CCI Bats for e-commerce portals; IT channel cries murder

The Competition Commission of India (CCI) has rejected the allegations of unethical business practices against five premier e-commerce portals—Flipkart, Amazon, Snapdeal, Jabong and Myntra. The commission, in its order passed on 23rd April, 2015 said that it did not find any prima facie evidence of violations against the five parent companies viz. Flipkart India Private Limited, Amazon Seller Services Private Limited, Vector E-commerce Private Limited, Jasper Infotech Private Limited and Xerion Retail Private Limited.

The order passed under Section 26(2) of the Competition Act, 2002 states, “… the Commission is of the prima facie view that no case of contravention of the provisions of either section 3 or section 4 of the Act is made out against the opposite parties.”

Mumbai based Mohit Manglani had filed a case in CCI and against alleged anti-competitive conduct of the five online retailers. After investigating the alleged charges, the fair trade watchdog has ruled that these online giants did not violate competition norms by abusing their dominant position.

No wonder, the traditional IT channel that has taken cudgels up against these e-commerce portals are fuming. They feel that either the CCI has misunderstood the case filed by the traditional market players or just ignored their pleas. In the statement made by CCI in favor of e-portals, it has nowhere disclosed the reason behind big continuous discounts given online while the traditional market availing low margin on similar products.

Swarn Singh, secretary of ADCTA (Delhi) aggressively said, “The case filed by us was yelling for proper attention by authorities. CCI just cleared that there is nothing wrong in promoting anybody’s product online. It’s just a choice of seller. We agree on the said order but what about large discounts and why the seller is only able to provide such discounts only on e-portals; why can’t traditional market compete with their discounts? Our submitted query is still unheard and we have decided to move ahead with our submitted query to CCI to investigate the things in right way.”

It is alleged that the E Commerce websites enter into ‘exclusive agreements’ to sell the selected product exclusively on the selected portal to the exclusion of other e-portals or physical channels or through any other physical channel. The offline channel partners have feared that such practices carried out by online giants are slowly destroying players in the physical market and creating a product specific monopoly leading to manipulation of price, control of production and supply, imposing terms and conditions detrimental to the interests of consumers. The partners said that such agreements distort fair competition in the marketplace.

However, the order stated that such agreement will not create any entry barrier aiming to distort fair trade practices. “It does not seem that such arrangements create any entry barrier for new entrants. It seems very unlikely that an exclusive arrangement between a manufacturer and an e-portal will create any entry barrier as most of the products which are illustrated in the information to be sold through the exclusive e-partners (OPs) face competitive constraints,” the order said.

Agreeing with the contention of the opposite parties (mentioned E Commerce companies), the Commission said that every product cannot be taken as a relevant market in itself.

“Irrespective of whether we consider e-portal market as a separate relevant product market or as a sub-segment of the market for distribution, none of the opposite parties seems to be individually dominant… There are several players in the online retail market, which have been arrayed as opposite parties in the present case, offering similar facilities to their customers,” the order said.

Reacting on the order, Champakraj Gurjar, president of newly formed Federation of All India IT Associations (FAIITA) said that the commission was required to be given more evidence and proofs of tax evasion. He said that FAIITA would take up the issue in its second AGM scheduled during the last week of May.

“This order can be challenged in the high court. FAIITA will take up the issue and decide its plan of action in our next AGM”, Gurjar said.

Chetan Shah, chairman of Mumbai based ASIRT said that the association, on different occasions have submitted proofs of tax evasion. He said that the association also submitted proof of E Commerce portals selling counterfeited software on its platforms. Shah said that neither the vendor nor the government took up appropriate steps to stop the alleged crime.

Shrenik Bingade, owner of Purvaja Infotech said that E Commerce portals take advantage of disparities in taxes in the states.

“We have different tax slabs in different states. E Commerce portals do billing from different places and hence take benefit of difference in taxes. Such practice might not be illegal, but it affects the pricing policy due to which e tailers afford to give huge discounts”, Bingade said.

Bingade, who is also a president of the Kolhapur IT Association (CAK) said that the offline channel would continue to fight till the government regulate the E Commerce industry in the country.

Punjab Partners took initial steps to save partners basic earnings which aroused due to online predatory pricing. Demonstrations, bandhs, dharnas resulted in nothing except drop  in business.

“It gives sad feeling that our fight for right is still pending after hearing the news. Again and again we said “We are not against online but the price differentiation which gave us tough competition”. Association will take step to regain equality and transparency in IT market, “said Rajiv Khanna, spokesperson of Jalandhar association.

“This order in favor of e-tailors will impact trader community at large. Challenge has proved itself which is totally unfair for us. We will definitely going to take step and write to authorities about the same again,” stated Varinder Singh President of Amritsar association.

Endorsing similar thoughts, P Padmanabhan, Secretary of  Association of Computer Traders Trichy, (Tamil Nadu) said, ” This order is a major blow to the traditional channel, and livelihood of more than 13.5 crore is at stake. This is a right time for the IT channel community across India to unite, join hands and challenge the order in higher courts with enough evidence.”

Most partners DQ Week spoke to feel that five-six portals are murdering the business of lakhs of partners. Higher authorities are not favoring those who gave their hard earned money by devoting sweat and blood in government banks.  Online has created opportunities there is no doubt but competition and in-difference has aroused too.

Vijay Singh secretary of Gurgaon association was more conservative, “We cannot deny the orders of CCI but now we have to think of more innovative ideas to excel or survive. Some of the partners are only responsible for creating this challenge and challenges will keep on knocking your doors when you are fighting to achieve great things.”

 

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