E-Commerce – A Chaotic World Waiting For Stabilisation

Prime Minister Narendra Modi literary sum up the Indian thrive for information technology and growing e-commerce sector in his words by saying ‘IT+IT=IT; Indian talent + Information technology = India Tomorrow’. The Digital India campaign has given a push to the budding e-commerce sector of India. However, the e-commerce sector doesn’t have a garden path ahead of it. Old legal machinery unfamiliar with the new game and its new rules, prevailing skepticism in Indian diaspora regarding the reliability of e-commerce enterprises, low internet penetration are some of the few challenges before them. On the other side of the coin, the e-commerce sector has also baffled the enforcement agencies. In the absence of laws dedicated to e-commerce sector, the prevailing ambiguity has created several problems. The problems range from Competition Law to Investment Laws and even to Intellectual Property Laws.

Possible Competition Law Issues

In competition law, exclusionary abuses have been defined by the European Court of Justice as those practice of a dominant enterprise which is not based on normal business conduct and which seek harm its competitors competitive position or to exclude them from the market altogether.[1] We even term it as predatory behaviours. The world of antitrust is full of examples of such behaviours. From the days of United States v. Terminal Railroad Association,[2] where an essential facility was denied for eradicating competition, to ECS/AKZO[3] where the good was supplied at very low cost. Similarly, the virtual world is no different.

Even though Internet is a uniform platform for all – with no demarcation of market value or property rates according to its location, those who have achieved dominance have proposed to be ‘landlords’ of their ‘network’ and demarcate the net by dividing it and establishing their ‘ownership’. They have threatened E-commerce websites of tying up with the telecom providers and restricting the internet. It is in this regard that the hue and cry of Network Neutrality are made in India. Vijay Shekhar Sharma’s, founder of PAYTM strong standpoint on  ‘net neutrality’ is doing the rounds on social media with tweets like: “Oh my fellow Indians, either choose this & do a jihad for independent Internet later or pick Net Neutrality today.”

E-commerce websites are generally app based. These apps require operating systems for running. In the absence of one, it can’t be used. Therefore, it is argued that the dominant operating systems like Android and iOS and windows should be checked for possible antitrust abuse by way of blocking certain apps.[4] The best example of such blocking can be found in the classic case of Apple iTunes where the enterprise was charged for anticompetitive conduct by blocking access to outside developed files from the Apple store.[5]

Contrary to this, is the problem of geo-blocking. Blocking content based upon region. On 23 July 2015, the Commission sent a statement of objections to Sky UK and the ‘Big Six’ major Hollywood film studios, alleging that geo-blocking provisions in their licensing agreements restrict the users from watching free content and arguably infringing EU competition law.[6] This is another fish in the pool of antitrust world facing challenges. Such practice results in market segregation and discriminates consumers on the basis of their access points.

Question of Fund Raising

For pumping a heart, you need blood. For running a company, you need money. Nowadays, the most sought way of investment is foreign direct investment. The current government has liberated the market further and is slowly opening the gates for the international investment.

Interestingly, there is no definition of an online marketplace under current FDI laws.[7] No wonder, this lacuna led to the on-going tussle and litigation against online retail website’s foreign investments.[8]

Recently, crowdfunding has been considered as another possible way of fundraising. Crowdfunding being one of the oldest ways of generating funds is on the outset appears to be legal, however, in the consultation paper moved by SEBI, certain questions have raised upon its legitimacy. One of the primary reasons behind its legitimacy is the ambiguous nature of investors. It raises concern for the security forces. Moreover, as there are no particular legislations governing crowdfunding, there is a possibility of the dichotomy between SEBI and the incorporated companies.

What’s the Way Forward?

E-commerce is here to stay for the tremendous convenience and transparency it brings to the consumer. The policies must aim to garner more compliance and taxing such platforms will essentially create a level playing field. FDI must not be discriminatory. Thus, allowing B2B (business to business), and not B2C (business to consumer) and C2C(Consumer to Consumer) creates tension between stakeholders and opens the field for violation.

Interestingly, the Competition Commission of India in Fast Track Call Cab Pvt. Ltd. v. ANI Technologies Pvt. Ltd.[9] has made a prima facie opinion for possible predatory pricing qua foreign investment. Similarly, the Online marketplaces and being dragged to courts against heavy discounting due to their strength of funds from investors including foreign investors.

[1] Case 85/76 Hoffmann-La Roche v. Commission.

[2] United States v. Terminal Railroad Association, 224 U.S. 383 (1912).

[3] ECS/AKZO, 28 OJ European Communities (No. L 374) 1(1985).

[4] Scott Cleland, EU Antitrust Endgame is Google-Android Platform Neutrality (May 08, 2015) available at http://precursorblog.com/?q=content/eu-antitrust-endgame-google-android-platform-neutrality (last accessed on January 25th, 2016).

[5] Apple iPod iTunes, 796 F. Supp. 2d at 1146-47.

[6] European Commission Press Release Database, Antitrust: Commission sends Statement of Objections on cross-border provision of pay-TV services available in UK and Ireland (July 23, 2015) available at http://europa.eu/rapid/press-release_IP-15-5432_en.htm (last accessed on January 25th, 2016).

[7] Asit Rajan Mishra, Government Set to Come Out with Definition of E-Commerce, liveMint (December 02, 2015) available at http://www.livemint.com/Industry/PGgMxhKaIISS0I0pZa0VXO/Govt-working-on-definition-of-ecommerce-Nirmala-Sitharaman.html (last accessed on January 25th, 2016).

[8] Please refer to All India Footwear Manufacturers & Retailers Association & Ors. v. Union of India & Ors., WP (C) 7479 of 2015.

[9] Fast Track Call Cab Pvt. Ltd. v. ANI Technologies Pvt. Ltd., Case no. 06 of 2015.