Need to strike a balance between regulation and ease of doing business

E-commerce giant Amazon India's one of largest sellers, Cloudtail India, will stop operations from May next year. As the two joint venture partners of Cloudtail - Amazon and NR Narayana Murthy-owned Catamaran Ventures - have decided not to renew their contract beyond May 2022, the seller will halt its operations. This has come at the backdrop of the Supreme Court ruling dismissing the pleas of e-commerce giants Amazon and Flipkart to quash the probe of the Competition Commission of India (CCI).

Currently, Indian laws don't permit a foreign entity operating an online marketplace and its group companies to own equity in any of the sellers on the platform or have control over their inventory. This regulation had earlier forced Amazon to reduce its stake in Cloudtail and Appario - the top two sellers on its marketplace- from 49 per cent to 24 per cent.

The halting of operations by Cloudtail from next year is significant because the entity has a dominant presence in the Amazon India platform with a host of categories, including smartphones, electronics and fashion. Though Cloudtail has reduced its focus on fast-selling goods such as smartphones and instead has been focusing more on other electronics and daily necessities, still its presence is significant on the ecommerce marketplace.

The impending probe by CCI and announcement of halting operations by Cloudtail will have major impact on the online marketplace ecosystem. For years now, trade bodies are alleging that deep-pocket ecommerce firms are offering 'predatory' deep discounts and favouring select big sellers that are working closely with them. So, the anti-trust investigation into this alleged collusion is good for the ecosystem.

Moreover, online marketplaces should democratise the sellers' ecosystem and treat all sellers, big or small, equally. This is critical because digital platforms globally put all stakeholders at an equal platform and give them chances to compete fairly. Therefore, any arrangement by large online retailers that impede the ability of small sellers to participate on the platforms on equal footing goes against the very rationale of digitalisation. Such practices should be abandoned swiftly.

However, online retailers - be it Amazon, Flipkart or a host of start-ups - are also empowering a lot of small sellers, artisans, housewives and other micro-entrepreneurs by allowing them to sell their produces to a larger audience. In this process, these platforms minimise the roles of middlemen and commission agents and help in price discovery. In this perspective, severe penal actions on online retailers, restricting their ability to operate is not advisable in Indian context. India should impose fair trade practices regulations without impeding online retailers' ability to do business here.

According to market research firm Statista, the ecommerce industry in India is growing at an exponential rate on the back of increasing internet user base. The current Covid pandemic has increased the reach of online retailers with people in rural hinterland are also opting for online purchase. As per the market research firm, the e-commerce industry in India was around $50 billion in 2018, which is likely to be more than $200 billion by 2027. With such growth potential, the whole ecosystem is likely to benefit in the medium to long-run. So, a fine balance between regulations and ease of doing business has to be struck