The government has decided to curb the discounts prevalent among the country’s e-commerce players. The proposed regulations will regulate the pricing strategy of e-commerce giants such as flipkart, amazon and the regulations will also extend to food delivery apps. These regulations are to boost the local retailers. The government is Concerned by ‘predatory pricing,’ which has badly hit the local market.The traditional retailers have to bear heavy losses due to these discounts.
Online retailers in India have been in stiff competition and many have chosen to offer aggressive steep discounts as a way to attract customers.However, government concerns may be overblown as e-commerce influx in India is somewhat limited compared to other markets like China and the US.
Competition experts said that industry practices, such as manufacturers imposing certain restrictions on online sellers in order to protect a large number of conventional dealers, who also compete among themselves, have been a subject of dispute since long time. In certain scenarios where certain brands face intense competition from rival brands, restrictions imposed by a producer on online dealers to protect its conventional dealers may not be seen by the competition regulators as anti-competitive. This, however, enables retailers to control the retail price and may not be in the interest of consumers.
It also notified new rules which can probably prohibit e-commerce marketplace from offering discounts and capping total sales originating from a group company or one vendor at 26%. However, this only remained on paper, while e-commerce companies continued to offer heavy discounts, much to the anger of offline retailers.