The new rules for Indian e-commerce must raise costs for all online retailers. And especially Amazon and Flipkart might need to review their business structures. The limit on flash sales might hamper and greatly affect these ecommerce leaders. And this is because of massive complaints of widespread cheating. The Ministry of Consumer Affairs of India has outlined plans on 21/06/2021. And those include limiting flash sales done by online retailers. And this step now compels them to appoint compliance officers.
In addition to that, they need to impose a fall-back liability if a seller is negligent of these new rules. The impact of these new rules across the board in an e-retail market India forecasts would be worth $200 billion by 2026. And this includes Flipkart, Amazon, Tata’s BigBasket, Softbank-backed Snapdeal, and Reliance Industries’ JioMart. These rules result from the growing confrontation between U.S. tech giants and New Delhi over a host of policy issues. These issues considered protectionist by some. The non-compliance with new rules, when implemented, is punishable with prison terms. And fines of ₹25,000 minimum as well, under India’s consumer law.
What some professionals say about the new rules?
Arjun Sinha, a partner at Indian law firm AP & Partners, shares, ” The rules will have a wider impact on all forms of e-commerce and will increase business costs. Entities, even beyond big players, are analysing the policy and will share concerns with the government. “
Salman Waris, a partner at TechLegis Advocates, states, ” The concept is about the promotion of local goods. It’s good for Made-in-India products, but not for the platforms. “
How does it affect the ecommerce leaders?
Flipkart did not respond to a request for comment as well. Snapdeal is reviewing the rules, and Reliance avoids responding to a request for comment. BigBasket refuses to comment. And Amazon said in a statement that online marketplaces promote competition and enable transparency. However, it also added that it’s reviewing the draft policy and that it’s too early to comment. All the companies have time till July 6, 2021, to respond to the proposals. And after that, it needs further reviews or implementation.
The Indian government notification on Monday, detailing the rules, states that it is issuing after complaints of widespread cheating and unfair trade practices en observed in the e-commerce ecosystem. However, no company is mentioned now. These rules bring a bigger setback for Amazon and Flipkart, as they contain clauses that say e-commerce firms must ensure none of their related enterprises listed as sellers on their shopping websites. And also that no affiliate entity should sell goods to an online seller operating on its platform.
The Indian government proposes changes to e-commerce rules under the Consumer Protection Act. And this is to make the framework under which firms operate more stringent. Several new provisions are similar to what the government seeks of social media companies through the IT intermediary rules announced earlier this year. And several proposals in the e-commerce rules aim at increasing liabilities for online retailers for services and goods purchased on their platforms.
How does the new rules affect consumers?
The draft rule issued by the Consumer Affairs Ministry is to ban specific flash sales by e-commerce entities. But, conventional e-commerce flash sale is not banned. Only specific flash sales or back-to-back sales that limit consumer choice increase prices needs to be banned. And it’s because they prevent a level playing field.
The rules introduce the concept of fall-back liability, meaning e-commerce firms would be held liable if a seller on their platform fails to deliver services or goods due to negligent conduct, which causes loss to the customer. Earlier, when issues arise with goods purchased from marketplaces, the e-commerce platforms direct consumers to their respective sellers to solve grievances. And now, with fall-back liability, consumers can reach out to the platform itself.
The rules propose to restrict e-commerce companies from manipulating search results or search indexes. And this is a response to a long-standing demand from traders and sellers to prevent preferential treatment to specific platforms. Furthermore, E-commerce company is restricted from making personal information about the consumer without affirmative consent and expression. And also, no entity shall record consent automatically, including in the form of pre-ticked checkboxes. In addition, the companies must provide domestic alternatives to imported goods, adding to the Indian government’s push for made-in-India products. And the new rules propose to ask e-commerce firms to become a part of the National Consumer Helpline mandatorily.
Also read: 11 online selling tips for beginners in 2021
The New rules in details
Any online retailer must register itself with the DPIIT (Department of Promotion for Industry and Internal Trade). Also, logistics service providers of a marketplace e-commerce entity cannot provide differentiated treatment between sellers of the same category. The associated enterprises and parties related to e-commerce companies are far from being enlisted as sellers on the respective platform. Any entity having 10% and more common ultimate beneficial ownership considered an associated enterprise of that e-commerce platform.
The Consumer Affairs Ministry proposes to mandate e-commerce companies to appoint grievance officers as well. And also a nodal contact person and a chief compliance officer for 24×7 coordination with law enforcement agencies.
The new rules ask e-commerce companies to share information with a government agency. And that is lawfully authorising for protective or investigative or cybersecurity activities. And these are for purposes of verification of identity, or for the detection, prevention, investigation, and prosecution of offences under any law for the time being in force, or for cybersecurity incidents too. The rules state that e-commerce companies must produce the information sought by the government agency within 72 hours of the receipt of an order from the government authority.