India’s Ecommerce Draft Policy To Look At Regulating Deep Discounts, Flash Sales

The much debated ecommerce policy draft is reportedly set to be reviewed by the Commerce and Industry and Civil Aviation minister Suresh Prabhu this week and one of the proposed regulations includes a measure to protect offline retailers against the deep discounting by ecommerce players such as Amazon and Flipkart.

The ecommerce policy draft, which is being handled by Department of Industrial Policy and Promotion (DIPP), is likely to propose restrictions for differential and predatory pricing strategies such as deep discounts used by ecommerce firms.

“The government and industry will define flash sales and their duration to enable provision of a sunset clause to restrict predatory pricing,” said a person aware of the development.

Prabhu told the Lok Sabha on Monday that ecommerce players who are in a dominant position could also be brought under the ambit of India’s competition law under Section 4 of the act, if they abuse their position. The minister will internally review the ecommerce policy but this would not be a stakeholder meeting,” an official in the know of the details reportedly said.

Like in the US/UK and China where shopping festivals such as Black Friday and Singles Day drive a substantial chunk of annual sales for ecommerce companies , deeply discounted festive season sales in India too are a big earner for ecommerce  players. In the months just before the Diwali festival, Flipkart runs its ‘Big Billion Days’ sale and Amazon has its’ Great Indian Festival’.

This year, during the festive season sale period, a Redseer analysis shows that Flipkart accounted for more than half of the Gross Merchandise Value (GMV) of the entire ecommerce industry. Between Flipkart and Amazon, the sales GMV share was 62% and 38% respectively.

The Remaking Of The Policy

The earlier draft ecommerce policy, which fell through due to a barrage of criticism and differences between ministries and departments, mentioned a sunset clause, which defines the maximum duration of differential pricing strategies  ( such as deep discounts) to prevent platforms from directly or indirectly influencing the prices of goods and services.

In September this year, the government set up a group of secretaries to look into the issues related to draft ecommerce policy, chaired by DIPP secretary Ramesh Abhishek. 

Earlier this month, a media report cited a senior official stating that DIPP has held discussions on payment mechanism, ways to control the sale of counterfeit products through online platforms, and facilitating logistics for the sector. DIPP is now the nodal agency for matters related to ecommerce and is expected to put out a draft for  public discussion covering more than 15 issues relevant to the ecommerce sector.

[This development was reported by ET]