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Sushil Kumar Modi writes: The online marketplace is skewed in favour of big players and hurts small businesses and consumers

Sushil Kumar Modi writes: It is time that a set of comprehensive rules and regulations, which are inclusive, eliminate conflicts of interest and prevent any anti-competitive practices is put together.

Written by Sushil Kumar Modi |
Updated: June 28, 2022 5:52:54 pm
Sushil Kumar Modi writes: The online aggregator platforms have also damaged large segments of small and medium businesses through their dominant position and the malpractices this position allows them to indulge in. (Illustration: C R Sasikumar)

As technology flattens the world, the way we operate our daily lives — travel, entertain, educate, shop, communicate and even obtain food — is undergoing a radical change. This has impacted a variety of stakeholders in the country differently – there are obvious winners and losers. The nature of our success in dealing with this change will lie in the ways in which we deal with the concerns of all players.

The proliferation of a wide range of e-commerce platforms has created convenience and increased consumer choice. But in hindsight, the initial cashback and deep discounts have turned out to be a forerunner to addiction. The online aggregator platforms have also damaged large segments of small and medium businesses through their dominant position and the malpractices this position allows them to indulge in. There is a clear pattern that shows the domination of a few big platforms.

These companies resort to predatory pricing to acquire customers even as they suffer persistent financial losses — SEBI is rightly revisiting the valuation norms of such companies looking to list on the stock exchange. They take away choice from suppliers and consumers. This, in the long run, can be viewed as an exclusionary practice that eliminates other players from the market. The ultimate loss bearer is the consumer who will have a reduced bargaining position due to less competition and will be subject to the arbitrariness of monopolistic conduct.

Be it e-marketplaces like Amazon and Flipkart or food service aggregators like Zomato or Swiggy or travel aggregators like MakeMyTrip and OYO, all have been accused of distorting the market. The story of big technology companies like Google, Facebook, and Apple is different, and best left for another time.

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While neutrality is the fundamental basis of a marketplace and a level playing field is in the fitness of things, claims of outfits such as Flipkart or Amazon to be a marketplace for a wide variety of sellers can be questioned. A few select sellers, who are generally affiliated with the platform, reap the benefits of greater visibility and better terms of trade — reduced commissions and platform-funded discounts. Zomato, like other food aggregators, is said to run cloud kitchens. Many of them run private-labelled products in categories where other sellers have been successful. The associate companies are prominent sellers on their platform. It is alleged that undue advantage is given while recommending or listing these products.

Online travel aggregators are often accused of cartelisation. The Competition Commission of India’s investigation in the OYO-MakeMyTrip collusion case resulted in MakeMyTrip being ordered to relist properties of Treebo and FabHotels. Other such arbitrary removals or suppressions of listing of competing products and services have also been heard of.

While using these platforms, citizens share their data voluntarily and involuntarily. The aggregators gather shopping habits, consumer preferences, and other personal data. The platforms are accused of using this data — data that is neither created by them (it is created by customers) nor for them (it is created for sellers of the product/service) — to create and improve their own products and services, taking away business from other sellers on their platform. They capitalise on this data and information about other brands to launch competing products on their marketplace. This information asymmetry is exploited by the aggregators to devour organisations they promise to support. They provide more prominent listings for their private labels and as they have complete control over customer reviews and ratings on the platform; manipulation and arbitrary removal have also been reported.

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Another issue often noticed is the lack of a fair and transparent dispute resolution mechanism for sellers on these platforms. Delayed payments, unreasonable charges, and hidden fees are common occurrences. The power of these platforms is at the cost of small hardworking businesses. Small restaurants complain that food-service aggregators’ inability to service a customer request is attributed to the restaurant’s inability. Similarly, hotels listed on these platforms are blamed for customer grievances arising from over-committing. In some cases, restaurants and hotels are arbitrarily shown as closed. Large restaurants with their own delivery networks are forced to use the aggregator’s delivery services.

Unreasonable and one-sided contracts allow travel aggregators to have a disparity clause (in the rates) which allows them to offer rooms at a much cheaper rate but bars the hotels from doing so. Restaurants are many a time forced to accept orders at prices much lower than their agreement. Hotels are denied delisting from platforms; other exit clauses are restrictive. Taxis attached with aggregators like Ola and Uber are pressured to use the company’s payment system and are often at the receiving end of arbitrary charges.

Across the world, small businesses are suffering from the unethical practices and unequal bargaining power of these large platforms. It is time that a set of comprehensive rules and regulations is put together. These regulations need to be inclusive, should eliminate the conflicts of interest inherent in current market practices, and prevent any anti-competitive practices. A model agreement that is fair and allows a level playing field between the aggregators and their business partners should be implemented. There is a lot to learn from the Digital Markets Act of the EU that seeks to address unfair practices by these gatekeepers. Strong and quick grievance redressal and dispute resolution mechanisms should be established. The rules should allow for punitive penalties for unfair practices. Market dominance and subsequent invoking of fair competition rules should be triggered at the level of micro-markets and for product segments.

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This column first appeared in the print edition on June 28, 2022 under the title ‘A skewed playing field’. The writer is Rajya Sabha MP and former deputy chief minister of Bihar

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First published on: 28-06-2022 at 04:00:30 am
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