The growing problem of tech behemoths [NEED A CATCHY TITLE]

One of the major paradigm shifts, caused by the lockdown has been the change in consumer
preference to use online platforms for their purchases. This is due to health concerns,
convenience and increased data connectivity in India. This has also led to an increase in retailers
shifting to online platforms to sell their products. During the lockdown consumers from Tier II
and Tier III cities recorded the maximum increase in online purchases.

The lockdown was the reason for many retailers to fold. Many others, to stay afloat joined online
platforms such as Amazon to cater to their customers. While multiple brick and mortar retailers
have folded due to the current economic uncertainty, Amazon has recorded a consistent spike
from the pre-COVID numbers. With Diwali on the corner, both Amazon and Flipkart will be
offering deep festive discounts, while brick and mortar retailers will still be limping back to
normalcy.

THE CURRENT POSITION OF COMPETITION LAW IN INDIA

This change however has blurred the line between the traditional brick and mortar stores and e-
commerce portals. The trend of retailers joining e-commerce giants such as Amazon and starting
their own e-commerce portals will re-agitate competition law issues such as abuse of dominant
power and predatory pricing.

To determine these issues it is necessary to determine the relevant market, which means the
market where the firm sells its products. 1 Once, the relevant market is defined, the CCI evaluates
if the firm in question has a dominant position within that market. If the firm does have a
dominant position, then the CCI checks if the firm has abused this dominant position.

So far, regarding e-commerce, the Competition Commission of India (‘CCI’) taken a

conservative approach and has included both online and offline markets as one composite
market. This has allowed, e-commerce giants such as Flipkart and Amazon to evade issues of a
dominant position within a market and the abuse of that position. Holistically, e-commerce
portals do have a smaller share of the market if analyzed in this manner. However, this betrays

1
Section 2(r), Competition Act, 2002.
the true picture. Case in point, Amazon and Flipkart control more than 60% of the Indian e-
commerce space. This allows them to dictate market trends and prices.

DATA EXPLOITATION

Things are further complicated as these tech giants act both as a marketplace and as a competitor
to other retailers. This means that Amazon not only provides a marketplace for other retailers to
sell their products on its platform, it also directly competes with them, by selling substitutes of
their products. Further, due to the quantum of data that e-commerce giants such as Amazon have
on both its consumers and its retailers they are always in a position to target specific products to
specific customers with exclusive pricing, who tend to buy them due to ease of discovery and
specialized pricing. This is something that neither brick and mortar nor retailers starting their
own online platforms can do.

Insidiously, the data which is collected also allows these behemoths to find what are some of the
most popular and profitable items on their platforms. They then go on to manufacture those
products themselves, price them lower, and display them prominently on their platform. Amazon
founder, Jeff Bezos has admitted to using third-party seller data to develop competing products.

The algorithm used by Amazon determines many things, including the ranking where the
retailer’s product will be shown on the platform. Any change in this ranking, reasons including
lesser stock during the pandemic, or being displaced by an Amazon product can spell doom for
many retailers. This kills both innovation and competition from independent retailers who are
selling their products on Amazon.

To rein in tech-behemoth, it is necessary for the CCI to delve into the data privacy of the retailers
against Amazon and to assess if such data exploitation is tantamount to abuse of dominant
power. Unfortunately, the CCI has refused to take cognizance of the competition angle of data
exploitation.

CONCLUSION

By all accounts, the change in Indian consumer preferences is going to be permanent. There is
thus a need to ensure that retailers who are using e-commerce portals are not driven out of the
competition because of the tech giants.
India has taken proactive steps to ensure that foreign tech-behemoths do not create a monopoly
in the Indian e-commerce ecosystem. This has been done through changing the Foreign Direct
Investment policy which that now bans e-commerce sites from offering exclusive sales, heavily
restrict the ability to offer discounts, and make it illegal for online retail platforms to sell
products from companies that they have more than a 25 per cent stake in. [NEED TO ADD
PART ON HOW COMPANIES ARE GETTING AROUND THIS]

There is also precedent for CCI treating online search market in silos. The CCI had used the
limited market of online taxi aggregators to determine if Uber and Ola were abusing their
dominant position in the market. A similar approach is required to rein in e-commerce portals
from killing off competition. Further, in the absence of a comprehensive data protection policy,
the CCI must delve in the issues of data exploitation to ensure that tech behemoths do not
destroy the Indian e-commerce system.