New e-commerce policy to shut down predatory pricing by firms: Officials

Any new e-commerce policy would have a clause to shut down predatory pricing by e-commerce firms that encourage deep discounting and distort prices in the marketplace, government officials say.

The draft e-commerce policy, under consideration by the government till about two months back, had proposed a sunset clause for predatory pricing policies that include ‘zero payment offers’, ‘flash sales’ and ‘unlimited offers’. It had also sought to define these practices and set fixed norms for each.

The nodal department for e-commerce rules in the country, Department of Industrial Policy and Promotion, is currently putting together a fresh draft of the proposed e-commerce policy after the last one faced heat from companies and the civil society alike.

The proposal to introduce Foreign Direct Investment in the inventory-based model of e-commerce by up to 49 per cent for Indian-owned businesses that procure exclusively from within India had faced extensive criticism by traders bodies. Current norms allow foreign capital in e-commerce only when the entity acts as a marketplace, facilitating other businesses and not selling directly to consumers.

“But we didn’t face any major hurdle on the deep discounting clause because e-commerce companies, retailer bodies and consumer groups agree it is not a sustainable or healthy model of business. So, the new draft, whenever it comes, will absolutely have that clause,” a senior DIPP official said.

After the Commerce Department was shown the door on the exercise of framing e-commerce rules, the DIPP is now working on a new comprehensive policy that would focus on all aspects of the business, encompassing data privacy and taxation, apart from a host of technical aspects such as technology transfer, server localisation and connectivity issues. But, chances of a new policy being framed before the general elections next year, remain low, officials warn.

Consumer protection activists say that ‘predatory pricing’ means that ultimately the customer loses out in the long run. Additionally, a quarter of all complaints on the National Consumer Helpline (NCH) continue to be related to e-commerce platforms, an official from the Consumer Affairs Department that oversees the helpline said.

WTO headache

At the world stage, developed nations wanted to start talks on a set of rules for global e-commerce which was fiercely opposed by India.

Over the past two years, rich nations led by the United States, the European Union and Australia have continuously pushed for a set of global rules on e-commerce. India has argued that the move would sideline discussions on food security and other development-based issues important to developing nations.

“While India should accept technology as it comes, we need to know which segments it will hurt the most,” trade expert and JNU professor Biswajit Dhar said. “A disruptive move like this will see tech-driven commerce displacing a significant number of players, like small traders, in the traditional market as behemoths stand the chance of gobbling them up.”

If a conclusive agreement on e-commerce was not feasible, developed nations would at least aim to secure greater commitments from all members on reducing tariff costs on trade, a senior official from the WTO Secretariat in Geneva told Business Standard on the condition of anonymity.

But, India’s domestic e-commerce industry has also remained cold to the proposal, fearing that the new rules could provide a pretext for unfair mandatory market access to foreign companies. “Because this is a WTO-led agenda, our suggestion has been that the access provided to India’s data, platform and markets should be reciprocal.

In a way, India’s open market is a big advantage to global companies but the same might not be true for domestic ones,” Paytm chief Vijay Shekhar Sharma had told the committee set to create the draft e-commerce policy, earlier this year.