CAIT Vs Amazon & Flipkart: Trade Body Calls For Establishing Dedicated Ecommerce Regulator

Amid the Competition Commission of India’s (CCI) ongoing probe into Amazon and Flipkart, traders’ body Confederation of All India Traders (CAIT) has called for establishing a dedicated ecommerce regulator to address unfair trade practices in the Indian ecommerce market.

In a white paper, CAIT outlined several recommendations to create a unified dispute resolution mechanism and streamline the regulatory framework for governing ecommerce platforms.

“The technical complexities surrounding ecommerce and its impact on the entire ecosystem require an expert regulatory body,” CAIT emphasised.

One of CAIT’s key proposals is to limit foreign investments by advocating for a “sunset clause”, which would impose a cap on foreign direct investment (FDI) in ecommerce companies to prevent capital dumping.

“Incorporation of Sunset Clause on foreign direct investment in any ecommerce entity or its affiliates after getting the FDI in initial few years so as to avoid capital dumping. The companies may raise subsequent funding locally through local public offerings etc,” read the white paper. 

The white paper also stressed the need to safeguard smaller sellers’ rights to free and fair trade. CAIT argued that mandatory GST registration for conducting ecommerce operations should be abolished to ease the burden on smaller sellers.

Additionally, CAIT advocated that marketplace platforms should not sell goods or services directly or indirectly to sellers using their platform nor should they hold controlling stakes in any manufacturers registered on the platform. 

All sellers, it said, must be independent third parties, unaffiliated with the marketplace itself.

The white paper further proposed that ecommerce platforms must not offer differential commission rates to select sellers within the same product category. It also called for stricter oversight on deep discounts offered by platforms to a select few sellers, which, as per CAIT, distort market competition.

“In fact, ecommerce marketplaces should not offer any discounts at all, as this practice is inherently discriminatory and market-distorting,” CAIT noted.

Moreover, the trade body also underlined that platforms should be prohibited from using the data collected on their platforms to create their own products or share that data with preferred sellers. 

To curb such practices, CAIT recommended amending the “Consumer Protection (E-Commerce) Rules, 2020” to prevent misuse of consumer data for commercial advantage. Additionally, it called for “outlawing” the practice of data masking by ecommerce companies to ensure that sellers have access to strategic data.

“We suggest the creation of a framework that grants access to non-sensitive consumer data to sellers and third parties on ecommerce platforms,” CAIT proposed.

This comes at a time when the competition watchdog has already internally found both Amazon and Walmart-backed Flipkart guilty of flouting its antitrust directions. Recently, it was reported that both Flipkart and Amazon are facing a penalty of up to 10% of their global annual turnover for violating competition laws.