Introduction

The advent of increased digitalization of the economy in recent times has led to a paradigm shift towards online trade and e-commerce, and disrupting traditional business models. Physical offices have given way to online and digital platforms across a number of sectors: be it travel (with the proliferation and growth of online travel agencies such as MakeMyTrip, Cleartrip and Yatra), entertainment (OTT platforms like Netflix and Prime Video revolutionizing viewership) or shopping either for consumer goods, electronics or groceries (Flipkart, Amazon, Myntra and Grofers to name a few).

To regulate these dynamic business practices, antitrust regulators need to first understand how these markets operate in order to determine the adequacy of traditional competition enforcement tools in these markets. To this end, in India, the report of the Competition Law Review Committee (‘CLRC’)[1], dedicated a chapter to examining whether the Competition Act, 2002 (‘Act’) needed amendments to be better equipped to regulate digital and high tech markets. Jurisdictions like European Union[2] (‘EU’), United Kingdom[3] (‘UK’), Australian Competition and Consumer Commission[4] (‘ACCC’) have examined, and issued industry reports in select sectors that have an increased digital/online presence. Earlier this year, the Competition Commission of India (‘CCI’) followed suit to issue findings from its first e-commerce market report[5] (‘E-Com Report’). In this article, we explore key issues identified by CCI in its E-com Report relating to online platform markets and examine a few CCI decisions, issued around the time of the E-Com Report.

Platform Neutrality: A key issue identified in the E-Com Report in platform markets related to concerns surrounding (the lack of) platform neutrality. CCI noted that where online platforms serve as both a marketplace and a provider of goods or services in that market, concerns with respect to maintaining ‘platform neutrality’ are likely to arise. Platforms may be incentivized to provide preferential treatment with respect to their own wares or services by, for example, offering preferential listing views to their own products[6].

Platform-to-Business Contract Terms: The E-Com Report notes that opportunities offered by online market places have led to a growing dependence of businesses on these platforms; the platforms’ high bargaining power enables it to unilaterally revise contract terms and impose ‘unfair’ terms on the providers. This, in turn, risks exclusionary or/and exploitative practices, proscribed under the Act.

Platform Parity Clause: Platform parity clauses (‘PPC’) are used by platforms to restrict sellers/service providers from offering their goods or services at more favourable terms to other platforms. The E-Com Report took note of both, the pro-competitive effects (generating efficiencies by preventing free riding and increasing non-price competition) and anti-competitive effects (reducing price-competition and raising barriers to entry) from such PPC’s and observed that their scope would need to be examined on a case by case basis as a vertical restraint or exclusionary unilateral abuse of dominance under the Act.

Exclusive Agreements: In its E-com Report, the CCI examined two kinds of exclusive arrangements commonly found on e-commerce platforms; (a) where certain products are launched and offered exclusively on a single online platform (e.g. Motorola phones exclusively available on Flipkart); and (b) where platforms list only one brand in a given product category (e.g. a food delivery platform will list only one burger joint on its platform). Consistent with its jurisdictional practice, CCI noted that although these exclusivity conditions were not per se anticompetitive, and a rule of reason approach needed to be adopted to examine where the anti-competitive effects arising from, these exclusivity conditions (foreclosure, entry barriers by increasing competitor costs) outweighed the pro-competitive effects (generating efficiencies and increasing inter-brand competition). Where a contracting party was in a position of dominance, CCI would also like examine the restraint as an abuse of dominance.

Deep Discounts: The E-Com Report identified the following three concerns arising from discounting policies by platforms: (a) discriminatory application; (b) directing service providers/sellers to offer significant discounts, adversely affecting their business model; and (c) bringing down prices to below cost, impairing the ability of offline and smaller service providers to compete. CCI then set out a framework for examining discounts offered by platforms which includes an evaluation of market power of the entity offering discounts, nature of discounts, rationale for offering discounts and effect on competition. In particular, discriminatory discounts will be examined to assess whether they are offered to forge exclusivity and curb multi-homing.

