Parliamentary Committee Recommends Identifying E-Commerce Platforms that Act as ‘Gatekeepers’

The parliamentary standing committee on commerce has adopted a strong stance on e-commerce platforms, recommending that India should select “gatekeeper” platforms of a specific scale that require more stringent supervision.

The committee reportedly believes that it is time for India to reform and enhance its ex-ante regulatory framework, as well as take steps to identify businesses that operate as gatekeeper platforms and establish a threshold for gatekeeper qualification.

It has proposed that the Competition Act of 2002 be amended to include additional quantitative criteria for identifying entities that act as gatekeeper platforms, such as the number of registered or active consumers and sellers on the platform, the number of transactions completed and the amount of revenue generated.

The Competition Act, 2002 replaced the erstwhile Monopolies and Restrictive Trade Practices Act, 1969. This act was first introduced in the Lok Sabha in August 2001. The definitions cited in the Competition Act are as follows:

• Acquisition is defined as a direct or indirect agreement to acquire shares, voting rights, or asset control over any enterprise.

• A cartel is defined as an association of producers and sellers who limit control over the distribution, sale, or promotions of goods through a previously agreed-upon arrangement.

• A dominant position refers to an enterprise’s position of power in a related market. It allows the company to operate freely and influence the market in its favour.

• Predatory pricing is the practice of lowering the price of goods and services well below the cost of production in order to eliminate competition.

• The interpretation of activity based on commercial justification, market impact on competition, and consumer impact.

However, criteria such as evaluation of the platform’s resources, amounts of data aggregated and its negotiating position such as its corporate customers and consumers, its gatekeeping function, and ability to determine the rules of the ecosystem may also be included, in line with the international growing trends.

The report also advised that platforms be required to notify regulators suo motu once they surpass the prescribed gatekeeper threshold.

As reported by Moneycontrol, various foreign practices, according to the committee, believe that digital enterprises of a certain size require “specialised and targeted regulation”.

Furthermore, the committee reportedly has proposed tougher procedures to detect anti-competitive mergers and acquisitions in the e-commerce sector, which comes at a time when internet businesses are likely to go through a period of consolidation following a fundraising boom.

The committee stated in a report on the country’s e-commerce sector that asset and turnover-based thresholds may not completely capture the significance of a combination of transactions in the sector, allowing the Competition Commission of India to avoid investigation.

It noted that requiring small sellers to register for GST has imposed an unnecessary burden on them when doing business through e-commerce platforms.

As reported, the committee also said that the worrisome 60-70% dropout rate from online platforms is concerning.

“The committee, therefore, recommends that the exemption provided to offline sellers with regard to GST registration be extended to online sellers as well with the same applicable threshold limit by the government,” it added.​

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