Reliance backs govt on proposed e-commerce rules as Tatas oppose

Stand on marketplace draft at variance with Tatas

E-commerce policy, which is typically a foreign-versus-Indian battleground, may turn out to be a pitch for a domestic tussle as well on the issue of doing business with related parties. Reliance Industries has endorsed the government view that a marketplace entity must not have its related parties or associated enterprises as sellers on the platform.

The development puts the two biggest Indian business groups—Reliance and Tatas—on opposite sides in their response to the proposed e-commerce policy.

Tatas have opposed the government move on restricting online marketplace business with related parties. The Tata group, which is building a super app,  told the government recently that the measure to restrict linkages with related parties would stop, for instance, Starbucks (a joint venture with the Tatas) from selling its products on a Tata-owned marketplace website. The same would apply to Croma, Voltas or Titan—all Tata ventures—when it comes to selling on the group’s e- commerce platform. At a conference recently, commerce and industry minister Piyush Goyal had spoken out against the Tata group for opposing the e-commerce draft framed by the government.   

Mukesh Ambani-led online retail business Jio Mart has decided to host products of only third party sellers on its marketplace platform, according to sources in the know. The group has conveyed its view to the ministry of consumer affairs, which recently brought out a draft for discussion on amendments to the Consumer Protection (e-commerce rules) Rules 2020.

A Reliance spokesperson declined to comment on the issue.

To comply with the e-commerce rules, Reliance would need to tweak its market place model. Currently, Jio Mart sells products owned by its related companies too.

Sources said Reliance may have two online formats or super apps--one could be a marketplace serving only third party sellers and the other could be a clutch of inventory-based businesses with no restriction on related parties. ‘’Even now, consumers go to Hamleys (acquired by Reliance) or Reliance Digital directly to order things,” a source aware of the development said.

The e-commerce draft rules, meant to bring a level-playing field between Indian and foreign players, followed complaints by brick and mortar retailers that online majors promoted select sellers on their marketplace platforms. They also alleged that many e-commerce companies used practices that could stifle competition.

The Supreme court recently gave a green signal to the Competition Commission of India to investigate Amazon and Flipkart on alleged anti-competitive practices.

Those supporting the Tatas argued that although the rule change seemed to be an attempt to impose curbs on e-commerce players with significant FDI, it could hurt the Indian players in the process. Large diversified Indian groups like the Tatas, Birla and Bajaj, which have built a customer eco system by foraying into diverse sectors through group companies, would need to alter the model, a top executive of a domestic retail chain said.

The e-commerce draft has also put in other restrictions. For instance, it does not permit usage of the name or brand associated with that of the marketplace e-commerce entity to offer for sale of products or services on its platform.

Also, the definition of an e-commerce entity has been expanded in such a way that it will impact diversified Indian groups. Under the new draft guidelines, the definition of an e- commerce entity has been extended to include all related parties.

A debate is already on in the country as to whether super apps work. Bharti Airtel is one company which has decided not to pursue super apps. A senior executive of Airtel said the concept had worked only in China, where companies like Tencent have a huge subscriber base. That’s also because competition from foreign companies is limited in China and customers have limited choice.