Relevant Market in E-commerce: The Dilemma Resolved?

[Samarth Saxena and Mohak Chikhale are Final Year students at ILS Law College, Pune]

This post aims to critically analyse a constant conundrum in the Indian antitrust scenario, namely the relevant market analysis in the e-commerce sector. It does so in the context of the order (“Order”) of the Competition Commission of India (“CCI”) in All India Online Vendors Association (“AIOVA”) v. Flipkart India Private Limited (Case No. 20 of 2018) (“Flipkart”) dated 6 November 2018.

Facts

This order emerged out of the information by AIOVA alleging contravention of section 4(1) of the Competition Act, 2002 (the “Act”). AIOVA is engaged in selling on e-commerce marketplaces through platforms like Flipkart. AIOVA based its allegations on an article by the ET Retail.com, whereby it was brought to light that certain arrangements were made between small vendors and big vendors like WS Retail on e-commerce platforms. AIOVA alleged preferential treatment to certain sellers by Flipkart which led to unfair trade practices. It also asserted that this led to a direct conflict of interest with other competitors on the e-commerce platform. Flipkart, being dominant in the e-commerce platform for selling goods, was thus alleged to have abused its dominant position in the said market. Thus, the information was filed under section 19(1) (a) of the Act.

Order

The CCI order shed light upon the definition of the term “relevant market” and accepted the definition of AIOVA: “Services provided by online marketplaces for selling of goods in India”. The abuse of dominance was alleged by AIOVA in the said market by facilitating discounts and by further leveraging its position to enter into another market of manufacturing products through private labels. The CCI held that e-commerce market being a recent phenomenon is still an emerging concept and has also led to offline retailers entering into partnerships with e-commerce companies in order to attract consumers.

The CCI observed that not only Flipkart but other e-commerce platforms like Amazon, Snapdeal, Paytm Mall, etc. are multiple competitors in the market. Although Flipkart has significant resources, however prevalent as well as the new entrants in the market stand in the way of Flipkart being the dominant one in the marketplace. Thus, no one single company can command a dominant position in the e-commerce sector. Flipkart not being dominant in the relevant market so ascertained, the CCI found no merits in AIOVA’s information alleging abuse of dominance by Flipkart.

Background and Analysis

Relevant market has been defined as “the market which may be determined by the Commission with reference to the relevant product market or the relevant geographic market or with reference to both the markets” (see section 2(r) of the Act). Therefore, for any enterprise to abuse its dominance, it will have to be dominant in its relevant product market (see section 2(s) of the Act) as well as relevant geographic market (see section 2(t) of the Act). While determining the latter does not pose an issue, it is the relevant product market analysis which has troubled the Indian competition regulator.

The CCI’s take on relevant product market analysis has been a confusing one. To put this into perspective one has to consider the various orders passed by CCI in this regard when dealing with e-commerce and other digital services. In the context of the online e-commerce businesses and marketplaces, the CCI had earlier observed that buyers tend to weigh the options available to them in the offline and online markets before making a final decision, taking into account the differences in discounts and shopping experience. A significant increase in price in one segment shall cause the buyer to shift to the other segment and therefore, “the offline and online markets are different channels of distribution of the same product and are not two different relevant markets” (Ashish Ahuja v. Snapdeal and others, (Case No 17 of 2014)).

In another case, the informant argued that if a given book is exclusively distributed through an e-commerce firm, it is not substitutable by another book distributed by brick and mortar stores, hence making it a separate relevant market. The CCI disagreed, holding that individual products cannot be construed as a relevant market by themselves (Mohit Manglani v. Flipkart India Private Limited and others, (Case No 80 of 2014)).

But, in the case of taxi aggregation services, the CCI had held ‘radio cabs service’ to be a relevant market by itself, on the ground that consumers do not find such services to be substitutable with other modes of transport. It cited “convenience in terms of time saving, point-to-point pick and drop, pre-booking facility, ease of availability even at obscure places, round the clock availability, predictability in terms of expected waiting/ journey time etc.” as relevant characteristics of radio taxis, which are not available in other modes of road transport (Fast Track Call Cab Private Limited v. ANI Technologies Pvt. Ltd., (Case No. 6 of 2015)).

Conclusion

From the various decisions of the CII one could conclude that up until the recent Order, for the purposes of delineating the relevant product market, offline and online selling or distribution were just two different channels of one product market. But at the same time the CCI through its judgments in the taxi aggregation cases considered radio cab services a different relevant market based on factors like convenience, ease of choice etc., factors which could be very easily be argued to exist in favour of e-commerce platforms as well as far as product market were considered. The recent Order of CCI took note of this (in para 23) and, for the same reasons, effectively put the e-commerce marketplaces on a similar pedestal as radio cab services thus, allowing them to form a separate relevant product market.

This Order of CCI is a welcome change primarily for three reasons:

1. It helps in clearing the confusion with respect to product markets caused by the CCI’s previous orders;

2. It puts the law for ascertaining relevant product markets for e-commerce marketplaces in line with the global perspective (see Case No IV/M.1407 – BERTELSMANN / MONDADORI; Case No IV/M.1459 – BERTELSMANN / HAVAS / BOL; Case No COMP/M.4731 – Google/ DoubleClick; Statement of Federal Trade Commission Concerning Google/DoubleClick FTC File No. 071-0170 released on 20^th December, 2007); and

3. It facilitates a healthy and fair market as establishing dominance becomes easier in a narrower market.

– Samarth Saxena and Mohak Chikhale