E-comm firms may be asked to reveal discount source under upcoming policy

In a move to ensure e-commerce companies are not indulging in predatory pricing, online marketplaces might soon have to disclose who is funding the discounts as part of the pricing details of a product, it is learnt. 

According to sources, under the upcoming e-commerce policy, platforms might have to give proof with every discounted product that the slash in prices is funded by the seller or brand and not the e-commerce portal itself. The upcoming e-commerce policy might not only have a new set of rules limiting the maximum discount given on a product, but also ensure it is the seller giving the discount.

“Under the e-commerce policy guidelines, platforms might have to a give detailed break-up of the discount in the pricing details to ensure e-commerce portals are not the ones financing it. Companies would even need to get yearly audits of discounts done mandatorily by independent auditors to ensure there has been no predatory pricing,” said a senior official at the commerce ministry. 

Sources indicate that the government is keen on ensuring offline retailers get a level playing field and are not rooted out by major e-commerce firms. Online marketplaces, on their part, maintained that they were following all guidelines around discounting and it is the seller offering the discounts.

“Even if a product is available at 80 per cent discount, it is the seller giving it. Sellers see value in giving that kind of incentive. We are following all rules set by the government and not indulging in anything that is not allowed. We work with traders and retailers in the country and not against them,” said a senior vice-president of one of the biggest e-commerce companies in the country. 

Sources indicated that some of the other things that would make it to the e-commerce policy would include provisions around data localisation, and a regulatory authority to monitor the e-commerce business in India with powers to penalise both Indian as well as foreign e-commerce players. 

To ensure discounts are not given via the cashback route, the government might also heavily regulate cashbacks given on the various platforms, especially by mobile wallets.

Trader bodies such as Swadeshi Jagran Manch, Laghu Udyog Bharati, and Confederation of All India Traders (CAIT) have over the years voiced their concerns over predatory pricing by e-commerce firms. 

“The monitoring of compliance of the policy is a big challenge in the absence of any regulatory mechanism. The government has very little knowledge about the actual number of e-commerce portals working in the country since their registration with any authority is not mandatory,” Praveen Khandelwal, national general-secretary, CAIT, said. 

The government had last year also restricted flash sales and deep discounting for e-commerce companies with foreign investment under foreign direct investment (FDI) in e-commerce guidelines. 

However, most players, including Amazon, Flipkart and others, are still holding massive discount sales. There was also a clampdown on the sale of private labels on such platforms. 

Besides, the current guidelines also restrict them from entering into exclusive merchandise deals. 

For making an e-commerce policy, yet another committee — the third so far — has officially been constituted. Under the authority of the Department for Promotion of Industry and Internal Trade (DPIIT), it will be headed by the additional secretary, with representatives from the commerce department and Ministries of Micro, Small & Medium Enterprises and Consumers Affairs, besides legal experts as members. 

The committee will provide necessary clarifications on issues related to FDI in e-commerce, it is learnt. Officials at the DPIIT said the next internal meeting for e-commerce policy will be held in the current week.

What’s in the e-commerce policy cart?

• Every e-commerce portal to obtain registration from the e-commerce regulatory authority before beginning operations
• E-commerce portals working as marketplace to mandatorily have an office in India
• Cashbacks given by online marketplaces and e-commerce firms to be regulated
• Predatory pricing to be penalised by the regulatory authority