Deep discounts by large e-commerce players may harm competition: CCI study

Discounts lead to lower prices and can reflect cost savings arising from a variety of sources.

A market study conducted by the Competition Commission of India (CCI) reveals that while discounts by e-commerce portals leads to user growth, but offering huge discounts by large platforms may have the potential to harm competition in the sector. The study was conducted to understand functioning of e-commerce in India and its implications for markets and competition.

“Discounts lead to lower prices and can reflect cost savings arising from a variety of sources. Discounts offered by the platforms in the early years are typically seen as a means to establish network effects for user on-boarding. However, discounts can harm competition when used as an exclusionary device by enterprises with market power,” the CCI study said.

The market study on e-commerce in India, released on Wednesday, was initiated by the fair trade regulator in April 2019 with a view to better understand functioning of e-commerce in India and its implications for markets and competition.

Examining competition issues in goods category, CCI said the issue raised by sellers is related to online discounts on major goods platforms, purportedly pushing the prices below cost, and impairing the offline small retailers’ ability to compete in certain product categories.

Platforms denied any involvement in pricing and have consistently maintained that all sellers on their platforms were independent sellers who themselves set prices. This, however, does not detract from the fact that ‘preferred sellers’ appear to be operating exclusively on either of the two major platforms, the fair trade regulator added.