E-Commerce: CCI study finds deep distrust between sellers, platforms

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August 31, 2019 5:19 AM

The report related to the interim findings which was made public on Friday, was conducted by the fair trade regulator to develop a better understanding of the functioning of e-commerce in the country and its implications for markets and competition.

E-Commerce,  CCI , food hailing apps, cloud kitchen, consumer data, deep discountsPlatforms have countered these claims by the restaurants. They say that cloud kitchen is a way to bridge the supply-demand gap.

The interim findings of a report by the Competition Commission of India (CCI) to study market trends with focus on emerging distribution methods and strategies in e-commerce has flagged a number of conflicting issues between such online platforms and sellers, which include preferential treatment, deep discounts and sharing of consumer data.

The report related to the interim findings which was made public on Friday, was conducted by the fair trade regulator to develop a better understanding of the functioning of e-commerce in the country and its implications for markets and competition. The complete report is expected to be made public during the October-December 2019 quarter.

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The study covered products like mobile phones, electronic & electrical appliances, lifestyle and grocery. It also covered services like hotels and food. CCI spoke with various stakeholders to gather their views on a number of issues for the study.

The study has highlighted deep mistrust issues between the restaurant owners and food hailing apps. For instance, restaurants said that neutrality of online food ordering platforms is questionable. Restaurants expect platforms to be neutral, but with certain marketplaces having their own private labels or cloud kitchen brands, it creates and incentive for platforms to favour their own brands and this dual role changes the nature of competition. It is compounded as the search algorithms can be changed to push their own brands as against other restaurants.

Restaurants also said that platforms do not share details about how their algorithms work. One key input that is fed into the algorithm is the user review and rating. Certain restaurants have found this to be non-transparent and unreliable. On top of it, ads are put with organic listings which impacts the visibility of organically listed restaurants.
Another concern that was flagged by the restaurants is that platforms by virtue of being an intermediary have access to all related competitive data of restaurants which can put them at risk in terms of competition. This, according to some restaurants, is being used by the platforms to launch and promote their own cloud kitchens. On the other hand critical customer data is not being shared by the platforms with the restaurants.

Platforms have countered these claims by the restaurants. They say that cloud kitchen is a way to bridge the supply-demand gap. As platforms are in a position to track this supply and demand, they can use such cloud kitchens as and when demand goes up. On search rankings, platforms said that they are algorithmically determined and a platform cannot manipulate it. Certain platforms said customer data is shared with restaurants.

The issue of preferential treatment was also flagged. Sellers say that platforms give preferential treatment to certain sellers and these entities are given high search rankings. Besides, sellers are compelled to participate in offering discounts.

E-commerce platforms said that sellers are independent third party players and that they participate in deals at their own discretion. Hotel industry too have said that they are forced to set unviable rates because of discounts by online travel operators, who countered the charge saying that prices are determined by hotels and they offer discounts above the listed room price.

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