Calcutta Notebook


Bharat Jhunjhunwala

E-commerce has provided huge relief to the consumers in the time of the pandemic. The consumer has been able to have the required goods delivered to his doorsteps. The choice of the consumer has also been expanded. I needed a book that was not available in India. This writer placed an order with an international e-portal and the book was delivered in 15 days. It so happened that the book came in damaged condition. The e-portal replaced it within 3 weeks. It was not possible for me to obtain the book with such ease sitting on my computer if there was no e-portal. It has also become possible to compare the prices. The consumer can, for example, search for a particular brand of a mobile phone on two or three e-portals and order the cheapest available. E-portals are, therefore, here to stay and so it must be. However, the emerging problems need to be addressed.

E-portals often promote the sales of goods produced by their own subsidiaries. Say, an e-portal has established a factory to make mustard oil. The e-portal displays the oil produced by itself upfront even though it may be of substandard quality and of a higher price. This puts other sellers at a disadvantage and imposes unnecessary cost on the consumer while the e-portal makes hefty profits. Drivers of Ola and Uber say that the e-portals give more traffic to the vehicles owned by the e-portal and less traffic to cars taken from private taxi owners on contract. The e-portals do the same. They hide cheaper alternatives and display their own products and befool the customer. The European Union has, therefore, made rules that e-portals will have to display the goods produced by themselves and good produced by others with equal visibility. The United States has proposed that an e-portal will be prohibited from establishing its own factories. A company may decide to run an e-portal or a factory to manufacture mustard oil. It cannot do both just like a government doctor cannot undertake private practice. In other words, there will be a strict separation between the aggregating activity of the e-portal and the manufacturing and selling activities. The e-commerce rules proposed by the Government of India do not prohibit a e-portal from manufacturing and selling own goods. Such activity must be prohibited as proposed in the United States.

The Government of India wants that domestic goods be produced and sold more than imported goods. Atma Nirbhar is the catch word. However, e-portals often display foreign goods with greater prominence. The Government has proposed rules that would require the e-portals to compulsorily display domestic goods along with foreign goods. Flash sales promoting specific goods are also proposed to be banned. The e-portals push the sales of their preferred producers under the flash sales putting other sellers at a disadvantage. These steps are welcome. The Government needs to do more though. They can sell goods that are expiring in, say, two months without disclosing this to the buyer. The e-portals should also be required to display the “expiry date” of the goods offered for sale so that the customer can make an informed choice.

The e-portals often “manipulate” a consumer. They know of a consumer’s past search history. They identify and display goods that the e-portal thinks you may be interested in buying even though you may not have a need for the same at the present time. This is called “customization” of a display for each customer. In this way they surreptitiously lead the customer to buy a product that she may not be wanting to buy.

There is a need to go further though. The Government must bring the large e-portals under the Right to Information Act (RTI). The present RTI Act is applicable only on the government departments and public sector undertakings (PSU). Even here, any information that could affect the commercial interests of a PSU are not required to be disclosed. Once m the Geological Survey of India (GSI) was requested to provide copies of geological investigation reports relating to a particular hydropower project. GSI refused saying that such disclosure will affect hits commercial interests. GSI will not be able to obtain contracts for geological surveys if it disclosed the report because hydropower companies would then give the contracts to private investigators who were not covered under the RTI Act. There is a need to remove this clause for e-portals because “public welfare” is involved. The e-portals must be placed at par with private infrastructure companies. Private companies that are engaged in building infrastructure, such as private hydropower developers in Uttarakhand, have been covered under the RTI Act. The Government must similarly bring the e-portals under the RTI Act. Then, the consumer would be able to ask them various questions. It could be asked, for example, please provide the list of mustard oil sellers listed with you and the margins you are offering to them. The availability of such information will empower the customer to peer behind the screen and take an informed decision. Certainly, e-portals will balk at such a suggestion but they will fall in line given the large market available in India.

[Formerly Professor of Economics at IIM Bengaluru]

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Vol. 54, No. 7, Aug 15 - 21, 2021