetration into existing ones are their reward. Phase Two is the
‘disenchantment phase’, during which all those that rely on this vision alone,
cannot survive. Well-organised, adaptable and sustainable business models

109
Andrew Nusca, ‘Forrester: E-Commerce “Better Suited to Withstand Economic Downturn”’ [2009] ZD
Net<http://www.zdnet.com/article/forrester-e-commerce-better-suited-to-withstand-economic-downturn/>
accessed 10 August 2015.
25
 will move on to the next stage, whilst the rest will be left behind. Phase Three
is the ‘stabilisation phase’, the main characteristic of which is the
development of critical size.”110

e-tail in India has already witnessed the first two phases. As trends indicate, there are huge
investments being made, along with adoption of aggressive market penetration strategies.111
The next observation is that there is consolidation of the market by a few dominant players,
through acquisitions and forcing weaker rivals out of the market. The third phase involves
aggressive consolidation and stronger network effects, with dominant players being able to
become price dictators.112 However, in order to avoid such a situation, and make the e-tail
boom sustainable, it is expedient that the Competition Commission of India revisit its
decisions, and formulate a wholesome framework to address these issues adequately. A
stringent regulation may not bode well for the growth of the industry and disillusion
entrepreneurs, but a regulatory guideline may work wonders in achieving an equal-playing
field in the nascent e-tail market.

110
Thenia D Dontoglou, ‘Competition@eCommerce.eu: An Appropriate European Approach To The Anti-
Competitive Implications In The Online World’ (2002) 24 Liverpool Law Review 218.
111
Technopak (n 4)
112
Julka and Ganguly (n 67)
26
BIBLIOGRAPHY

Cases

- Competition Commission of India

Ashish Ahuja v. Snapdeal.com & anr. [2014] CCI 17

M/s Jasper Infotech Pvt Ltd (Snapdeal) v. M/s Kaff Appliances [2014] CCI 61

Mohit Mangalani v Flipkart India Pvt Ltd and Ors [2014] CCI 80

- European Commission

UTC/Honeywell/i2/My Aircraft.com (Case IV/M.1969) Commission Decision 4064/89/EEC

[2000] OJ C289/10

Legislation

- Primary Legislation (India)

Competition Act (2002)

- European Secondary Legislation

European Commission, Guidelines on Vertical Restraints [2010] OJ C2365

European Commission, Notice on the Definition of Relevant Market for the purposes of
Community Competition Law [1997] OJ C372/03

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Deak EJ, Economics of E-Commerce and the Internet With Economic Applications
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Lieber E and Syverson C, ‘Online versus Offline Competition’ [2012] Oxford Handbooks
Online

Shapiro C and Varian HR, Information Rules: A Strategic Guide to the Network
Economy (Harvard Business School Press 1998)

27
Journal Articles

Foer AA, ‘E-Commerce Meets Antitrust: A Primer’ (2001) 20 Journal of Public Policy &
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Graubert J and Coleman J, ‘Consumer Protection and Antitrust Enforcement at the Speed of
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Loginova O, ‘Real and Virtual Competition’ (2009) 57 The Journal of Industrial Economics
319

Pressey A and Ashton JK, ‘Competition Policy Implications of Electronic Business-to-

Business Marketplaces: Issues for Marketers’ SSRN Electronic Journal
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Boshoff WH, ‘Why Define Markets in Competition Cases?’ (2013) 10 Stellenbosch

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Collard C and Roquilly C, ‘Closed Distribution Networks and E-Commerce: Antitrust Issues’
(2002) 16 International Review of Law, Computers & Technology 81

Dontoglou TD, ‘Competition@eCommerce.eu: An Appropriate European Approach To The

Anti-Competitive Implications In The Online World’ (2002) 24 Liverpool Law Review

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