Amazon, Flipkart private labels under lens in new draft e commerce policy

The judgement allows CCI to continue its investigation against the two marketplaces under Section 3 of the Competition Act which deals with anti-competitive agreements.

Sellers on marketplaces like Amazon and Flipkart have been crying foul for long that e-tailers scoop up their data to launch competing items, commonly called private label products, which are sold online.

To counter this, the draft policy for e-commerce has suggested that companies will have to ensure that they do not use any "information collected through its platform" for unfair advantage of its "related parties and associated enterprises".

Private label products are not just competitively priced but also have better features as compared to the existing products of third-party sellers.

Marketplaces are alleged to be using piles of data that gives them the advantage to decide not just the price and features but also details of the categories that they should enter to get a larger return on their investments.

It's not possible for a small seller to compete with the products offered by large e-tailers in the garb of private label offerings.

Amazon India has private label brands like Solimo, Symbol and Presto while Flipkart runs brands such as MarQ and SmartBuy.

So far, even though there was no direct restriction on private labels, the existing regulation, Press Note 2, barred e-commerce companies from selling their "own inventory" on their platforms.

According to industry experts, companies often use their preferred vendors to sell these private label products.

For instance, the storage basket of Solimo brand is currently being sold by Cloudtail India on Amazon.

Similarly, Omni-tech Retail can be seen selling microwave ovens of Flipkart's in-house brand MarQ.

However Amazon and Flipkart have consistently maintained that their policies are not biased against third-party sellers and that they completely follow the law of the land.

On multiple occasions the two companies have clarified that they do not prefer select set of vendors against other independent sellers.

During a recent court hearing, Flipkart said sellers such as Omni-tech Retail are no longer directly or indirectly related to the company.

Amazon also revamped its organisational structures a couple of years ago following which Cloudtail ceased to be its group company.

However small vendors claim otherwise adding that a majority of the business of the marketplaces are generated by some of these sellers -- often termed as preferred vendors of the marketplaces.

Amazon and Flipkart did not immediately comment for this story.

The draft policy also said that the e-commerce companies will not permit the usage of the name or brand associated with that of the marketplace for promotion or offer for sale of goods on its platform further tightening the scope for circumvention.

The e-tailers may also be required to disclose its relationship with sellers on its platform and describe if it gives any differentiated treatment which it gives or may give to sellers of the same category in its terms and conditions page.

If implemented, these new set of rules have the potential to further tighten the noose of the e-tailers in India.

However, sellers do not seem to be fully convinced.

According to the All India Online Vendors Association (AIOVA), the wordings of the draft are ambiguous. There should be strong clarification from the government on this.

The government has sought views from stakeholders by July 6 on the draft.