Predatory Pricing by e-Commerce Companies

Department for Promotion Industry and Internal Trade (DPIIT) vide Press Note 3 of 2016 containing Guidelines for FDI on e-commerce was issued on 29 March 2016. However, allegations were made against e-commerce companies that the marketplaces were violating the norms laid down in Press Note 3 of 2016. Press Note 2(2018) was issued by DPIIT on 26 December 2018 to provide further clarification on FDI policy in relation to e-commerce. Clause (ix) of Press Note 2(2018) stipulates that e-commerce entities providing market place will not directly or indirectly influence the sale price of goods or services and will maintain a level playing field. Services should be provided by e-commerce marketplace entity or other entities in which e-commerce marketplace entity has direct or indirect equity participation or common control, to vendors on the platform at arm’s length and in a fair and non-discriminatory manner. Such services will include but not limited to fulfillment, logistics, warehousing, advertisement/ marketing, payments, financing etc. Cashback provided by group companies of marketplace entity to buyers will be fair and non-discriminatory. For the purposes of this clause, provision of services to any vendor on such terms that are not made available to other vendors in similar circumstances will be deemed unfair and discriminatory.

Confederation of All India Traders (CAIT) has represented that large e-commerce platforms are in violation of Press Note 2 of 2018 of the FDI Policy as they are engaging in predatory pricing and are providing excessive discounts. In this regard, responses/clarifications were sought from e-commerce companies concerned with the allegations made by CAIT. All e-commerce companies, in their responses, have maintained that they do not exercise any control over sellers and operate a pure marketplace. Any discount which is offered is offered by the seller/vendor or the respective brand alone.

CAIT has also filed a petition with the Jodhpur Bench of Rajasthan High Court alleging FDI policy violations by e-commerce companies like Flipkart and Amazon which is sub-judice.

The imposition of unfair or discriminatory prices (including predatory pricing) by a dominant enterprise or group is prohibited under provisions of Section 4 of the Competition Act, 2002. The Act provides for the establishment of a quasi-judicial body viz the Competition Commission of India (CCI) which decides matters of anti-competitive practices, including inter alia predatory pricing, on a reference by the aggrieved party.

This information was given by the Minister of Commerce and Industry, Piyush Goyal, in a written reply in the Rajya Sabha.