News and developments
Open Network for Digital Commerce (ONDC)
During the Pandemic, with the whole world being home bound, while there was a decline of digital commerce in the travel services, digital commerce in the retail space sky-rocketed. People flogged online to purchase medicines and medical supplies, household supplies and groceries, leading to an increase in business-to-consumer (B2C) sales. India did not remain untouched by the impact the COVID-19 Pandemic had on the online retail space and consequently, all the shortcomings of the Indian digital commerce ecosystem were exposed since most parts of the retail chain were found to be digitally absent and there was a complete breakdown of the supply chain. Local grocery stores or ‘Kirana’ stores as they are colloquially called, while being just round the corner from the consumer and having the requisite supply, were not digitally present, leading to a simultaneous loss to both the consumer and the owner of the ‘Kirana’ stores.
In view of the weaknesses in the digital commerce space exposed by the COVID-19 Pandemic, the dominance of e-commerce giants such as Amazon and Flipkart and in order to democratize the e-commerce space and to not have buyers and sellers restricted to one e-commerce platform, the Department for Promotion of Industry and Internal Trade (“DPIIT”), Government of India (“GoI”), created the Open Network for Digital Commerce (“ONDC”).
The ONDC entity was incorporated on December 30, 2021, as a not- for- profit Company, under Section 8 of the Companies Act, 2013, with limited liability and a majority ownership of private sector institutions. The GoI, on September 30, 2022, released ONDC on a beta testing basis in Bengaluru, Karnataka.
What Is The ONDC?
The DPIIT, while introducing ONDC, released its Strategy Paper[1] on January 25, 2022 (“Strategy Paper”), threw light on the new e-commerce sphere sought to be created by the DPIIT. In the Strategy Paper, the DPIIT recognized the importance of a facilitator driven and interoperable decentralized network such as ONDC. In the ONDC, as long as the platforms/applications are interoperable, buyers and sellers can transact, no matter what platform/application they use to be digitally visible/available. The Strategy Paper describes ONDC as a network that enables location aware, local digital commerce stores across industries to be discovered and engaged by any network enabled applications. The Strategy Paper further clarifies that ONDC is neither a super aggregator application nor a hosting platform and all existing digital commerce applications and platforms can voluntarily choose to adopt and be a part of the ONDC network. The responsibility of onboarding sellers and buyers and the management of the end-to-end order cycle would also continue to reside with such network- enabled applications.
The ONDC, thereafter released the ONDC Network Policy[2] (“ONDC Network Policy”), whereunder it defined “ONDC Network”[3] as the open, interoperable network established, facilitated, managed, made available and owned by ONDC for enabling digital commerce.
The operation of the ONDC Network, in terms of the ONDC Network Policy can be depicted as under:
Participants Of The ONDC Network Clause 3.2.1 of the Strategy Paper, clearly stated that the “Network Participants” (“NPs”) within the ONDC could be broadly categorized into the following 2 (two) categories[4], the definition of which NPs has also been laid down under the “Technology Components” of the ONDC in the Strategy Paper[5]:- Buyer-Side Application: Any application that will interact with the buyers i.e., the demand side of any transaction, where the transaction originates. These can include different types of applications including User Experience (UX) based applications, voice assistants, chat-bots, etc. depicting the demand layer for the good or service.
- Seller-Side Application: Any application which will interact with the sellers, i.e. the supply side of any transaction. These can be any applications that receive buyer requests and, in response, publish their catalog of goods and services and fulfill buyer orders.
- Buyer Apps (Also known as Buyer Nodes): Buyer Apps are NPs that handle the buyer-side operations such as buyer acquisition, search and discovery and also provide a functionality to the buyer to place orders on ONDC.
- Seller Apps: Seller Apps manage the seller-side of the operations and can be further categorized into 2 (two) categories:
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- Market Seller Nodes (MSNs): MSNs are essentially aggregators that allow market sellers (who, themselves, are not network participants) to transact on the ONDC. MSNs hold no inventory, but rather function as purely marketplaces.
- Inventory Seller Nodes (ISNs): ISNs are sellers themselves, who are also participants in the ONDC.
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- Gateways: Gateways purely function as nodes for multicasting search queries and collecting results. The ONDC Network Policy, defines NPs/Participants as participants on the ONDC Network, including Gateways, Buyer Side Application, Seller Side Applications, NP-ISN, NP-MSN and NP-BN. The NPs within the ONDC, in terms of the ONDC Network Policy, are defined as under:
- Network Participant- Inventory Seller Node (NP-ISN) is an entity who is registered on the ONDC network and acts as the “seller on record” with respect to the goods and services offered by them to any buyer accessing the Network from any NP-BN from their own inventory which is either from their own production or obtained procured from other merchants/service providers.
- Network Participant- Market Place Seller Node (NP-MSN) is an entity who is registered on the ONDC network and represents itself and acts as the marketplace with respect to the goods and services offered by third party merchants/service providers to any buyer accessing the Network from any NP-BN. In this case, the NP-MSN will not be “seller on record” but the third party merchants/service providers will be the “seller on record”.
- Network Participant-Buyer Node (NP-BN) is an entity registered in the ONDC network and enables any person to search for and buy products or services on the ONDC network from any NP-ISN/NP-MSN.
- Gateway shall mean the technology provider that will ensure discoverability of all Sellers in the ONDC Network by multicasting the search request received from Buyer App to all Seller Apps and vice-verse, based on criteria, including but not limited to, location, availability, and other customer preferences as provided for in the Network Policies of ONDC.
- Consumer has the same meaning as under the Consumer Protection Act, 2019
- Buyer Side Applications/Buyer Apps means all platforms and applications which enable the Consumer to purchase any goods or avail any service on the ONDC Network.
- Seller shall mean any seller registered with a Seller Side Network Participant to offer products or services through the ONDC network, including service provider as defined under the Consumer Protection Act, which can be searched for, discovered and procured by Buyers registered with Buyer Side Applications.
- Seller Side Applications/Seller App means all platforms or applications of Network Participant NP-ISN/MSN, which allows sellers to publish their product/service inventory, pricing, and other terms of transaction and enables the sellers or any other service providers, including but not limited to logistics service provider, to transact on the ONDC Network.