CCI report asks online marketplaces to adopt self regulation

The CCI (Competition Commission of India) has suggested a list of self-regulatory measures for online marketplaces to ensure greater transparency as part of a report titled ‘Market study on e-commerce in India’. The guidelines cover online marketplaces in e-commerce, food technology, online travel aggregators and hotel booking platforms as well as restaurants. 

The competition watchdog initiated the study in April 2019 in the backdrop of discussions around the draft national e-commerce policy. 

“... it is observed that lack of transparency in the platforms’ functioning and practices can, on the one hand, allow for possible distortion of competition on the platforms, and on the other hand, consumer choice may not reflect consumer preference with perfect information,” said the report. 

The report states that search results, seller data and user reviews are often manipulated or exploited by marketplace platforms for unfair advantage. “Making more information available on the search ranking criteria, collection, use and sharing of data, and review and rating mechanisms will thus help address the concern of the business users of platforms to some extent,” it added.

The findings of the report can have far-reaching consequences on the e-commerce marketplace models as the report points out issues of preferential treatment of private labels and deep discounting, in violation of the FDI (Foreign Direct Investment) in the marketplace model. The DPIIT (Department for Promotion of Industry and Internal Trade) had also released Press Note 2, which prohibits FDI in inventory-led e-commerce models and their subsidiaries. Press Note 2 came into effect on February 1, 2019. 

The CCI report, also touches on the contentious issue of food-technology platforms running cloud kitchens and using data from listed restaurants for preferential treatment of the same, as well as unilateral revision in contract terms between the platforms and the restaurants. These issues were at the core of the tussle between the NRAI (National Restaurant Association of India) and food-technology platforms, especially Zomato, in 2019. 

According to recent reports, the DPIIT has stepped in to resolve the deadlock and the CCI report may have a bearing on the same.