The first principles of commerce should guide e-com policy too

Relevance: E-commerce has become one of the most important segments of the global economy. Any attempt to regulate it, will have implications for the economy of the country.

Synopsis: Over-stringent e-com regulations would lower consumer welfare, work against small businesses, and also stifle innovation.

Concerns Regarding Growth of E-commerce in India

• India’s e-commerce sector is set to expand into an oligopoly with the entry of Reliance, Tata, and a revamped Snap deal from a near-duopoly of Amazon and Walmart-owned Flipkart at present.
• An oligopolistic market can indeed see its players join hands to form a cartel and act against consumer interests.
• There are oligopolies that exist in other industries; for example, cement, where producers have been punished by the Competition Commission for operating illegal cartels.

However, at present, there is no evidence of such anti-competitive practices in the e-commerce sector.

Proposed E-commerce rules are flawed

• If enacted into law, India’s e-commerce regulations would shift the burden of liability for the products sold on these platforms onto e-commerce companies, instead of sellers.
• Further, the proposed rules would come down heavily on promoting their own brands, among several other restrictions.
• It would also lower consumer welfare as well as the ability of small sellers to expand their market reach. Further, it will also reduce innovation by lowering the ability of newer e-commerce companies to take risks.

Significance of E-commerce entities to India

• Increase Competitiveness of Indian goods: They offer discounted prices to small sellers for their raw material and lower their cost of production.
• Increase Exports: These platforms have increased the reach of small businesses nationwide and even helped them address export markets.
• Efficient service delivery: For customers, they have made product returns hassle-free and improved product quality and variety.
• Improved Logistics: They have revolutionized the country’s logistics industry and supply chains.
• Employment Generation: Their contribution to employment generation is now significant.
• Increased Disbursal income for poor households: The lower prices that e-commerce companies offer is an indirect real income increase, especially for our relatively low-income households.

Way forward

• Encourage market entry and ensure that there is no excessive regulation.
• More e-commerce companies entering the market should result in more choices for small sellers in terms of the platforms they want to list on, depending on the listing fees, commission, and so on.
• Further, many of India’s small-business owners should be gainfully employed elsewhere; large numbers are into subsistence entrepreneurship because of a lack of jobs.
• E-commerce platforms cannot engage in such price discrimination, like any other retail shop. So, they should be allowed to offer discounts for limited periods on specific goods.