This article is written by Akshita Gupta, pursuing BBA LLB from Symbiosis Law School, Noida. This article discusses the highlights of the draft e-commerce policy and its impact.
The new e-commerce rules, known as the Consumer Protection (E-Commerce) Rules of 2020, came into effect on July 23, 2020, and the draft was designed to provide a legal framework for consumer protection. The Amendment Rules aim to increase transparency on e-commerce platforms while also strengthening the existing regulatory framework. While a variety of recent provisions are kind of like what the Centre sought of social media companies through the IT intermediary rules announced earlier this year, several proposals within the e-commerce rules are aimed toward increasing liabilities for the web retailers for the products and services purchased on their platforms. In today’s world, where most things are accessible with a few clicks and we are not restricted by constraints such as location, distance, opening hours, and so on, it is critical to have a detailed regulatory framework in place to avoid unfair trade practices in India’s e-commerce space.
Scope of the e-commerce policy
The e-commerce policy is applicable on:
- All online inventory entities and e-commerce marketplaces.
- All goods and services purchased or sold through online platforms, including digital products by every e-commerce business owner.
- All trade practices are unfair and unequal on any e-commerce platform.
- All e-commerce retail, including multi-channel single-brand retailers and single-brand retailers in single or multiple formats.
- It applies to all e-commerce platforms that are based outside of India but provide services to Indian customers.
Those entities that own a list of products and services in order to sell them directly to consumers are referred to as inventory entities. One of the most impressive aspects of these e-commerce rules is that they apply to all e-commerce platforms that are not based in India but provide services to Indian customers. Offshore e-marketplaces that operate in India and sell goods or services to Indian consumers must meet the following criteria:
- A company that is incorporated in India, or a company that is incorporated outside of India but conducts business in India via the internet.
- Alternatively, a branch/office in any foreign country which is controlled by an Indian citizen.
About the draft policy
Despite the fact that the Consumer Protection (E-commerce) Rules were introduced last year, vendors and brick-and-mortar sellers have complained that the e-commerce giants are not adhering to the regulations. The growing popularity of e-commerce shopping necessitates a stringent set of rules for online marketplaces. The draft report was prepared with the objective of enabling the stakeholders to tap the opportunities that would arise from the progressive digitalization of the domestic and global economy. The draft report seeks to identify strategies for strengthening the regulatory regime – for protecting the consumer and facilitating the ‘Digital India’ campaign through e-commerce.
The ground rules
- In the event of inconsistency, FDI policy will take precedence over e-commerce policy.
- Marketplaces must be fair to sellers and not exploit data to gain an advantage over them.
- Marketplaces’ associates and related parties will be subject to restrictions.
Increasing the popularity of e-commerce
- The government will work to bring more offline sellers online.
- India’s express delivery service posting and integrating government interfaces to facilitate e-commerce exports.
- Consumers should be able to access the Government e-Marketplace (GeM).
- It is the responsibility of e-commerce operators to ensure that their algorithms are not biased.
- Create safeguards to ensure that the products sold by sellers are genuine.
- Platforms will share liability for counterfeits in the event of end-to-end fulfilment.
- Algorithms must not prioritise any vendors, and discount policies must be transparent.
- To counter digital monopolies, the government will ensure the availability of more service providers.
- All e-commerce entities must register with the Indian government.
- The measurement of e-commerce activities will be carried out by the appropriate agencies.
- The Standing Group of Secretaries on e-commerce (SGoS) will make policy recommendations on e-commerce.
- On flash sales
Flash sales are sales organised by an e-commerce entity to attract customers by offering specific goods and services at significantly reduced prices, large discounts, or other similar promotions. The initial government proposal included a blanket ban on all flash sales, but a later clarification stated that it may not apply to “conventional” flash sales. These are usually pre-planned sales events for brand new smartphones with limited quantities available at a discounted price. It’s not clear what a typical flash sale entails.
