The Dark Side of E-Commerce: How Online Marketplaces Manipulate

GAJENDRA SINGH

The rise of e-commerce brought about convenience, global access, and an explosion in choices for products. However, despite this expansion, there is a worrying trend: large online platforms exploiting the system to dominate market share, frequently at the expense of merchants and consumers. From replicating product designs to manipulating algorithms, e-commerce giants are accused of exploiting their data power to distort the market. Let’s examine some notable cases and the broader implications, supported by key data.

In India, the brand John Miller, owned by Future Group, became an unwitting victim of Amazon’s e-commerce practices. It is reported that Amazon used platform data to replicate exact measurements of the John Miller shirts—for instance, sleeve length and neck circumference—so as to sell its own private-label goods. Such practices have raised serious concerns. According to a Forrester Research report, 44% of Indian SMBs believe e-commerce sites such as Amazon unfairly leverage their market power by copying popular products and selling them under private-label brands.
It is not an single case. Internal documents of Amazon reveal a concerted effort to replicate products sold by other companies on its marketplace, alter listings, and leverage marketplace data for its own benefit. For instance, as part of its strategy for its private-label brand Solimo, Amazon harvested information from Amazon.in to create similar goods and sell them directly on the website.
A similar pattern has been observed in the United States. Allbirds, a sustainable footwear brand, accused Amazon of copying its wool sneakers and under-pricing them significantly. Allbirds, which generates approximately $100 million in annual revenue, has expressed concerns over Amazon’s copying practices, which jeopardize their business model based on sustainability and ethical sourcing. Amazon’s version of Allbirds’ wool sneaker was sold at nearly half the price, despite lacking the eco-friendly materials Allbirds is known for. According to a Bloomberg report, Amazon’s private-label strategy accounts for nearly $7.5 billion in revenue annually, a direct result of using internal sales data to create knockoff versions of successful products.

In terms of price manipulation, ride-sharing platform Uber has also been accused of manipulating its pricing algorithm. Uber's pricing algorithm is designed to increase fares when demand is high, but has been heavily criticized for being manipulated during non-peak hours. A 2018 study discovered that Uber's surge pricing mechanism resulted in a 20-30% increase in fares during high-demand periods such as severe weather, holidays, and city-wide events, even when demand did not considerably increase. This tendency, known as "price gouging," has engendered distrust among consumers, with accusations that fares were frequently unpredictable and unduly expensive.

Flipkart has received widespread criticism in India for enabling bogus listings to thrive on its marketplace. According to The Economic Times, approximately 15% of electronic goods sold on Flipkart were found to be counterfeit or inferior, with some mobile phones and accessories marketed as originals but actually reproductions. Flipkart’s attempts to improve quality control have not been sufficient, leading to a decline in consumer confidence. The Indian Brand Equity Foundation found that 50% of Indian consumers who encountered counterfeit goods on e-commerce platforms would stop buying from that platform altogether, illustrating the long-term impact of these issues on brand loyalty.
Similarly, Facebook has also been accused for fraudulent activity on multiple occasions. A 2020 report from Consumer Reports showing that more than 70% of users have encountered counterfeit products or scams on Facebook Marketplace, with popular categories such as electronics, clothing, and furniture being common targets. Despite Facebook’s efforts to tackle fraud, the platform’s peer-to-peer nature leaves users vulnerable. For example, consumers often report receiving counterfeit electronics after paying full price for what they thought was a legitimate product. In 2020, Facebook took down 1.7 billion fake accounts, but scams still persist, affecting consumer trust and platform integrity.
The cases of Amazon, Flipkart, and Facebook Marketplace illustrate the widespread nature of e-commerce manipulation. According to a report from GlobalData, the global e-commerce market size reached $5.7 trillion in 2022, with a projected annual growth rate of 9.7% until 2026. However, as the marketplace grows, so too has exploitation by platform giants, which has negatively impacted consumers and small sellers. In fact, the same report showed that more than 40% of small businesses believe they lack the resources to compete with large platforms that use data to market their own brand products.

Online platform revenues are increasing rapidly, with the top businesses profiting from their dominating position. For example, Amazon reported $469.8 billion in e-commerce revenue in 2021, with private label products such as Amazon Basics and Solimo accounting for approximately $7.5 billion. In India, Flipkart, the leading e-commerce platform, earned $6.1 billion in gross merchandise value (GMV) in 2021, primarily through its marketplace and private labels. Uber, which operates in the ride-sharing and food delivery industries, produced $31.8 billion in revenue from ride-sharing alone, with Uber Eats contributing an additional $8.3 billion. Meanwhile, Facebook’s total ad revenue for 2021 reached $114 billion, with a significant part driven by its Marketplace platform, underscoring its growing role in the e-commerce space. These platforms are not only transforming the way consumers shop but also shaping the global economy. However, this dominance raises key questions about fairness, competition and consumer protection, especially as concerns about manipulation of market dynamics grow.

As the e-commerce industry expands, there is a growing need for stricter regulation to curb manipulation and exploitation by dominant online platforms. Governments and regulators must ensure that online marketplaces are accountable for their actions. According to research by the World Economic Forum, 50% of consumers in emerging markets such as India and Southeast Asia want stricter regulation of online platforms to prevent fraudulent offers, data exploitation and unfair pricing practices. Tighter regulation could include stronger protection of brand intellectual property, greater transparency of pricing algorithms and strict controls on counterfeit goods. Data from various studies and reports show that ensuring fairness in e-commerce is about more than just protecting consumers. It’s also about fostering a healthy, competitive market where innovation can thrive.

E-commerce has revolutionized the way we shop, but manipulative practices by major online platforms threaten the integrity of the market. From product copying to unfair pricing strategies, these platforms are increasingly using their power to distort competition and harm consumers. For e-commerce continue to thrive in a way that benefits everyone from consumers, sellers, and platforms alike, a concerted ethical effort to ensure fairness and transparency is imperative. Only through stronger regulatory frameworks and ethical practices can we unlock the true potential of e-commerce while protecting ourselves from its dark side.

(Views are personal. Email: shekhawatgajendra@live.com)