The National e-Commerce Policy, 2019

The draft national e-commerce policy 2019 states that the e-commerce platforms use network effects and mining of unstructured data to create entry barriers. We argue that network effects alone do not create sustainable competitive advantage for the platforms. The added effect of the high customer switching costs creates a dominant position for the big firms. It is to be noted that their business models are not built around data. The provision of consumer data or the regulation of foreign participation in this space, does not translate into better business opportunities for micro, small and medium enterprises due to their small-scale operations. Rather, the big domestic retail players might take over and limit the opportunities.

To create a supportive regulatory business environment for the growth of e-commerce in India, the Ministry of Commerce and Industry released the draft National e-Commerce Policy (henceforth “the policy”) on 23 February 2019 (DPIIT 2019). The aim of the policy is to enhance consumer protection, data privacy and create a level playing field. It is expected to promote competition and protect the interests of all stakeholders—“investors, manufacturers, MSMEs, traders, retailers, startups, and consumers.” The policy aims for inclusive growth in the digital space and in the e-commerce sector along with Make in India and Digital India programmes. The government hopes to encourage competition and prevent market failures and other market distortions. The policy assumes significance in the context of the e-commerce industry report of the India Brand Equity Foundation (2022) (IBEF henceforth), which projects that with grocery and fashion/apparel as the key drivers, the Indian e-commerce industry would be valued at $99 billion in 2024, eventually growing to $300 billion by 2030.

Monetisation of data by foreign-based multinational corporations (MNCs) is a big concern for the government. The policy argues that network effects¹ maximise the data generated by big platforms as their businesses are data and technology-driven. It claims that data is the new oil and the ability to mine data increases market power. The business models centred on data use it for targeted advertisements, personalised recommendations and developing strategies that creates a competitive advantage. The ability to amass vast amounts of data generates first-mover advantage and creates high entry barriers ultimately creating monopolies. This provides an unfair advantage to large firms against small traders, including micro, small and medium enterprices (MSMEs).