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New Draft Rules for E-Commerce Companies
Context: The government has proposed changes to the e-commerce rules under the Consumer Protection Act to make the framework under which firms operate more stringent.
Key Changes mooted are:
- Commonalities with the IT intermediary rules: The draft rules also stipulate the appointment of a chief compliance officer, a nodal contact person for 24×7 coordination with law enforcement agencies.
- Fall-back liability: Here, e-commerce firms will be held liable in case a seller on their platform fails to deliver goods or services due to negligent conduct, which causes loss to the customer. Earlier, the platform used to direct an aggrieved person to seller, now they will be able to reach out to the platform itself.
- Fair platform: The rules propose to restrict e-commerce companies from “manipulating search results or search indexes” so as to prevent preferential treatment to certain products.
- Push for made-in-India products: E-commerce entities offering imported goods or services to ‘incorporate a filter mechanism to identify goods based on country of origin and suggest alternatives to ensure a fair opportunity to domestic goods’.
- Ban of “specific flash sales” by e-commerce entities: While as per the draft rules, conventional e-commerce flash sales are not banned, specific flash sales or back-to-back sales “which limit customer choice, increase prices and prevents a level playing field are not allowed”.
- Integration with Consumer Helpline: The draft amendment also proposes to ask e-commerce firms to mandatorily become a part of the National Consumer Helpline
- Registration has also been made mandatory for all e-commerce players
- Any entity having 10 per cent or more common ultimate beneficial ownership will be considered an “associated enterprise” of an e-commerce platform.
- All entities must provide information within 72 hours on any request made by an authorised government agency probing any breach of law including cybersecurity issues.
Analysis of the draft rules
- Greater Oversight by Government: Following the enactment of New IT Rules, the draft e-commerce amendments show the Government’s increasing keenness to exercise greater oversight over all online platforms.
- Fair Market practices: There were accusations that the pricing practices of two large e-commerce giants (Amazon and Walmart owned Flipkart) are skewed to favour select sellers on their platforms. The draft rules aim to makes marketplaces fair & level playing to all.
- Level playing field for offline retailers: The deep-pocketed e-commerce companies have adopted deep discounting strategies to enhance their market share. This predatory business practices have hurt offline retailers. New rules aim to rectify this.
- The enforcement of many of these norms is bound to spur protracted legal fights.
- The Government appears to be going back to an era of tight controls.
- Overregulation with scope for interpretative ambiguity risks retarding growth and job creation in the hitherto expanding e-commerce sector.
Connecting the dots: