Asmbhav Summit moots stricter regulation and central agencies led investigation over foreign platforms to save livelihoods of lakhs of small retailers

Asmbhav Summit moots stricter regulation and central agencies led investigation over foreign platforms to save livelihoods of lakhs of small retailers

New Delhi: The ‘Asmbhav Summit’, successfully held virtually across India representing the voices and aspirations of lakhs of small retailers and traders across India saw enthusiastic participation from participants across industry and callings. A key point that emerged was the need for stricter regulation and penalization for wrongs done by the foreign retailers posing as marketplaces. According to Dr. Ashwani Mahajan from Swadeshi Jagran Manch, “Some government agencies have now become active and vigilant. ED is one while the Competition Commission of India (CCI) is also investigating and has gone to court too. My request is for the RBI to investigate FEMA violations wherever these have taken place so that the foreign platforms, if they are defaulters, can be checked and stopped.”

Lively, informed panel discussions among legal experts and amongst leading industry associations provided practical insights into the problems and challenges facing the fair operation of the e-commerce industry today. Speakers also provided a set of solutions, both industry specific and regulatory to control errant foreign retailers from strangulating domestic retailers and from bypassing the existing laws with impunity. The summit witnessed two engaging panel discussions followed by the ‘Asmbhav Awards’, given to those individuals who had managed to the possible impossible through their actions and deeds insofar as the destruction of the small Indian retailer is concerned.

Top Concerns

1. Foreign retailers misleading the government by showing a large number of sellers on their platforms. The reality is that only five to six sellers account for 95 percent revenue from their platforms.

2. Foreign e-commerce retailers misuse the data and sales trends related information of small sellers to gain insights into consumer behaviour and then use either their preferred entities for sales leads or launch private labels to serve these identified ‘hot’ customers.

3. Foreign e-commerce retailers are essentially just retailers in their DNA and do not have any proven expertise of running marketplaces in other countries. Since they understand the direct-to-customer retail game better, they try to create surrogate models to achieve the same goals instead of building marketplaces in India. They have procreated just a handful of entities which do most of the business on their platforms while lakhs of small, unsuspecting traders are kept dangling with false hope.

4. There is no standardisation of pricing, policies, or even business terms for small and large sellers working with so-called foreign retail marketplaces. There is discriminatory pricing and other adverse conditions making it difficult for small sellers to grow on these platforms.

Top Demands

1. Indian investigative and enforcement agencies must look into the practices of foreign e-commerce retailers operating in India. The ED, CCI, and RBI, etc., must unearth the real story and take stringent action on these operators, including cancellation of license to operate in India.

2. CCI should monitor the large sellers on these platforms and their business activities and relationships with these platforms should be controlled. Any large seller should have a cap of sales which it can achieve on these platforms. This should be a maximum of 10 times the average seller sales (total sales on the platform divided by the number of active sellers on the platform).

3. Exclusive pricing deals between mobile brands and platforms should be declared illegal.

4. The government should actively promote home-grown Indians’-owned tech and internet companies.

The panellists were of the view, put forth by Mahajan when he said, “Believe me, and I say this with full responsibility, that these foreign retailers are all working illegally in India. These companies are operating in my country through deception in e-commerce, since otherwise, as per law, they can only operate under certain clearly stated restrictions. For instance, they can only run a platform, implying that these companies cannot keep any stocks, sell own label brands, or offer market discounts. Unfortunately, and to the detriment of our small sellers and even the entire Indian market, foreign retailers, under the guise of running platforms, have blatantly misused their money and influence to wield their clout and twist the regulations at will. We hope that our coming together at Asmbhav will prod the government and our institution to quick and effective action.”

Laxity in law implementation

The key points that emerged from the various deliberations go to the very nub of the issues that are destroying the small trader who has gone largely unseen and unheard so far. The central issue of the summit was the absence of implementation of rules and laws through oversight and loopholes. Speakers agreed that there was a need to urgently strengthen our regulatory system so that errant foreign retailers may be brought under control. For this, it was stated, our institutions had to work as mandated, and, over and above all, there is political will.

Threat of monopolistic practices

Another tent-pole of the discussion was the issue of monopoly and how CCI law and FDI laws need to be re-worked. According to Pranav Sachdeva, Advocate on Record, Supreme Court, “We should not focus too much on FDI law since these e-com giants do not technically violate these. We must focus on competition law being violated and create a policy that stops retailers above a certain size from becoming sellers.” Elaborating on this, MM Sharma, Advocate, Head – Competition Law & Policy, from Vaish Associates Advocates Law opined, “Effective enforcement of law through CCI is an absolute must now. Predatory pricing cannot be applied as a contravention since none of the players can be designated as ‘dominant’—only one entity can be dominant as per competition law.

Platforms posing as marketplaces

The systemic illegality of the so-called platforms operating as marketplaces was highlighted. According to Sharma, “There are three clear aberrations of the new digital marketplace: Self-preferencing, abuse of dominance, foreclose of data access in acquiring potential customers.” According to Chanakya Basa, a legal expert, “The need of the hour is objective dispute resolution between the platform and the aggrieved retailers and, where applicable, a deterrent penalty. In many cases, we now see the crying need for an Ombudsman also.”

Ill-treatment of small retailers

The issue of ill-treatment of small retailers at the hands of so-called platform owners turned marketplaces assumed centre-stage. According to Abhay Raj Mishra, PRAHAR, “the small to medium sized traders have been constantly subjected to a cruel bias by the foreign retailers. It is apparent that these merchants serve no other purpose than just becoming lifeless statistics for the large platforms to claim bragging rights on reach and depth.”

Bewailing their plight, the All-India Online vendors Association (AIOVA) spokesperson said, “When we failed to find solutions to our issues of mistreatment and arbitrariness by the monopolistic platforms, we reached out to the government five years ago, who ignored our complaints saying we were just 0.5 percent of retail then. Today, as per the government figures we have a seven percent share. Hope we shall be heard now.” Said Abir Roy of Sarvada Legal, “Today, it is the CCI that can give relief. My recommendation is that the SEBI example can be a good one to emulate. There should be no relation between sellers and platform at all, no common employees, no holding, no equity.”

Data Dictatorship

The contentious matter of data was also extensively discussed. As per Parminder Singh from IT for Change, “The central issue that faces us today is data ownership. With a single entity controlling all data, power fully resides with that entity always. This has to be addressed and data must be made democratic and free.”

Loss of livelihoods

One of the key issues discussed related to loss of livelihoods through predatory pricing and arbitrary contracts. According to Arvinder Khurana, AIMRA, “The large e-commerce portals are flouting FDI rules at every level and tying up directly with brands and offering deep discounts that none of us can match. As a result, over 40,000 mobile shops have shut down in the last two years. Portals now have 55 percent market share in mobiles whereas mobile shops have seen 60 percent loss in business.”

Insider View

The Summit also included views and observations by Vijay Gopal, a former Amazon manager, who brought to light the unsavoury practices of arbitrary legal contracts and sudden modifications to the modes of engagement between small retailers and the large foreign retailers. He said, “Fundamental rights are suspended in ecommerce, so to speak; anyone can be ousted, or terms changed at will without assigning any reason.

Asmbhav Awards

The finale of the Asmbhav Summit was the Asmbhav Awards which were given to individuals who had the dubious distinction of actually making the possible impossible as far as the small India retailer was concerned. These inglorious awards were given to Mr. NR Narayanmurthy, Mr. Jeff Bezos, and Mr. Amit Aggarwal, Country Head, Amazon India.