Self-Regulatory Measures: The E-Com Report also sets out certain self regulatory measures to be adopted by platforms, particularly pertaining to goods, online travel agencies and food delivery. These include: (i) setting out clearly and coherently, applicable terms and conditions adopted for search ranking, including the possibility of ranking being influenced by remuneration; (ii) data collection policies, including where such data may be shared with third parties; (iii) transparency in collecting and publishing user reviews and rating mechanisms; (iv) implementing business terms in a clear and fair manner, including notifying business users of proposed changes with sufficient notice; and (v) implementing clear and transparent discount policies involving basis for discount rates for different products/suppliers and implications for non-participation in discount schemes.

CCI’s Enforcement Evolution in the E-commerce Sector

Around the time CCI issued its E-Com Report, it examined allegations of anti-competitive conduct involving e-commerce shopping platforms and online travel agencies.

When examining MakeMyTrip’s (‘MMT’) acquisition of Go-Ibibo[7] in October 2016, CCI examined competitive effects in the market for ‘sale of travel and travel related services’ In doing so, notably, CCI did not distinguish between online and offline modes of travel bookings. Instead, it found that travel channels with a predominantly offline presence posed “significant competitive constraints” on the likes of MMT, an online travel agent (‘OTA’). However, a couple of years later, when examining allegations[8] relating to excessive discounts, exclusivity and parity clauses imposed by MMT, the CCI, in its preliminary order, examined MMT’s conduct in the relevant market for ‘online intermediation services for booking of hotels in India’. Noting its departure from its earlier decision, CCI held that the intervening period has established OTAs as a distinct channel for hotel bookings and hotel operators now perceive OTAs as a distinct mode of distribution. These could not be viewed as substitutable with offline modes or direct sales, without losing customer reach.

 Similarly, earlier this year, in Delhi Vyapar Mahasangh v Flipkart & Amazon[9] the CCI directed an investigation into Flipkart and Amazon against allegations of deep discounting, preferential listing, private labels and exclusive tie-ups (sale of mobile phones on a single shopping platform), finding that both Amazon and Flipkart exercised market power in their respective markets, creating an ecosystem in which their practice may lead to an appreciable adverse effect on competition. On this basis, CCI directed its investigative arm, the office of the director general (‘DG’) to initiate an investigation[10]. This decision too, marks a departure from its earlier findings involving a similar set of allegations, in All India Online Vendors Association v Flipkart[11] in which CCI held that there were multiple players in the online marketplace platforms. CCI went on to hold that although the size and resources of Flipkart were large, no single player would command a dominant position in the relevant market at this stage of the evolution of the market[12].

Conclusion

The CCI’s recent decisional practice as set out above denotes a shift in its approach towards scrutinizing conduct in e-commerce businesses. With more and more businesses moving towards an e-commerce centric business model, much like their counterparts world over, CCI is scrutinizing the conduct of online platforms closely. The next few years will likely witness antitrust enforcement focusing on conduct in online and digital markets, yielding a more consistent body of jurisprudence.

[1] The Ministry of Corporate Affairs constituted an expert committee to review the Act and issued a report recommending amendments to the Act. This report was published on 14 August 2019 and culminated in a draft Competition Amendment Bill. [2] The report is available here: https://ec.europa.eu/competition/publications/reports/kd0419345enn.pdf [3] The report is available here: https://www.gov.uk/government/publications/unlocking-digital-competition-report-of-the-digital-competition-expert-panel [4] The report is available here: https://www.accc.gov.au/focus-areas/inquiries-ongoing/digital-platform-services-inquiry-2020-2025 [5] https://www.cci.gov.in/sites/default/files/whats_newdocument/Market-study-on-e-Commerce-in-India.pdf [6] Products under the brand name ‘Amazon Basics’ listed on Amazon, or setting up cloud kitchens such as under the Swiggy’s ‘Swiggy Access’ business. [7] Combination Registration No. C – 2016/10/451 [8] Federation of Hotel & Restaurant Associations of India v. MakeMyTrip India Pvt. Ltd, Case No. 14 of 2019 [9] Case No. 40 of 2019. [10] Karnataka High Court has stayed CCI’s order directing the DG to investigate the matter [11] Case No. 20 of 2018 [12] On appeal, the National Company Law Appellate Tribunal observed that the All India Vendors Association has put enough material on record for CCI to consider the matter on merits, and remanded back the case to CCI for re-investigation.