"CCI’s Regulations Should Not Become Hurdle of India's Growth"

Technology is at the heart of life and business in India today. This has been exacerbated in a post-pandemic world. E-commerce, time and again, has offered much-needed resilience to keep businesses afloat by supporting their digitization journey and providing access to a broader market. However, one of the most important issues concerning e-commerce and the digital markets today, is the question of “how should relevant markets be defined?”

In India, the competition law framework was designed at a time when online markets were yet to be relevant from a competition point of view. But with e-commerce recently gaining mainstream traction in antitrust discourse, questions pertaining to the applicability of various provisions of competition law have come to the fore. The Competition Commission of India (CCI) has, on multiple occasions, considered both online and offline markets as a part of the ‘relevant market’. However, the Commission is now looking to restrict this only to the ‘online market’ in certain cases, creating an unlevel playing field. The manner in which the relevant market is defined in competition law can have crucial implications for healthy competition in the market and for antitrust investigations. The online market is still evolving and is at a very nascent stage. Any restrictive definition will augment innovation and growth of the sector.

The Dialogue, a leading research and policy think-tank, conducted a virtual stakeholder consultation, comprising bureaucrats, legal experts and industry leaders, moderated by Mr. Kazim Rizvi, Founding Director, The Dialogue, to deliberate and understand the meaning of ‘relevant markets’ in the context of competition law concerning e-commerce and digital markets. In the past, CCI has observed that online and offline markets are part of the same relevant market and are often considered substitutable with each other. However, in a series of cases recently, the Commission adopted a narrower definition of the relevant market, effectively distinguishing between online and offline modes of engagement. Speaking on this, Ramesh Abhishek, IAS - Former Secretary, DPIIT, said that “The favorable positioning by CCI and increased scrutiny against many players in the ecosystem can harm the competitive spirit of the industry. There is a need to re-examine policies as a narrow interpretation of markets, without sufficient evidence, can have detrimental consequences for the Indian economy.”

Nirupama Soundararajan, Economist and CEO, Pahle India Foundation, stressed “The CCI is currently looking at relevant markets through a myopic lens. Online and offline entities are not separate markets, rather separate channels of sale. It is crucial that we create a distinction between the market and channels of sale.” She also added that “Every regulator and ministry has a dual objective: one is formulation of regulations and the other is market development. It is essential to bring a balance between the two, the law should be flexible to accommodate new formats of retail.”

Ms. Unnati Agrawal, Partner, Competition Law, IndusLaw, said that “It is important to be mindful of the fact that compared to the EU/ USA, digital markets in India are still evolving. Further, the growth of e-commerce in India has resulted in many consumer benefits such as availability of a bigger product portfolio to consumers in tier 2/3 cities. Caution should be adopted while defining the relevant market in digital space, as a narrow definition may lead to false positives in regard to market power exercised by a digital player, which may in turn have a chilling effect on the growth of e-commerce.  Thus, it is important to ensure that a balance is struck between regulating this sector and promoting the growth of e-commerce in the country.”

Some key highlights that came up during the discussion are as below.

• One size fits all approach while investigating e-commerce and digital markets is a backward step for India’s economic growth.
• Incorrect definitions of ‘relevant market’ which are not in consonance with the actual act, can lead to incorrect determination of violations.
• E-commerce companies are getting dissuaded from innovating and growing into established platforms to avoid the risk of being investigated by CCI under incorrect definitions of relevant markets.
• There is uncertainty over the legal validity of the factors that may be notified in the future, as the Competition Bill’s amendment gives powers to the Board to provide ‘any other factors’ in determining relevant markets.