Keeping a close watch: CCI warns online retailers against unfair practices

The Competition Commissionof India (CCI) has sent out a strong warning to e-commerce players against unfair practices, saying it’s keeping a close watch and will investigate the “phenomenal’’ online sale of mobile phones. Pointing out that the opaque behaviour of dominant e-commerce companies was hurting the fate of brick-and-mortar stores, CCI Chairman Ashok Gupta indicated on Saturday that he meant action.
The warning by the anti-trust watchdog has come days ahead of Amazon founder Jeff Bezos’ India visit, about which the Seattle-headquartered company has been tight-lipped. Sources in the know indicated that Bezos, coming on a short trip, has sought a meeting with Prime Minister Narendra Modi.

Coinciding with the hardening stand of the CCI, small traders too have intensified their protest against e-commerce majors, mainly Amazon and Walmart-owned Flipkart. The Confederation of All India Traders (CAIT), representing thousands of small businesses, has threatened to protest across 300 cities in the country when Bezos arrives.
Gupta, while addressing a PHD Chamber’s conference, asked e-commerce platforms to put their house in order amid growing concerns from the retail sector, which fears further erosion of business due to the deep discounts offered by technology-driven online market players. Specifically, exclusive tie-ups between the online market players and certain sellers have been a bone of contention. This has been building up for sometime.
The CCI had earlier taken cognizance of a complaint filed by Delhi Vyapar Sangh, a trade body, against sale of mobile phones on e-commerce platforms. In fact, in a recently released study on the market place model, it advised self-regulation for e-commerce players, while asking them to remove deficiencies that gave them an unfair advantage vis-à-vis others.
Gupta said the Commission was working with all the stakeholders to remove information asymmetry and improve transparency to positively increase competition. He said that while time should be given to e-commerce players to carry out the necessary steps to remove such deficiencies, the CCI can take “suo moto action” if any such concern came to its notice.
chart“The CCI is keeping a close watch...Competition law as it stood had provisions that were adequate to deal with the emergence of e-commerce as also technology-driven products thrown up by innovations from time to time,” Gupta said. He said that the proposed changes to the Competition Law by the review committee would strengthen the legislation further and bring it in tune with current day requirements.
The e-commerce sector is estimated to touch $200 billion in market size by 2026 from $38.5 billion at present, according to CCI.
In its study released on Wednesday, the watchdog had said that the issues it had identified may have a bearing on competition, or may hinder the realisation of the full pro-competitive potential of e-commerce.
“Some of the issues in specific circumstances may have a potential to contravene the provisions of the Competition Act, 2002 (‘the Act’), which shall be the subject matter of case-by-case determination by the Commission.”
Last October, CCI had launched an investigation against Oyo Hotel & Homes and MakeMyTrip (MMT-Go) on charges of predatory pricing, creating a monopoly and deep discounting.
The marketplace platforms should bring out a clear policy on discounts, CCI has argued. This would include the basis of discount rates funded by platforms for different products or suppliers and the implications of participation or non-participation in discount schemes.

CCI may soon lose adjudicating powers, authority to pass orders & penalise

The government is considering taking away the adjudicating authority from the Competition Commission of India (CCI). Essentially, this could take away the competition watchdog’s authority to pass orders and penalise those contravening the Competition Act.
Competition experts say this could render the commission toothless. The anti-trust regulator investigates and penalises cartels, apart from ensuring that mergers do not lead to monopoly.

“(The move would mean) the commission would become an advisory authority only and would become redundant. Somebody will have to take this power and it may go to the corporate affairs ministry,” said R Prasad, a competition expert.
He added this would mean the CCI would conduct investigations and recommend actions such as closure.
Vaibhav Gaggar, managing partner at Gaggar & Associates, said it would be a travesty if the adjudicatory powers were vested with bodies that did not possess any experience in the field as all the learnings of the past decade would be lost.
Corporate Affairs Secretary Injeti Srinivas recently said the commission should work like a regulator and not a tribunal or a court. He also stated that in discharging its advocacy role, the commission needed to do more.
Further, the government planned to set up regional offices of the commission so that the body at the centre was not burdened, he said.
Recently, the government reduced the number of members in the commission. It now has a chairperson and three members, against six earlier. The government plans to let the commission have part-time members in order to ease its workload.
Below these members, the commission has 43 vacant positions of the total sanctioned 91 at the level of secretary, advisor, director, joint director and deputy director.
In the director-general’s office under the CCI, which investigates cases, there are 17 vacancies in 33 sanctioned posts at the levels of director-general, additional director-general, joint director-general and deputy director.
Over the years, fewer orders passed by the CCI are being quashed by the appellate body that looks at competition appeals.
According to the official data, 87 orders passed by the CCI were set aside by the appellate tribunal in 2015-16, and it came down to 69 in 2016-17 and just four in 2017-18.
Competition lawyers say this is because the commission has streamlined its investigations. Many orders passed by the commission have been quashed on procedural grounds, which is not happening now.
In 2017, the government merged the Competition Appellate Tribunal (COMPAT) with the National Company Law Tribunal (NCLAT).
The number of anti-trust cases pending with the CCI stands at 223 as on January 31, 2018. Of these, 176 cases are pending for more than one year. Further, 564 combination notices have been filed. Of these, only 15 notices are pending and none is more than one year old.
The Competition Act was enacted in 2002 to prevent monopoly and break cartels. Cement manufacturers, automobile parts makers, pharmaceutical companies and aviation firms have been regularly investigated by the CCI.