Regulatory bias towards e-commerce can undermine MSME growth

Uniform approach to retail sector needed to achieve $1 trillion exports vision Amazon and Walmart’s Flipkart are playing a critical role in MSME’s growth Onboarding challenges on Indian e-commerce platforms is a deterrent

October 28^th, 2024: India’s approach to e-commerce regulation risks undermining Micro, Small, and Medium Enterprise (MSME) growth in the country. By focusing on only one segment of the market, current regulations may unintentionally hamper MSME competitiveness and seller autonomy. A cohesive regulatory framework is necessary to ensure MSMEs can compete fairly, boost transparency, and support India’s economic vision of reaching $1 trillion in exports.

The Policy Consensus Centre (PCC) hosted a webinar today on “Unlocking Seller Autonomy: Ensuring Transparency and Fair Competition,” that brought together experts from academia, research institutions, and the e-commerce sector to address critical regulatory challenges impacting MSMEs in India’s e-commerce landscape. It also explored disparities between regulatory approaches and their effect on MSMEs’ competitiveness and autonomy in the digital marketplace.

Speaking at the webinar, Ms. Nirupama Soundararajan, Founder of Policy Consensus Centre, said, “The Competition Commission of India (CCI) and regulators must expand their perspective beyond just foreign players and consider practices across the entire retail sector. It’s essential to develop a mature understanding of how these practices impact competition and fairness. Achieving parity across the board is critical for fostering a level playing field that empowers all businesses, regardless of their origin. Only then can we ensure that the interests of MSMEs and independent sellers are truly safeguarded in our evolving marketplace.”

Regulatory focus on large online platforms can create a flawed perception of market dominance, panelists argued. Ms. Meghna Bal, Director, ESYA Centre emphasized, “An emerging trend in antitrust is the tendency to narrow the market scope, which inadvertently increases the likelihood of large firms being labeled as dominant. This focus on large online marketplaces as dominant players is fundamentally flawed. As retail evolves, especially online retail, we see many joint ventures increasingly concentrated in the hands of a few players, spanning both offline and online sectors. This reality underscores the need for a nuanced understanding of market dynamics considering complexities of both retail formats.”

During the event, a seller on Walmart’s Flipkart shared her experience, stating, “We generally have the freedom to set our own prices, but recently, there’s been an issue. Locking prices based on an average of the last 6–12 months and binding us to that is unfair.” The seller also raised concerns about onboarding practices by Indian e-commerce players like Reliance and Tata, highlighting challenges faced by independent sellers in navigating these platforms.

Mr. Lloyd Mathias, Business Leader, Angel Investor and Business Strategist noted, “To foster a fair and competitive marketplace, we need more regulatory stability and robust oversight on unfair trade practices. Sellers should not be held to ransom by platforms dictating price points or using threats regarding pricing operations. Just as we hold the offline world accountable, we must extend that scrutiny to online platforms, where unfair trade practices can weaken seller autonomy. Furthermore, we must recognize that there’s no place for nationalism in consumer markets; the focus should be on ensuring fair competition that benefits all stakeholders.”

The panel concluded by emphasizing how e-commerce platforms play a vital role in empowering MSMEs and independent sellers, and their success depends on fostering good business practices that uphold seller autonomy. For the digital marketplace to thrive, platforms need to streamline processes and maintain open, ongoing engagement with sellers. This means regularly seeking feedback, making continuous improvements, and addressing sellers’ needs proactively to make doing business easier. When e-commerce platforms prioritize transparent and seller-friendly practices, they protect the autonomy that is fundamental to fair competition and help cultivate a balanced, thriving ecosystem that benefits both sellers and consumers.

About Policy Consensus Centre (PCC):

The Policy Consensus Centre is a leading think-tank focused on promoting dialogue and solutions for critical policy challenges in India. Through research, advocacy, and collaboration, PCC strives to foster a policy environment that encourages innovation, competition, and economic growth.