CCI Initiates Fresh Investigations Against Ecommerce Companies for Violating Resale Price Regulations

Last week we had reported that Competition Commission of India (CCI) has absolved major ecommerce portals from accusations of anti-competition charges filed by a strong lobby of offline retailers.

But it seems that the woes of eCommerce portals are far from over. As per reports emerging, it has been revealed that CCI will initiate fresh investigation against ecommerce portals for violating resale price & discount rules, as mentioned in the Indian Competition Act 2002.

If the charges are proved, then these ecommerce portals can experience a slew of penalties; and even change in their business model.

What Are The Charges?

As per CCI, they noticed that several ecommerce portals have made illegal discount and pricing arrangements with the manufacturers for reselling their products. As per these special arrangements, the manufacturers do not allow the ecommerce players to sell a product below a particular threshold.

Logically speaking, this makes perfect sense, as the manufacturers do not want to devalue their products, and to avoid it, they ask the sellers to maintain a particular pricing threshold. But when it comes to resale of products, then the same arrangement is deemed illegal and against the rules by CCI.

What Are The Rules for Reselling?

As per the Competition Act, 2002 (which was re-formed in 2012), Resale Price Maintenance is an offense and anti-competitive agreements which is liable for punishment.

In the Act, Resale Price Maintenance has been described as an agreement “.. to sell goods on condition that the prices to be charged on the resale by the purchaser shall be the prices stipulated by the seller unless it is clearly stated that prices lower than those prices may be charged.”

To simplify, assume a company named Tiger International, which sells cricket bats, decides to offer their products exclusively to Flipkart. During the negotiations, Tiger International explicitly mentions that Flipkart must sell every unit of a cricket bat at a minimum price of Rs 100, below which no product should be sold.

Such an arrangement, as per CCI under the Anti Competition Act, 2002, is not permitted.

As per the reports, CCI has started its investigation against ecommerce players, which has formulated such arrangements and contracts with manufacturers; inorder to sell their products exclusively on their platform.

CCI & Net Neutrality

In a related news, CCI has plans to investigate telecom players & ISPs to find whether they are violating any anti-competition rules or not.

CCI decided to interfere after TRAI and the Indian Govt. received millions of petitions and emails to save Net Neutrality in India.

However, considering that there exists no rules or clear regulations to check Net Neutrality principles vis-à-vis Anti-Competition rules, they will wait till Govt. comes out with clear-cut rules for the issue.

An official from CCI recently told PTI, “With regard to the issue of Net Neutrality, there are no clear regulations in place so far. The authorities are working on it and once the regulations are clear, then we (Commission) can look at the issue”

Although Indian Govt. had mentioned that they will come out with their verdict on Net Neutrality on May 9th, there hasn’t been any update from their end.

We will keep you updated as more details come in.