India: Do Online Markets Effect Competition?

Article by MM Sharma, Head Competition Law & Policy Practice, Vaish Associates, Advocates, New Delhi, India

The author heads the Competition law practice at Vaish Associates, Advocates, New Delhi. He served in the Competition Commission of India. He can be reached at The views expressed are personal.

Of late, media is abuzz about the ongoing clash between the retail physical markets and online markets (e-tailers). A recent news item in The Financial Express of 16th October, 2014 "Online and offline retailers are on war path at present with the latter accusing e-tailers of resorting to predatory practices to grab a larger share of the $525 billion retail market in the country. In fact, traders body CAIT has threatened to move the Supreme Court and Competition Commission of India (CCI) if government failed to act on complaints of alleged unfair trade practices by ecommerce firms like Amazon, Flipkart and Snapdeal" evoked my interest to examine if there areany competition issues or are real issues being brought up or is it only a media hype?

Can the e-tailers, a small part of the overall electronic commerce in India, estimated to be over INR 400 Billion in 2013 and dominated by online travel & booking portals for movie tickets, such as MakemyTrip, Yatra , BookmyShow etc. in the private and IRCTC in the public sector, be accused of violating the competition laws of India ? Are the perceived threats to competition for real? Or should the threat to the Physical retail stores, from growing popularity of the e-tailers due to penetration of the internet in semi urban centres now, be taken as a threat to competition per se? Or more simply, should a threat to competitors (physical retailers) be taken as threat to competition as such? Conceptually, competition law is enacted to protect and prevent "competition" and not the "competitors"! After all, both have co-existed in the West for so long!

Further, even in the above context, are there no serious anti-competitive practices in the electronic commerce activities, of which e-tailers, like flipcart, snapdeal are a constituent? What are the lessons for an emerging economy like India from the experience of e-commerce activities in the developed economies where competition issues are taken very seriously?

Before analysing both, it will be interesting to have a flavour of a real case study in India. The case in hand is about a physical market player trying to get the sale of its products promoted through online portal of Snapdeal. The complaint was filed in the Competition Commission of India (CCI). The complainant was engaged in selling various products like pen drives, hard disks, laptops etc. and wanted to sell its products online through the portal of Snapdeal, and had started selling it online through Snapdeal initially too but the online sale was scrapped in January, 2014 by Snapdeal because the complainant was not in the list of the "authorised online channel partners" of ScanDisk India, the Indian sales office of SanDisk Corporation, USA, also engaged in the business of manufacture, distribution and sale of non-volatile memory drives or flash drive and storages devices of different capacities, SD cards, micro SD cards, solid state drives etc., and thus a competitor of the complainant. Obviously, SnapDeal and ScanDisk India had some agreement to market the latters' products online for Indian consumers, which may have been subsequent in time to the agreement which Snapdeal had with the complainant firm. The focus of the complaint was that through this method SanDisk and SnapDeal, in collusion with each other, were trying to stop the complainant from offering competitive pricing which was much below than the other sellers of the same product.

However, instead of taking the next step, i.e. investigating this complaint, CCI vide its order dated 19 May,2014 had closed the case holding that "both offline and online markets differ in terms of discounts and shopping experience and buyers weigh the options available in both markets and decides accordingly. If the price in the online market increase significantly, then the consumer is likely to shift towards the offline market and vice versa. Therefore, the Commission is of the view that these two markets are different channels of distribution of the same product and are not two different relevant markets." An appeal challenging this order of closure has been admitted by the Competition Appellate Tribunal (COMPAT) on 08 October, 2014 and the matter is sub judice.

The question naturally arises whether the CCI was correct in holding both the online and offline "markets" as one and the same as mere different platforms/suppliers now available for sale of the same product to the same customer instead of being two distinct "markets" competing with each other. Was it a competition issue or a case of breach of contract by snapdeal for which the remedy lies with the civil courts and not in CCI? Since the matter is sub judice, the question is open to a judicial decision.

Adverting to our set of propositions i.e. whether there are real "competition" issues or an ill-informed media is just being gradually made to taking up cudgels on behalf of a weak competitor and what, if any, could be the "real" competition concerns that have emerged outside India ?

Since internet intensifies price competition, this may not be liked by most of the physical retailers and they may just be trying to protect their margins by trying to restrict price competition online so they can continue to compete on non-price elements such as service and presentation in-store. Filing complaints in CCI could be the easiest way to do so by camouflaging this as a genuine competition issue. Incumbents might defend their conduct using efficiency-based arguments based on limiting free-riding, improving service, or protecting brand signalling of quality. These can be legitimate concerns, and sometimes the firms are quite frank and say they are simply protecting what most consumers still choose to use: bricks-and-mortar sales outlets. Difficult questions of balancing efficiency, exclusivity and exclusion have arisen in such cases in traditional markets in other jurisdictions and similar questions are likely to arise in India when assessing restraints of online commerce.

On the other hand, there could be genuine contractual issues in existing physical retailers trying to use online platform for mitigating decline in profits and the online portals trying to resist, for objective commercial considerations, which may eventually lead to foreclosure of opportunity to use the online portal for smaller, often , domestic players, as noticed in the above case. Online portals are supposed to provide use of their platform on equitable and fair terms, to benefit the end consumer with lower prices.

