The All-India Mobile Retailers Association had recently threatened to approach the Competition Commission of India (CCI) against Chinese phone maker Xiaomi’s alleged bias in favor of online marketplaces over offline retailers. The issue is particularly relevant in the backdrop of the recent Supreme Court ruling that allowed the CCI to proceed with an investigation into a complaint by the Delhi Vyapar Mahasangh against e-commerce players Flipkart and Amazon, which was a purveyor of small and medium businesses. Represents, makes a particular charge. Partnership between smartphone makers and e-com companies for exclusive launch of smartphone models on these platforms. For antitrust investigations, the determination of the ‘relevant market’ is important to assess whether such transactions result in an abuse of an entity’s dominant position.
Relevant Market Dilemma: Under section 4 of the Competition Act, 2002 of India, “dominant position” means a position of strength enjoyed by an enterprise in a relevant Indian market which enables it to operate independently from competitive forces and to compete with its competitors or consumers. able to influence. Party. Therefore, to check any abuse of such dominant position, the first step would be to establish the relevant market in which competition has been affected. Section 2(r) of the Act defines it as “as may be determined by the Commission with reference to the relevant product market or the relevant geographic market or with reference to both markets.” In the present scenario, the question is whether Do our online and offline markets constitute the same relevant market?
The decisions of the Indian courts have not been consistent in this aspect. Although courts increasingly supported the view that online and offline markets fall within the same contextual market, there are opposite views.
In Ashish Ahuja Vs Snapdeal (2014), CCI observed that “offline and online markets are different channels of distribution of the same product and are not two separate relevant markets. In this case, CCI was of the opinion that consumer change from online to offline markets on the basis of price fluctuations and vice versa. In Deepak Verma v Clues Network Pvt Ltd (2016), CCI adopted the same approach. In these two cases, it can be seen that CCI has adopted replaceability test without looking at external factors. However, it can be seen that CCI has taken a significantly different position in many respects that other online platforms deal with, creating room for ambiguity on the issue. .
In the case of Fast Track Call Cab Pvt Ltd Vs ANI Technologies Pvt Ltd (2015), CCI took into account external factors such as “saving time, point-to-point pick and drop, convenience in terms of pre-booking facility, Ease of availability even at obscure locations, round the clock availability, travel time, etc.” and recognized that “radio cab taxi” services constitute a relevant market as they would be substituted with any other mode of transport in view of the above facilities. are not eligible.
Analysis of such cases: The customer-access cost of online retailers is much lower than that of offline retailers. The latter must bear the costs of setting up a warehouse, transporting products there, and so on, while online retailers can serve customers over a larger area with a single warehouse and customer-service unit. In addition, the transportation cost of the products is often passed on to end customers. Savings on these allows online retailers to sell the same products to customers at lower prices.
However, it should be noted that price is not the only criterion that attracts customers to an online store. Internet retail services reduce customers’ transportation costs, allow quick and convenient product searches, offer a variety of products in price brackets, and provide detailed product information that is often not available at regular retail stores. Huh. Furthermore, even though transportation fees are often charged by online retailers for the delivery of goods, it is usually only a fraction of the cost for customers to visit a brick-and-mortar store for these purchases.
On the other hand, offline retailers have the upper hand when it comes to customer experience. Many customers prefer to physically experience or inspect a product before making a purchase. Plus, many customers find instant gratification buying what they want, a feeling of satisfaction that is not matched by most online retail platforms, which usually take a few days for delivery.
What needs to be determined: Even though some customers may switch from online to offline and vice versa, competition authorities should examine whether they are a sufficient choice for a significant portion of consumers, and if so, if so. Both can be said to constitute the same relevant market. It is clear from the above discussion that both online and offline markets offer different shopping experiences, and at times, consumer choice depends not only on face-to-face price comparisons, but also on several other factors such as his/her own Age also depends on income. and location. Therefore, external factors must also be considered (beyond pricing, i.e.) when deciding on replaceability, especially in the context of a pandemic that has made safety a major consumer concern.
Given the way the COVID pandemic has changed shopping conditions, attitudes and habits over the past 20 months, with an increase in the number of retail consumers now relying on online purchases that are beyond price differentials, Indian jurisprudence Calls Analysis of whether an online and offline outlet constitute the same relevant market may need to be looked at from a fresh perspective.
Insaf Ahmed and Priya Garg are student research assistants at The Corporate House and law professionals teaching at OP Jindal Global University, respectively.
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