- Regarding the country of origin
E-tailers must make sure that product listings include information about the country of origin (CoO), which is a difficult task given the time constraints. Millions of products are available on online platforms like Flipkart and Amazon.
It would be particularly difficult to implement than recommending local alternatives whenever a consumer considers purchasing an imported good or service. It would also be difficult to implement a ranking of local alternatives. Both e-tailers and sellers are uninterested in maintaining their websites.
- No e-commerce entity shall engage in the fraudulent sale of goods or services.
The marketplace is operated by companies such as Flipkart and Amazon India, and they are not directly involved in the sale of goods. Platforms that provide services, such as food delivery and travel, also function as marketplaces. Such entities which provide a platform for business and consumers to interact are popularly known as “gatekeepers”. They may refuse, delay or control the access to the site.
- Users should not be misled by e-tailers who manipulate search results.
The jury is still out on how these algorithms perform on Indian and international online marketplaces. Flipkart and Amazon India have been alleged of promoting their brands by manipulating search engine results in India.
- No e-commerce entity with a dominant market position shall be permitted to abuse its position.
This is an area where the CCI has taken parallel action, as it is fighting a case in the Karnataka High Court to investigate e-tailers and their business practises in response to seller complaints.
- Data must be provided to agencies within 72 hours.
Information provided to agencies within a certain time frame, if justified, could be more compliant for e-tailers and sellers than anything else.
- No logistics company of a marketplace e-commerce entity shall consider sellers of the same category differently.
E-tailers typically want more sellers to ship their goods through the marketplace’s in-house logistics arm so that they can be delivered more quickly.
- Major e-commerce giants would face problems to engage in any activity in the associated marketplace
If related parties are still not permitted to sell on the marketplace, this can have a significant impact on the operations of e-tailers such as Amazon India. Amazon has a minority stake in Cloudtail and Appario, both of which are prominent sellers on the company’s India marketplace. Legal experts are still divided on the issue.
Impact on consumers
E-commerce industries will be prohibited from disclosing consumer information to anyone without the consumer’s explicit and affirmative consent. No entity shall automatically record consent, including through pre-ticked checkboxes.
Furthermore, the companies are required to provide domestic alternatives to imported goods, which will contribute to the government’s push for made-in-India products.
The draft Amendment also recommends that e-commerce companies be required to join the National Consumer Helpline.
Impact on e-commerce companies
An “associated enterprise” is defined as any entity that owns 10% or more of an e-commerce platform’s common ultimate beneficial ownership. To sell on the internet, you must first register with the Department for Promotion of Industry and Internal Trade (DPIIT).
According to the proposed rules, no marketplace e-commerce entity’s logistics service provider can treat sellers in the same category differently. According to the DPIIT’s Foreign Direct Investment Policy for e-commerce marketplaces, parties and associated enterprises related to e-commerce companies will not be allowed to be listed as sellers on the respective platform.
Similarities to the rules governing IT intermediaries
The Ministry of Consumer Affairs has proposed mandating e-commerce companies to appoint a grievance officer, chief compliance officer, and a nodal contact person for 24×7 coordination with law enforcement agencies, similar to the IT Intermediary Rules announced for social media companies. The provisions also aim to require e-commerce companies to share information with a government agency that is lawfully authorized to conduct investigative, protective, or cyber security activities, for the reasons of identity verification, or the prevention, detection, inquiry, or prosecution of offences under any law currently in force, or for cyber security incidents.
International trade, domestic trade, competition policy, consumer protection, information technology, and other issues are all covered by e-commerce. As a growing sector with a lot of interest from both domestic and international players, it’s important to regulate it to protect both entrepreneurs and consumers’ interests. It is important to promote a positive environment and a level playing field. Policymakers must also consider how to foster a thriving domestic industry. It is critical to have a comprehensive policy that reflects India’s position in both domestic and international or multilateral forums.
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