Let us admit that to the end consumers, online and offline markets are not really separate. Many "shopping journeys", mainly in metropolitan cities, do take place purely along one of those channels; but increasingly the line is blurring. As we all readily experience, some shoppers start searching in the real world, then go online to comparison shop, and then make the purchase; some go the other way; and some consumers start online, dip into a shop and pop back online again. Some even go online while in-store, comparison shop with other bricks or clicks outlets, then show these rival offers at check-out, which stores can then match or better, or lose that customer. To the consumer then, online and offline options are merging; and firms are experiencing this too, moving towards providing service in both channels to meet growing customer expectation.

Thus, in assessing business practices, the competition authority must take in account the above shoppers' journey and think more from the consumers' perspective. There is a need to have a view on how a potentially anti-competitive restraint might affect this market environment, rather than on the particular form of 'restraint' that is used.

So, then, what are the real competition issues that may plague the sale of products or services through the online portals or the e-tailers? Are there any hidden consumer risks in e-commerce in general?

Consumer risks- Alongside the huge benefits that the internet provides for consumers in terms of improved information and choice, new sources of consumer detriment are emerging. For example, fake reviews, undisclosed commercial blogging, complex tariff structures, misleading or skewed search results, drip pricing, concealed recurring payments, and complex bundling can all harm consumers' interests and distort competition. Problems may be even worse in markets characterised by information asymmetries, consumer biases (including to inertia) or vulnerability, like those in semi-literate populace in semi urban Tier -2 and Tier -3 towns or in rural areas .The Consumer fora need to act quickly to protect consumers and need to act comprehensively, recognising that the online world is international. CCI also need to act so consumers do not lose trust in online markets themselves, so that internet-based trade can continue to flourish and offer them the information and confidence they need to exercise effective choice.

Competition risks- The Internet has lowered search costs but not to zero because consumers have exogenous search costs and firms adopt tactics to make more difficult for consumers to compare prices. Although the Internet has expanded the geographic scope of transaction, most of the e-commerce still takes place within neighbouring areas because consumers prefer to shop within limited distances both for cultural and for security reasons. Though distribution costs were generally lowered as the Internet allowed manufacturers and consumers to trade directly and online retailers to carry a much wider variety of products. However, buying on-line may create information asymmetry because consumers cannot test the product they are going to buy and so it is more difficult for retailers to build a reputation. As a result, Internet is making price competition more intense, geographic markets are becoming wider and it is also allowing consumers to buy products that would not be available in the physical world.

Globally, there have been two types of competition issues, one common to both physical and online market place and the other unique to e-commerce. The former is notice in (i) Resale price maintenance (RPM). RPM is treated very seriously in all jurisdictions as an infringement by 'object', because it has such a high potential for restricting competition, and consumers may end up paying more than is necessary. The second type of issue noticed are (ii) internet minimum advertised pricing (IMAP) acting to set a price floor online. IMAP and other vertical restraints that prohibit the advertising of any prices online, or ban online sales outright have also been a concern. IMAP restrictions soften intra-brand competition, reduce discounting and can mean higher prices for consumers ;(iii) Dual pricing restrictions raise similar issues. Setting a higher price for online sales may be seen as a way of restricting passive sales; (iv) Price ceilings and platforms-Restraints that set price ceilings can operate to soften price/commission and competition on the platforms, and any resulting increased costs of sales may be passed through by third party sellers to consumers. Price parity and price relativity agreements have come up in a number of antitrust cases and (v) Preventing selective distributors from selling through platforms- like the one seen in the Indian case study above. There are many other practices which can be mentioned, such as, access to platforms, online-targeted advertising, MFN clauses or the "Price parity " or "Best price" agreements between seller and an electronic trade platform , under which the physical sellers undertakes not to charge on that platform a price that is higher than the price that he charges on other platforms. Such agreements are condemned by most competition authorities.(the recent Apple e-book case being one example).

Under the Indian competition law, these practices will attract intervention from CCI only if the e-tailer is found "dominant" in the "relevant market" and the determination of each itself will be a difficult task before CCI.

New wine, old bottles, and telling the difference- One question that naturally arises. Are the issues in online sales in any way or substantially any different from what are found in physical sale? The answer has to be in negative. Internet or online markets, like mobile networks, exhibit strong "network effect" i.e. the value of the product or service increases with each added user, which reduces the variable cost to almost zero for large players ,like Google or Facebook with billions of users worldwide. Like in the case of economies of scale, network effects can make it hard for a new firm to enter the market where the minimum viable scale of Network is large in relation to the size of the market. Online markets with network effects are characterized by such inherent "entry barriers" for new entrants because of large networks of existing players created due to their "first mover" advantage, for which they cannot be blamed. However, what also must concern competition agencies is the other, non - price predatory behaviours exhibited by existing and dominant players such as excluding rivals from "platform software" , as was seen in the above case study .

Such conducts are likely to be repeated in developing countries like India as more and more retailers are likely to include the online platform as an alternate mode of retail sale, as noticed in the recent joint venture between Kishore Biyani of the Future Group (Big Bazaar) and Amazon India. CCI has to act swiftly and intervene when breaches of competition law are significantly and artificially preventing consumers from exercising effective choice. Similarly, consumer authorities should be prepared to intervene quickly and comprehensively when breaches of consumer law are distorting the information consumers need to be able to choose. 

Thus balancing the potential competition issues with the numerous advantages for the consumer without sounding too interventionist should be the ideal approach for the fair trade regulator.

Specific Questions relating to this article should be addressed directly to the author.

© 2014, Vaish Associates, Advocates,
All rights reserved with Vaish Associates, Advocates.

The content of this article is intended to provide a general guide to the subject matter. Specialist professional advice should be sought about your specific circumstances. The views expressed in this article are solely of the authors of this article.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

MM Sharma, Head Competition Law & Policy Practice
In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.