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E-Commerce Regulation

  • IASbaba
  • June 29, 2021
  • 0
UPSC Articles
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ECONOMY/ GOVERNANCE

Topic:

  • GS-2: Government policies and interventions for development in various sectors and issues arising out of their design and implementation. 
  • GS-3: Science and Technology- developments and their applications and effects in everyday life

E-Commerce Regulation

Context: Recently, government published draft e-commerce rules under Consumer Protection Act.

Contributions of E-commerce Sector

  • Empowered Consumers: Over the past 10 years, e-commerce has empowered consumers probably more than any other intervention. Through its network, it has reached every corner of the country and enabled consumers to get goods at the click of button.
  • Brought Parity amongst Consumers: E-commerce companies has created a parity between consumers from all sections, social and geographical strata. Consumers across the country have more and equal choice, increased accessibility, and convenience.
  • Empowered sellers: The emergence of pan-India e-commerce companies has helped products/brands to reach even the remotest corners of the country at the most affordable price. Sellers have more access and ease of selling with reduced inventory and logistics costs.
  • Saviour during Pandemic Times: E-commerce emerged as the hero in keeping the economic engine running by supporting MSME sellers to replenish inventories as well as catering to consumer demand during lockdown

Concerns 

  • Increasing Government Intervention: The past few years have witnessed numerous regulations (draft e-commerce policy, FDI norms, Personal Data Protection Bill) that have been proposed to streamline/regulate the e-commerce sector. 
  • Small segment in large market: Streamlining the growth of the sector is important given its market potential, but government has to be mindful that this is a nascent sector and accounts for only four per cent of the total retail market in India
  • Can become Counter-productive: Over-regulation tends to curb competition and create monopolies instead of ensuring its holistic growth dovetailed with fair competition. 
  • Increased complexity of Doing Business: The new draft e-commerce rules would make the operating framework for e-commerce entities in India much more complex due to the compliance requirements that it requires to be followed.
  • Overlapping regulation: The proposed amendments seem to have an overlap with existing regulations under FDI norms and Competition Law. Clauses about related party transactions and exercising control over sellers, in case of marketplaces, have been addressed through existing FDI press regulations.
  • Going back to control era: The new e-commerce rules has the potential of creating a licensing regime for the sector given the powers of regulators, which may again limit competition and become detrimental for consumers.
  • Discourages investment: When the time is ripe to open up the economy to encourage investments, these amendments will act as a disincentive for e-commerce companies and sellers.

Conclusion

While the intent behind enacting these regulations is noble – to protect consumer interests – these complex regulations may have unintended effects on the sector that has thrived and expanded to empower both consumers and sellers over the past few years.

Connecting the dots:

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