Bring e-commerce under RTI Act

E-commerce has provided a huge relief to the consumers in the time of the pandemic. The consumer has been able to have the required goods delivered at his doorstep. The choice of the consumer has also been expanded. I needed a book that was not available in India. I placed an order with an international e-portal and the book was delivered in 15 days. It so happened that the book came in a damaged condition. The e-portal replaced it within three weeks. It would not have been possible for me to obtain the book with such ease sitting before my computer had it not been for 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 one. 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 sale 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 those of other manufacturers 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 an 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 ones. 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 he/she may not be wanting to buy.

There is a need to go further though. The government must bring large e-portals under the Right to Information (RTI) Act. The present RTI Act is applicable only to 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. I once made a request to the Geological Survey of India (GSI) 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 e-portals under the RTI Act. Then, the consumer would be able to ask them various questions. They could, for example, ask e-portals for the list of mustard oil sellers listed with them and the margins they are offering. 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.

The government must also ask the Competition Commission of India to fix the highest numbers of customers that an e-portal can enroll. Let us say there are 10 crore persons that are buying goods on e-portals in India. The Competition Commission can stipulate that any e-portal will not enroll more than, say, 33 percent of the total e-customers. E-portals having more that 33 percent customers must be forcibly broken up into a number of smaller independent e-portals. That will make space available for home-grown e-portals. The competition between the e-portals will put a limit on their manipulations etc. Indeed such a break-up will lead to higher price of certain goods. Certain suppliers may not be able to offer their goods on a number of e-portals simultaneously. At the same time, competition among the e-portals will open up the e-market to a number of new sellers. My firm assessment is that the benefits will be much greater than the cost. In the result, the rules proposed by the government are in the right direction but grossly inadequate given the vast power of and the manipulations being done by the e-portals. There is an urgent need to bring them under RTI Act and break up large e-portals to establish a level playing field and promote Atma Nirbhar e-portals.

(The author is former professor of Economics at IIM, Bengaluru)