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News: The proliferation of a wide range of e-commerce platforms has created convenience and increased consumer choice. But, the online aggregator platforms have damaged large segments of small and medium businesses and favour the domination of a few big platforms. Across the world, small businesses are suffering from the unethical practices and unequal bargaining power of these large platforms
How do big players hurt small businesses and consumers in the online marketplace?
For consumers
a) Big platforms resort to predatory pricing to acquire customers even as they suffer persistent financial losses, b) The cashback and deep discounts offered by big players have turned out to be a forerunner to customer addiction, c) Big players 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, d) Using customer data: While using these platforms, citizens share their data voluntarily and involuntarily. The aggregators gather shopping habits, consumer preferences, and other personal data.
For small businesses
a) A few select sellers, who are generally affiliated with the e-market platforms, reap the benefits of greater visibility and better terms of trade. Further, they also have complete control over customer reviews and ratings on the platform; manipulation and arbitrary removal have also been reported, b) Online travel aggregators are often accused of cartelisation. For example, the Competition Commission of India’s investigation in the OYO-MakeMyTrip collusion case, c) Lack of a fair and transparent dispute resolution mechanism for sellers on e-commerce platforms.
d) Unreasonable and one-sided contracts allow travel aggregators to have a disparity clause (in the rates). This 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. The same goes for Taxis attached to aggregators like Ola and Uber also.
What should be done to protect the online marketplace?
1) A set of comprehensive rules and regulations should be 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.
2) A model agreement that is fair and allows a level playing field between the aggregators and their business partners should be implemented. For instance, the Digital Markets Act of the EU.
3) Strong and quick grievance redressal and dispute resolution mechanisms should be established. The rules should allow for punitive penalties for unfair practices.
4) Market dominance and subsequent invoking of fair competition rules should be triggered at the level of micro-markets and for product segments.
Source: The post is based on the article “Sushil Kumar Modi writes: The online marketplace is skewed in favour of big players and hurts small businesses and consumers” published in “Indian Express” on 28th June 2022.
