“A holistic framework that addresses these issues, irrespective of the marketplace being funded by foreign or domestic entities, is the need of the hour,” the report said, before recommending ways to tackle various competition issues in the sector.
The committee noted that the foregn direct investment (FDI) policy on ecommerce is “limited” in addressing anticompetitive practices such as “self-preferencing, lack of platform neutrality, deep discounting, exclusive agreements and preferential treatment to selected sellers,” the committee said in the report, which was submitted to the Rajya Sabha secretariat on Wednesday.
It added that a time-bound investigation mechanism is needed “to address the fast paced digital market and ensure that unfair market practices do not occur due to sluggish investigation process”.
The committee recommended that the Department for Promotion of Industry and Internal Trade (DPIIT) work out a comprehensive framework for ecommerce and include it in the National Ecommerce Policy.
The panel also said the marketplace and inventory models of ecommerce should be clearly defined. It suggested that marketplace entities should not sell any goods owned or “controlled” by them on their platforms, and those that wish to sell directly to customers should not have any third-party sellers on their platforms.
Discover the stories of your interest
The panel added that it hopes the government would bring in “much-needed reforms in the ecommerce sector in a time-bound manner in order to give a fillip to the trade industry while instilling customer confidence and providing a level playing field to the stakeholders”.
The report was prepared after hearing views from various stakeholders, including DPIIT, the Ministry of Commerce and Industry, the Ministry of Finance, Vidhi Centre for Legal Policy, the National Restaurant Association of India (NRAI), logistics player Ecom Express, and various state governments.
The committee observed that the underlying cause of issues raised by sellers and businesses was a lack of neutrality on platforms.
“In the absence of a clear policy and guidelines that specifically spell out what practices amount to conflict of interest in the e-marketplaces and what are the acceptable conducts of platforms, irrespective of the platforms being funded by foreign or domestic entities, such contestation between platforms and business users are bound to happen,” it noted.
According to the report, the FDI policy on ecommerce, which does not let foriegn entities sell directly to customers, has “fallen short in its enforcement mechanism”. It said the policy needs to be strengthened and proactive measures need to be taken against ecommerce giants that flout the rules.
These rules have also gone through multiple changes over the last decade, the committee said, adding, “frequent changes to policy are against the ethos of ease of doing business as it brings uncertainty in the policy regime”.
US-based companies such as Amazon and Walmart, which owns Flipkart, have been accused by sellers and other stakeholders of preferring certain sellers even though they do not own a stake in them. Etailers have maintained they do not give preferential treatment to any seller on their platforms.
The committee also said that a blanket policy covering the entire ecommerce industry would be counterproductive and hamper the growth of the sector in India.
“The committee, therefore, recommends that a calibrated approach be adopted towards regulating ecommerce entities and the additional duties and liabilities sought to be introduced through the draft rules should be made applicable specifically to only ecommerce entities that qualify a certain threshold, devised particularly to regulate ecommerce giants,” the report said.
The committee added it was “surprised at the undue delay” in updating India’s competition laws to refliect the changing nature of digital commerce.
“Competition Commission of India (CCI) is required to consider a limited set of factors laid out in Section 19(3) of the Competition Act. These factors were formulated over two decades ago and may not always account for considerations that are unique to the current platform economy,” the report said.
