The issue of competition law compliance for the e-commerce sector

Businesses are constantly complaining against the anti-competitive behaviours of the e-commerce platforms. The accusations against them are quite templatic: deep-discounting, self-preferencing, manipulation in search ranking, misuse of consumer data. While the allegations may not be true all the time, the e-commerce platforms are always prone to violation of competition law risking massive amount of fine by the Competition Commission of Bangladesh (CCB).

The CCB met the leading e-commerce platforms in Bangladesh: BoomBoom, BabyneedsBD, Aladiner Prodip, Daraz Bangladesh Ltd., Priyoshop.com Ltd., Chaldal Ltd., Redex and many others on 21 September 2021. The aim of the meet was to brief these platforms about different practices ongoing in digital marketplace risking the breach of competition law.

In such situation, it is important for e-commerce platforms to be cautious about anti-competitive behaviours and engage lawyers to vet their offers on the platforms before launching it. This article delineates some of the widely common anti-competitive disruptive behaviours and/or actions of e-commerce platforms under the Bangladeshi competition law regime.

The businesses and e-commerce platforms use cheaper pricing offers to enter and capture a market. Initially cheaper rate of products or services sounds pro-consumer. However, as soon as the businesses drive out all the competitors in the market, they exploit their monopoly in the market by increased price of the products and/or services. This is where the competition law intervenes.

The Competition Act 2012, according to section 16(2)(a), prohibits the sale of goods or provision of services at a price which is below the cost of production of the goods or provision of services that aims at reducing or eliminating competition in the relevant market. Section 20(a)(ii) of the Act also provides that the Commission may penalise an e-commerce platform for predatory pricing with a fine which may extend up to 10% of the average of turnover for the last 03 (three) preceding financial years. Thus, the caveat for e-commerce platforms and business entities therein is to make sure the selling price of products or services is not lower than the production cost.

Notably, the availability of products or services at a cheaper rate cannot always be considered as predatory pricing. Because the cheaper price of products may also result from the exemption of the sellers from the cost of marketing, and a wider market access in the digital platform. However, the giants in e-commerce platforms enjoy such massive amount of sale that they can at times for a limited time offer deep discounts amounting to product price lesser than apparent manufacturing cost. Such deep discounts may amount to predatory pricing when it is aimed at driving competitors away from the market. The Competition Commission of India in their latest study on e-commerce sector titled 'Market Study on E-Commerce in India' found that deep discounting is gravely problematic and needs to be cautiously monitored. The CCB has been sloth in monitoring the e-commerce sector. The recent catastrophe in the e-commerce sector with the 'Evaly scam' is a departure moment for the CCB. It is expected that with the recent recruitment of staff, the CCB will gear up their energy and extensively monitor the e-commerce platforms to ensure a competitive online marketplace.

The e-commerce platforms may perform the role of both marketplace and a competitor in that marketplace. Such dual characteristics of these platforms provide both benefits and drawbacks. These e-commerce platforms possess control over three important features of a possible sale and procurement of product or service: search result, seller's/service provider's data, and user review. As a result, the products of the platforms might enjoy increased visibility, and the consumers' choice might fail to mirror consumer preference. But a transparent business ecosystem should have facilitated a pro-competitive market for the sellers.

E-commerce platforms generate huge revenue with their listing services by placing some products of specific companies higher in the search results. The big companies do not mind paying for such subscription fees to list their product above everyone else. In practice, it is found that the big corporations purchase all the top positions for all products and the small and medium enterprises are left dry. Therefore, these small and medium enterprises fail to competitively perform in the marketplace. This is where the CCB is authorised to intervene and regulate the business ecosystem by ensuring transparency in the system by occasional directives and guidelines. The Competition Act empowered the CCB to prevent e-commerce platforms from distorting market by abuse of dominant position in the market under section 16(2).

The e-commerce platforms in their contracts with the suppliers often include a price parity clause. A price parity clause demands from the supplier not to offer products or services at a cheaper rate or better terms in other e-commerce platforms or at times even on their own websites. Instances of such clauses are usually found in the online travel agency markets, online food ordering apps and delivery markets. These parity clauses may come under the scrutiny of the CCB if they have adverse effect on competition.

From a business perspective, the sellers might have different incentives to receive from different platforms for supplying products in different rates. An established e-commerce platform might not be willing to charge lower than a newly established e-commerce platform and thus the supplier might like to enjoy the fruits of scale economies and network effects. In consequence of a wide parity clause, the end-users might need to pay higher prices. Again, section 15(1) of the Competition Act prohibits such exclusive supply and distribution agreements when they have adverse effect on competition. If the e-commerce platform is dominant in the market, then such clause may be prosecuted under section 16 of the Competition Act as well.

The writer is lecturer, department of law, bangladesh university of professionals, and consultant, a.S & associates.