A change in the interpretation of ‘relevant market’ by the Competition Commission of India (CCI) has opened up several digital platforms to an antitrust probe. The CCI is currently investigating at least a dozen leading digital platforms, including Amazon, Flipkart, Zomato and Swiggy, for alleged violation of competition rules. This is as per a report by the Economic Times.
Earlier, the commission used to club online and offline markets while determining the market dominance of a digital player, they said. For instance, while considering an e-commerce platform that sells consumer goods, the CCI used to consider the online and offline markets together to arrive at the market share of the e-commerce player. Since the offline market is a large segment, most own any bricks-and-mortar stores. But now the CCI has started considering only the online segment as a ‘relevant market’ for digital platforms.
“The interplay between online and offline markets has changed significantly in recent times, prompting this change from the CCI,” said one of the persons, who did not wish to be identified.
According to the person, earlier if consumers did not find specific things they were looking for on e-commerce platforms, or if they had any other concerns such as price or speed of delivery, they used to just go to a nearby store and buy the product. “Now, the majority of consumers who shop online no longer go to the physical stores. If an item is not available on a platform, they just search for it in a different application,” said the person. “Hence digital platforms are now standalone markets and should not be clubbed with offline stores.”
Legal experts said this distinction being drawn between the online and offline markets will have a significant impact on e-commerce from a competition law standpoint.
“The definition of relevant market is the most critical aspect of competition laws and antitrust battles are often won or lost on the basis of how the relevant market is defined by the competition authority,” said Akshayy Nanda, Partner, Saraf & Partners. “The debate on how relevant markets are to be defined in the digital economy is still open, though it can be expected that while forming an opinion whether an investigation is to be directed, the CCI is likely to consider digital markets to constitute separate relevant markets.”
Until three-four years ago, digital markets were still in a nascent position, and there was no certainty on how the e-commerce market would shape up. But now the digital market is much more evolved. Business models involving deep discounts backed by private equity funding will continue to dominate the consumer market in the coming years, according to industry experts. Hence a shift in the interpretation of relevant market was needed from the CCI.
“With the evolution of e-marketplaces as a prominent mode of business transactions and shopping, the CCI responded in a nimble way in its interventions and where found appropriate, considered e-marketplaces to be falling in a separate market, distinct from the offline marketplaces,” said Vaibhav Choukse, head of competition law practice at JSA, a corporate law firm.
The onset of the Covid-19 pandemic disrupted the market further in favour of ecommerce players as several bricks-and-mortar stores suffered more due to the lockdowns and restrictions imposed.