Context: Competition Commission of India has recently ordered an investigation against companies such as MakeMyTrip, Flipkart and Amazon.
Domination of online marketplace by two companies: Most segments of India’s online marketplace are dominated by two companies. This condition is known as a duopoly. Under different provisions of Competition Law, the Competition Commission of India has ordered an investigation against some of these companies dominating the online marketplace. Some important issues arising out of the domination of the online marketplace by two companies are restricted competition and predatory pricing.
Competition: Online platforms or intermediaries in the market should increase more competition because online platforms lower entry barriers. But this is not the case. In India, most segments of the online marketplace are dominated by two companies. Other companies have been either acquired by dominating companies or stopped doing business. Factors for domination of India’s online marketplace by two companies and how they restrict competition are explained below.
Predatory pricing: Predatory pricing is defined as the practice of keeping sale prices below cost prices. Dominating companies in the online marketplace, keeping sale prices below cost prices by funding costs through the capital available with them or the producers. Predatory pricing eliminates online and offline competition. So, predatory pricing helps to dominate companies in eliminating certain competitors. It does not eliminate competition because when companies raise prices in the absence of no competitors, higher prices attract more companies in the market and increase competition. In order to survive, companies may enter into agreements as the strategy of lowering prices is not sustainable for a long time. In the short term, predatory pricing benefits consumers as consumers can buy products at cheaper rates.
CCI has ordered an investigation against some companies dominant in the online marketplace as they restrict competition and indulge in predatory pricing. Such actions under a predetermined law give more importance to competitors or producers at the risk of benefits to consumers. Instead of a predetermined law, regulatory guidelines should be framed to bring transparency in pricing and safeguard competition, not competitors.
Recently, the Competition Commission of India has ordered an investigation against certain companies dominating segments of India’s online marketplace. Examine the domination of segments of India’s online marketplace by two companies. (150 words)
NEED TO KNOW FACTS:
Competition Commission of India: