By Trisha Shreyashi and Shreevidya Nargolkar

A saying goes that the government has no business doing business but a non-profit platform developed by the Government of India has apparently shaken up the marketplace scene. Hailed as the UPI of e-commerce, the Trivago of marketplaces – Open Network for Digital Commerce – is the talk of the online retail scene.

For the consumer side, it offers better deals and addresses the issue of limited choices, restrictive multi-homing, and comparative pricing, rating and quality, differential pricing, and multiplicity by offering a one-stop-shop solution. It levels the playing field for sellers of all forms, categories, and sizes along with access to a wide consumer base, low operational costs, and no role of middlemen. 

Higher e-commerce penetration 

ONDC commendably aims to generate gross merchandise value that places high importance on the number or volume of products sold. It is a matter of common understanding that a product may not necessarily be repurchased or popular owing to its basic properties. This cannot be said to be a foolproof method of actual revenue. The question arises whether the government is aiming at having a higher volume of goods sold online or simply at generating wealth is also via a higher volume of transactions is an obscure alley to navigate. Further, whether an e-platform that places all sellers on a level-playing field could resolve the real reasons for the lack of e-commerce penetration remains to be seen. 

Also read: ONDC consumer protection: Assessing the new frontier in food delivery

Access to all products on a single platform whilst helping online retail penetration may seem like a balancing act. However, it is also being seen as an interference in the market. Capitalist proponents argue that government intervention should be kept at a bare minimum especially since mere dominance is not deemed anti-competitive in India. Ex-ante competition laws are alien to Indian jurisprudence and the policy. 

Unseen hand of the government: Vice or Virtue?

The prospects of novice sellers against dominant entities which have already attained a placid state in the market might seem unrealistic. This is primarily owing to the consumer tendency to prefer trusted brands leaving the products of novice sellers on e-shelves. 

Even assuming that the said novice sellers do notice a boom in their sales, the question arises whether this is the winning government is looking forward to. Introducing new sellers in the market by artificially lowering market barriers cannot be an indefinite solution for a brighter future.

The open network approach aims to unbundle various components of an e-commerce transaction and put the power in the hands of the buyer to pick the various components from the options available by designing an entire transaction. ONDC will allow buyers to access the products and services of various sellers, choose between payment gateways, and choose from various logistics providers. 

Critics argue that the projections might be a paradox. Sellers are already at liberty to list on other marketplaces and it is routine for buyers to multihome across platform marketplaces. Moreover, several websites & blogs effectively bridge the information gap by offering price comparison services. Moreover, a uniform platform for accessing products may not necessarily lead to better quality shopping experience for buyers. Quality of the shopping experience is not limited to the number of products being purchased in a given budget. The quality of products equally matters. 

With financial products being proposed to be sold on the ONDC platform, the scales for measuring the quality of financial products are puzzling. Furthermore, financial products are already available on trading platforms or other regulated platforms. Making them available on ONDC would create a web of regulations causing delays and complexities in dispute resolution. 

Another challenge is the complex legal relationships involved in joining the ONDC network. Since ONDC is decentralized, participants must establish multiple legal relationships, and the terms and conditions set out in the Network Participant Agreement (NPA) cannot be negotiated or changed. Furthermore, implementing standard and uniform contracts for differently placed players could result in unequals being treated equally. 

Also read: Has the Union Budget 2023 helped India move closer to financial inclusion?

The future of ONDC might be placed on the belief that the success of the platform is inevitable given the governmental backing. With the elections fast approaching, such support may prove to be a venal spell. George Stigler’s theory of ‘The Economic Regulation’ demonstrates incidences whereby businesses have suffered owing to regulations. Considering his theory, it can be noted how interests other than purely public interests influence the regulators in their policy-making decisions. 

Nonetheless, as the ONDC network is still in its beta testing phase, it is expected that its governance policies and framework will evolve over time. It’s pertinent to note that the impact and effectiveness of the ONDC network will become clearer as it progresses from the beta testing phase to wider usage and implementation. 

(The authors: Trisha Shreyashi & Shreevidya Nargolkar are advocates. Views expressed are personal.)