Designing Proxy- Businesses on Proxy E-commerce
August 17, 2021
The policymakers should come up with laws that make such crimes a criminal offense. The promoters who initially had a business should not be in hurry to reach the top in the shortest time by practicing unacceptable business behavior. — Alok Singh
The big technology-based companies have emerged as controllers of business using e-commerce driven conveniences. The unique selling point of these companies is that the customers are getting advantages and hence their work is holy cow. Their businesses should be worshipped as they have made available many choices and complete transparency to the consumers, whether it be in product purchase or services purchase. They create an impression that the customers are happy and so the policymakers should support them in their endeavors. End of the day it’s customers who should be happy and they claim that they practice the philosophy that the Customer is the King. In a globalized world, one entity is a customer to another in one sector and the role reverses in other sectors.
In the global village, it’s not about the domestic company or foreign company. It’s about the net new job created, net new taxes generated, and the net new growth contributed. It’s not about making the unorganized sector organized blindly. The new organized sector which provides the convenience of doing business to the customer by sitting in the living room on their home but kills the independence of service providers is unacceptable. On one hand, the customers are at ease but on the other hand, the whole supply chain including the people involved in the logistics is stressed. A consumer of one product is a supplier of the other product. For example, a person who is a logistics supplier for restaurant food is a consumer when the same person books a taxi. It’s the whole business fabric and the social balance which is getting distorted. This is a massive misuse of technology without considering the constraints of social basics. Such business drivers need to be given due diligence.
The customer is the most important chain in a business deal. Since these companies provide the convenience of use to the customers and so, it’s obvious that such companies will drive the business. It forces unwilling suppliers to partner with such companies. Once they are in their loop the technology companies start eating the thin margin of small service providers, for example, small hotel owners in case of online platforms for hotel booking, and small taxi owners in case of an online platform for taxi booking. They claim to be a common platform but don’t behave like that. Such a business model kills the private label of the small players. The customers perceive themselves to be primarily the client of the proxy platform provider and not the customer of the manufacturer or service provider. The local suppliers are on the verge of collapse. These practices are anti-competition. The competition commission of India (CCI) is looking into such matters. The tools available with CCI seem to be ineffective. They need to be equipped with laws that have sharp teeth. These business models offer no risk to proxy platform providers. They generate business, they impulse consumers to the chosen vendors and the chosen service providers of their choice and don’t own the responsibility of employer-employee-related laws. They even practice socially unacceptable advertisement behavior.
It means that these big companies aspire to control the sector, whether it is the vegetable purchase, mobile phone purchase, apparels purchase, food purchase, hotel room purchase, or any other product or service. Each of them initially passes the advantage to the end-user customer and makes the other suppliers in the chain dependent on them. These companies have literally forced the whole system to collapse. They have manipulated their accounting, their sales, their profit, their financing, their tax to the government, their business origin and are facing rage worldwide.
These companies publicly admit that their businesses are at a huge loss and so they don’t qualify to pay corporate taxes to the government. But surprisingly year after year despite incurring huge losses their valuation keeps increasing and they are able to attract a huge amount of foreign money in their companies. They create a web that hinders tax collections of all the nations of the world.
These companies don’t realize that moment the regulators catch them they will be defenseless. Even the team of the best breed of lawyers won’t be able to defend them. They will have to run away from the country. They will move from one court to the other for bail and if they are unlucky they will land in jail, their reputation of success will be ruined, their assets will be ceased and the repercussions will be huge to the stakeholders. The earlier the collateral damage happens better it is for everyone.
The policymakers should make accountable not only the promoters of such businesses but those who are on the payroll of such companies should also be made liable. Few of such proxy platform companies had successfully listed themselves in the stock market and the Securities and Exchange Board of India (SEBI) couldn’t stop them from doing so. The existing laws are hopeless. The ill-informed investors are at huge risk.
The policymakers should come up with laws that make such crimes a criminal offense. The promoters who initially had a business should not be in hurry to reach the top in the shortest time by practicing unacceptable business behavior. The corporate governance laws won’t spare them for their misdeeds in the long run. The domain expert top-level employees of such companies who participate in the strategic decision-making process should not be discounted as far as a partner in crime is concerned. Most of the best brains working for such companies got trained themselves in institutes of national importance at a much-subsidized rate on taxpayer’s money and are now on the payroll of proxy platform companies should also not be spared. The best lawyers, the best finance expert, the best accounting experts, the best operations expert, the best human resources people, and the entire best mind that are willing to rent their expertise for generating income for them to have a lavish lifestyle at the cost of small and marginal business owners are criminals of the nation. Such people can do any harm to society. The laws need a look into it. The government can come up with its own platform which is fair to small and marginal business providers as well as transparent to the consumers.
(Alok Singh is a Fellow of the Indian Institute of Management Indore and currently is faculty of general management at NICMAR, Delhi-NCR Campus.)