Govt likely to review market practices by e-commerce players and impact on traditional retailers, consumers

The government is looking at a possible probe into market practices by e-commerce players and whether there has been any breach of competition laws by these firms. The Ministry of Consumer Affairs is understood to be examining the issue, although the matter is still at an initial stage, sources indicated.

“E-commerce players have become an important player in the market and are giving stiff competition to the traditional brick and mortar shops. There is a view emerging that it has to be seen whether their growth is due to anti-competitive practices and if so, what has to be the solution,” said a source familiar with the development, adding that the impact of their practices on consumers also has to be assessed. The ministry and the Competition Commission of India may also be involved in the exercise at a later date.

Commerce and industry minister Piyush Goyal had also on Wednesday raised the issue of predatory pricing and had signaled that e-commerce players like Amazon had possibly bypassed regulations prohibiting B2C sales by e-commerce platforms.  

Goyal had flagged e-commerce giant Amazon's business practices, especially its billion-dollar investments, which he suggested are more about covering losses than contributing to India's economic growth. "If you make Rs 6,000 crore loss in one year, doesn't that not smell like predatory pricing to any of you?" he asked, while underlining the potential long-term damage to small retailers and the broader market. The minister was speaking at the launch of a report on the 'Net Impact of E-Commerce on Employment and Consumer Welfare in India’.

The report by Pahle India Foundation had estimated that online vendors generate 15.8 million jobs, including 3.5 million jobs for women. “On average, online vendors employ 54% more people and almost twice the number of female employees, compared to offline vendors,” it had said. As reported by online vendors, the highest net growth in employment is observed in management at 42%, followed by 39% in marketing, it further said

The report also highlighted that two of the most widely-recognised contributions of e-commerce penetration in the retail sector are the growth in employment and improvements to consumer welfare. At the same time, there are concerns that this impact may be two-sided, it had said.

“The retail sector is a growth engine for the Indian economy. A small but rapidly-growing chunk of the retail pie is e-commerce, comprising 7.8% of total retail sales in 2022 and growing at a CAGR of 27% between 2018 and 2030, which has transformed the retail landscape significantly in a short period of time,” it had said.

For the purpose of the study, it had conducted a pan-India survey of 2062 online vendors, 2031 offline vendors, and 8209 consumers of products from ecommerce websites across 35 cities in 20 states and union territories.

But this is not the first time the e-commerce and gig economy sector has come under the scanner. There have previously also been concerns about the working conditions of e-commerce and gig workers as well as the lack of social security and insurance benefits. A NITI Aayog report in June 2022 had said that the gig workforce is expected to expand to 2.35 crore workers by 2029-30 from 68 lakh in 2019-20 and an estimated 77 lakh in 2020-21. While highlighting that there is growing demand for gig work, it had suggested measures for improving skilling, expanding social inclusion and social security for such workers.