Open Network for Digital Commerce (“ONDC”), an initiative of the Ministry of Commerce and Industry (“MCI”), currently launched in 5 cities – Delhi-NCR, Bengaluru, Bhopal, Shillong, and Coimbatore effective April 29, 2022, to promote open networks for exchanging goods and services through e-commerce distribution channels.
Similar to the UPI, ONDC is based on an open-sourced methodology, using open specifications and open network protocols independent of any specific platform.
Establishing an open network based on open-source technology implies that the code or the steps of that process is available freely for others to use, redistribute and modify.
The move to launch ONDC comes in the light of recent controversy hovering around the raids conducted by CCI on the premises of Amazon and Flipkart, amongst other companies, for flouting the provisions of the Competition Act of India and spreading monopolistic market in India.[4]
A council, comprising of Nandan Nilekani, Non-Executive Chairman at Infosys, Dilip Asbe, CEO at National Payments Corporation of India, and Adil Zainulbhai, Chairman, QCI, amongst other prominent industry experts.
The project outline for ONDC platform states that it will facilitate the buyers to discover any seller, product, or service on the portal established by GoI. The disclosed idea is to increase freedom of choice for consumers and connect them with small and local sellers offering them visibility amongst other pre-existing established sellers in the market.
FEATURES AND AIM
ONDC, the UPI of e-commerce, hopes to democratise the e-commerce platform. It also provides an opportunity for the sellers to save their data to build a credit history and be easily accessible to the consumers.
It is a step towards, bringing marketplaces like Amazon and Flipkart, to a level playing field with the local sellers. It could be viewed as a restoration of the “kirana stores” in the digital space.
However, there is some concern around confidentiality and data privacy issues, which, the spokespersons for ONDC have confirmed, that the data of the platform users will be protected. The GoI has indicated that to manage the Open Network, an Independent Regulatory Authority for e-commerce, such as SEBI for Capital Market may be instituted.
The participants will not be required to share transaction-specific data with ONDC but instead only share anonymised aggregate metrics on network performance[1].
ONDC IS TO DISRUPT
It is apparently directed, that all the e-commerce companies will have to operate using the same process. When mandated, the process will give a booster shot to the smaller online retailers and new entrants. This can be conflicting, for pre-invested entities and their proprietary processes in view of the significant progress made by these entities. In aligning to ONDC, there is some efficiency loss these market leaders are bound to face. Additionally, this is an opportunity for change in and introduction of new laws revolving around compliance and regulatory footprint.
WHAT IS THE INTEGRATION WITH PAYMENT INTERFACE
The ONDC acts as a connecting source for the buyers and the sellers. Paytm currently, is responsible for the buyer-side interface and the seller-side interface is being catered to by GoFrugal and Digiit.[2] This essentially means, the buyer can search for any item on the Paytm App and get a list of sellers who provide the product requested.
At the backend, there are multiple partners involved, including logistics service providers, enterprise resource planners, e-commerce store hosting service providers, etc., to help ONDC platform function smoothly. The API integration will have data planning and privacy conformations to be implemented for all parties involved. The interim period for the stakeholders and participants is likely to create data centralisation issues.
Aiming to onboard 30M sellers and 10M merchants, ONDC will cover 100 cities and towns by August 2022. Lenders like SBI, ICICI Bank, and Bank of Baroda have committed to support the capital needs to the tune of INR 2.55B by investing in ONDC.
Amazon and Walmart-owned Flipkart own approximately 80% of the e-commerce marketplace control with significant market share in the country, limiting the outreach of the small sellers.
E-commerce companies have had an advantage over the other players by offering discounts and promotions, which small sellers find difficult to match upto.
GoI, through ONDC, wishes to penetrate into the monopoly of big sellers, disrupt the dominance and provide recognition to small merchants. The listing parameters on ONDC platform will be different and include items like consumer needs, price, seller’s location, and delivery time.
CHALLENGES
The biggest one, for ONDC will be to establish a competitive technical ecosystem, as robust as the forward technology of Amazon and Flipkart.
Integration, standardization and data handling for both, the buyer and the seller.
Smoothening of trade policies like return and refund policy and creating an open network where everybody is profited and served fairly.
E-commerce rules are evolving to accommodate the digital marketplace, competition laws are empowering the regulator, Privacy laws are likely to be sprung one day. Amidst all, ONDC brings in the inflection point.
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Sources:
[1] https://economictimes.indiatimes.com/news/economy/policy/ondc-to-end-e-commerce-monopolistic-practices-ensure-data-privacy-piyush-goyal/articleshow/85311138.cms
[2] Why ONDC push could boost small retailers online, The Indian Express
[3] India to launch open e-commerce network to take on Amazon, Walmart, Reuters
[4] CCI raids Amazon, Flipkart seller offices; CAIT welcomes the move – BusinessToday.in