Despite years of efforts to rein in e-commerce giants, their monopolistic hold remains largely unchallenged. Recently, commerce and industry minister Piyush Goyal criticised platforms like Amazon, flagging predatory pricing policies and potential violations of foreign direct investment norms. However, these concerns are not new. The government has long spoken about ensuring fair play and creating a level playing field for all, but with little success.
One reason for the government’s limited progress could be its reluctance to introduce stricter regulations that might deter FDI. Goyal says the government is keen to attract FDI and technology that brings the “best of the world” to Indian citizens. Even while criticising online retail behemoths, Goyal reiterated the significant benefits of online retail. This might explain why companies like Amazon operate unchecked — India cannot halt the online retail juggernaut, even if an estimated 100 million small retailers across the nation are affected.
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Rise of e-commerce in India
Amazon has been in India for over a decade, but the rise of e-commerce coincided with the expansion of 3G networks. The debut of Mukesh Ambani’s Reliance Jio in 2016 further accelerated this growth. Higher internet penetration, coupled with the proliferation of smartphones and digital payments, especially during the Covid-19 pandemic, led to an online shopping boom.
While India celebrated this phenomenon, small businesses began to feel the pressure of the Amazon effect, with traditional brick-and-mortar retailers fearing they would be pushed out by e-commerce. Goyal also pointed out the sharp decline in corner mobile shops as consumers increasingly opted to buy online due to cheaper prices.
Small retailers cry foul
By 2020, following complaints from small traders, the Competition Commission of India (CCI) began investigating whether Amazon and Flipkart were violating competition laws. Goyal’s recent comments have revived an old debate on the impact of online retail giants. The commerce minister later clarified that the government is not opposed to online retail per se but is concerned with ensuring fair play for Indian businesses and consumers.
However, India was not entirely unaware of the potential effects of FDI when it opened the gates to foreign multinationals. Concerns about the consequences of allowing FDI in retail were raised over 15 years ago.
E-commerce dominating retail space
The key to addressing the influence of online giants lies in understanding their appeal. Industry insiders note that e-commerce thrives due to convenience, aggregation efficiencies, generous discounts, and broader market access for vendors. Despite its growing allure, e-commerce still accounts for only 7-8% of the retail market, valued at over $70 billion.
A study by the Pahle India Foundation observes that, despite the negative attention e-commerce has attracted, its impact on offline retail is mainly concentrated in sectors like electronics (particularly smartphones), fashion, footwear, books, and games. Meanwhile, traditional retail continues to dominate categories such as food, household products, jewelry, and beauty products.
If the government is genuinely committed to addressing retail concerns, it must establish a robust regulatory and institutional framework to oversee this vast market. Addressing issues like predatory pricing is impossible without effective action from the competition regulator.
Regarding anti-competitive practices, particularly the tendency of platforms to prioritise their own products over those of third-party sellers, thorough investigations are essential. Another critical area that needs immediate attention is data protection regulations. It is time for the government and policymakers to revisit the draft e-commerce policy developed several years ago.
Rather than issuing statements that create uncertainty among stakeholders, a more constructive approach would involve engaging in open dialogue and crafting a policy that addresses both anti-competitive practices and data protection concerns.
As governments worldwide recognise the profit-maximising strategies of online e-commerce, they are rushing to regulate this sector and its trade practices. While the focus has traditionally been on preventing tax leakages and protecting brick-and-mortar merchants, a renewed effort is needed to safeguard privacy concerning personal data on e-commerce platforms. Otherwise, in this era of the Fourth Industrial Revolution, technology giants will continue to exploit consumers’ digital footprints to sell their own or third-party products, amassing massive profits at the expense of unaware users.