Submissions to the Department Related Parliamentary Standing Committee on Commerce
On the subject ‘Promotion and Regulation of E-Commerce in India’.
The Department related Parliamentary Standing Committee on Commerce (“the Committee”) invited the Vidhi Centre for Legal Policy to make written and oral submissions on the subject ‘Promotion and Regulation of E-Commerce in India’.
Vidhi submitted a comprehensive research note along with its recommendations (“Submissions”) on the role of E-marketplaces in promoting fairness in Indian E-commerce. Manjushree RM (Senior Resident Fellow, Competition) and Manmayi Sharma (Research Fellow) also deposed before the Committee as Expert Witnesses on 12 May 2022 on the key issues pertaining to E-marketplaces in India, particularly those concerning relationships between online platforms and business users (“Platform to Business relationships” or “P2B relationships”) and provided recommendations that may be considered in respect of the E-commerce landscape.
The Submissions emanate from the Vidhi Working Paper titled, “Fair and Competitive E-marketplaces (F.A.C.E.): The Business Users’ Narrative” and the consequent recommendations authored and published by them in “(F.A.C.E.) The Business Users’ Narrative – Recommendations” (“Recommendations Report”).
All key recommendations made by Vidhi in their Submissions and in the Recommendations Report were accepted by the Committee and published in the Parliament’s 172nd Report on Promotion and Regulation of E-commerce in India. A topic-wise summary of Vidhi’s recommendations indicating where they have been accepted by the Parliamentary Committee, is provided in the table below –
|S.No.||Topic||Vidhi Recommendation||Whether accepted by the Committee|
|1.||Effective enforcement of the FDI policy||The FDI Policy, which directly regulates several P2B issues should be effectively enforced as one of the only ex-ante tools to regulate E-marketplaces at present.||Accepted as per Para 5.5 at pg. 5: The Committee recommends that the enforcement mechanism under the FDI policy is effectively strengthened, and proactive action is taken against e-commerce giants that are found to flout the FDI rules.|
|2.||Guidance on the Dominance standards for digital markets||The Competition Commission of India (“CCI”) should adopt a differentiated standard for ascertaining dominance in digital markets. Guidance elaborating on the different dominance standard for digital markets may be issued by the CCI pursuant to adequate public consultation.||Accepted as per para 7.8 at pg. 9: The Committee recommends that guidance elaborating on the different dominance standards for digital markets be issued by the CCI pursuant to adequate stakeholder consultation.|
|3.||Enactment of the Draft Competition (Amendment) Bill, 2020||Given that the CCI is currently only equipped to examine transactions based on asset value and turnover, the Draft Competition (Amendment) Bill, 2020, which allows notification of additional thresholds empowering the CCI to scrutinize digital market transactions, should be speedily enacted to prohibit E-marketplace giants from engaging in anti-competitive transactions that may irremediably tip the Indian e-commerce market.||Accepted as per para 7.12 at pg. 11: The Committee recommends enactment of the Draft Competition (Amendment) Bill, 2020 at the earliest as it will empower the Central Government to notify additional criteria to widen the ambit of merger scrutiny and prohibit e-marketplace giants from engaging in anti-competitive transactions that may irremediably tip the Indian e-commerce market.|
|4.||Creation of a dedicated Digital Markets Division within the CCI||To pin accountability to a single identifiable authority to ensure digital markets remain fair and contestable, it is recommended to create an expert division dedicated to digital markets within the CCI, to inter alia, coordinate policy and enforcement action that may impact competition in digital markets across sectors.||Accepted as per para 8.3 at pg. 12: The Committee recommends that a Digital Market Division within the CCI be created as an expert division specifically tasked with regulation of the digital markets with participation from all the existing regulators concerned with e-commerce.|
|5.||Strengthening inter-regulatory coordination||As E-commerce regulation in India is highly fragmented, it is recommended that the Central Government formulates a scheme whereby the CCI, other concerned regulators and ministries such as Department for Promotion of Industry and Internal Trade, the Ministry of Electronics and Information Technology, Ministry of Consumer Affairs, Food & Public Distribution, etc., periodically meet and exchange information. The Digital Markets Division of the CCI could be tasked with administratively facilitating these exchanges.||Accepted as per paras 8.2 and 8.3 at pg. 12: The Committee recommends formulation of a framework to enable interaction and information exchange among CCI and other regulatory bodies and Ministries such as DPIIT, Ministry of Electronics and Information Technology, Ministry of Consumer Affairs, Food & Public Distribution, etc., that govern aspects of e-commerce in India. The presence of an overarching regulatory body will strengthen the regulatory regime and bridge the existing gaps in enforcement.|
|6.||Designation of Gatekeeper platforms||As the success of the ex-ante model will hinge on precise identification of ‘gatekeeper’ platforms in digital markets, the Competition Act should be amended to prescribe criteria for qualifying as a ‘gatekeeper’ platform. The platform must have the obligation to suo moto notify the regulator once it reaches the prescribed threshold. The gatekeeper status may be kept valid for a specified period of time before it is mandatorily reviewed.||Accepted as per para 9.5 at pg. 13: India should strengthen its ex-ante regulatory framework and identify entities that act as gatekeeper platforms and set a threshold for qualifying as such. The Competition Act should be amended to prescribe additional quantitative criteria and an obligation must be placed on platforms to suo moto notify the regulator once it reaches the prescribed threshold.|
|7.||Framing codes of conduct for gatekeeper platforms||Ex-ante regulation may be implemented as mandatory ‘codes of conduct’ framed by the CCI based on the gatekeeper’s business model. Tailored codes for each business model made after adequate market studies and consultations will ensure that obligations stipulated in the code are relevant to the gatekeeper. Breach of the code must entail commensurate action for the ex-ante regulation to be meaningful.||Accepted as per para 9.7 at pg. 14: The Committee recommends the CCI to formulate a mandatory code of conduct that clarifies acceptable conduct between operators of e-marketplaces and their business users and consumers, after stakeholder consultation. The code should comprise core principles and hardwired do’s and don’ts and must be tailored to the platform’s business model.|
|8.||Creation of a nodal agency||The regulatory regime surrounding E-commerce will benefit from the establishment of a separate nodal authority (‘an E-commerce Authority’) that is responsible for implementation of new legislation for comprehensive e-commerce regulation. The authority may also be tasked with carrying out periodic market studies and surveys to gauge the overall health of the e-commerce market to ensure swifter regulatory responses to upcoming problems.||Accepted as per para 8.3 at pg. 12: The Committee feels that the presence of an overarching regulatory body that glues together different Ministries/Departments and Authorities that presently regulate e-commerce will strengthen the regulatory regime and bridge the existing gaps in enforcement.|