E-commerce has provided huge relief to the consumers in the time of the pandemic by delivering goods right to the consumer’s doorstep. The consumer also has a wider array to choose from. For instance, I needed a book that was not available in India, so I placed an order with an international e-portal and the book was delivered in 15 days. It so happened that the book came in damaged condition. The e-portal replaced it within three weeks. It would not have been possible for me to obtain the book with such ease sitting at my computer had there been no e-portal. It has also become possible to compare prices.
The consumer can, for example, search for a particular brand of a mobile phone on two or three e-portals and order the cheapest available. E-portals are, therefore, here to stay and so they must be. However, the emerging problems need to be addressed.
E-portals often promote the sales of goods produced by their own subsidiaries. Say, an e-portal has established a factory to make mustard oil. The e-portal displays the oil produced by itself upfront even though it may be of substandard quality and costlier. This puts other sellers at a disadvantage and imposes unnecessary costs on the consumer, while the e-portal makes hefty profits.
Drivers of Ola and Uber say that e-portals give more traffic to the vehicles owned by the e-portal and less traffic to cars from private taxi owners on contract. The e-portals do the same. They hide cheaper alternatives and display their own products and befool the customer. The European Union has, therefore, made rules that e-portals will have to display the goods produced by themselves and goods produced by others with equal visibility. The US has proposed that an e-portal will be prohibited from establishing its own factories. A company may decide to run an e-portal or a factory to manufacture mustard oil. It cannot do both just like a government doctor cannot undertake private practice.
In other words, there will be a strict separation between the aggregating activity of the e-portal and manufacturing and selling activities. The e-commerce rules proposed by the government of India do not prohibit an e-portal from manufacturing and selling its own goods. Such activity must be prohibited as proposed in the United States.
The government of India wants domestic goods to be produced and sold more than imported goods. ‘Atmanirbhar’ is the catchword. However, e-portals often display foreign goods with greater prominence. The government has proposed rules that would require the e-portals to compulsorily display domestic goods along with foreign goods. Flash sales promoting specific goods are also proposed to be banned. E-portals push the products of their preferred producers on flash sales, putting other sellers at a disadvantage. So, the government steps are welcome. However, more needs to be done, though. E-portals can sell goods that are expiring in, say, two months, without disclosing this to the buyer. The e-portals should also be required to display the expiry date of the goods offered for sale so that the customer can make an informed choice.
'Customisation' of display
E-portals often ‘manipulate’ a consumer. They know a consumer’s past search history. They identify and display goods that they think you may be interested in buying even though you may not need those at the present time. This is called ‘customisation’ of a display for each customer. In this way, they surreptitiously lead the customer to buy a product that they may not be wanting to buy.
There is a need to go further though. The government must bring the large e-portals under the Right to Information Act (RTI). The present RTI Act is applicable only on government departments and public sector undertakings (PSU). Even here, any information that could affect the commercial interests of a PSU are not required to be disclosed.
I once made a request to the Geological Survey of India (GSI) to provide copies of geological investigation reports relating to a particular hydropower project. The GSI refused, saying that such disclosure would affect its commercial interests. If it were to disclose the report, it would be unable to obtain contracts for geological surveys because hydropower companies would then give the contracts to private investigators not covered under the RTI Act. There is a need to remove this clause for e-portals because public welfare is involved. E-portals must be placed at par with private infrastructure companies.
Private companies that are engaged in building infrastructure, such as private hydropower developers in Uttarakhand, have been covered under the RTI Act. The government must similarly bring the e-portals under the RTI Act. Then, the consumer would be able to ask them various questions. It could be asked, for example, to please provide the list of mustard oil sellers listed with them and the margins being offered to them. The availability of such information will empower the customer to peer behind the screen and take an informed decision. Certainly, e-portals will balk at such a suggestion but they will fall in line, given the large market available in India.
Limiting no. of customers
The government must also ask the Competition Commission of India to fix the highest numbers of customers that an e-portal can enrol. Let us say there are 10 crore persons that are buying goods on e-portals in India. The CCI can stipulate that any e-portal will not enrol more than, say, 33 per cent of the total e-customers. E-portals with more than 33 per cent customers must be forcibly broken up into a number of smaller independent e-portals. That will make space available for home-grown e-portals. The competition between the e-portals will put a limit on their manipulation etc. Indeed, such a break-up will lead to higher prices of certain goods.
Certain suppliers may not be able to offer their goods on a number of e-portals simultaneously. At the same time, competition among the e-portals will open up the e-market to a number of new sellers. My firm assessment is that the benefits will be much greater than the cost. The rules proposed by the government are in the right direction but grossly inadequate, given the vast power of, and the manipulation by e-portals. There is an urgent need to bring them under the RTI Act and break up large e-portals, to establish a level playing field and promote ‘Atmanirbhar’ e-portals.
The writer is former Professor of Economics, IIM Bengaluru, and can be contacted at: 85278-29777
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