Talking about how US e-commerce giants are flouting local laws by indulging in predatory pricing practices, Commerce Minister Piyush Goyal at a virtual event stated that, "A number of these large e-commerce companies have come to India and very blatantly flouted the laws of the land in more ways than one."   

"The Indian market is big and we welcome all players to come and participate. But clearly, we have to have them working within the rules and laws of the country," the minister said. He also stated that most of the practices followed by these firms are against the consumer interests. Hence, the government has come up with draft rules for e-commerce firms, recently.

India’s new draft e-commerce rules and its impact

Comprehensive in nature are the changes that have been proposed by the Department of Consumer Affairs, which has spread to numerous aspects and segments beyond e-tailers and their flash sales.

ET stated that it took a look at few of the other proposals which could impact the growing route of retail, while some of the following proposals and its implications are still being debated.

• Flash Sale

The central government’s original proposal specified a blanket ban on all flash sales. However, it will not be applicable for conventional flash sales – stated one of the clarifications later. While these are generally sale events that are pre-decided for items such as new smartphones with limited stocks at a discount. It is still unclear what exactly is a conventional flash sale.

• Ad Promotions by sellers

E-tailers should not acknowledge/let ‘misleading’ ads most likely on factors such as pricing, quality, & guarantee. Furthermore, they should not advertise sellers rendering discounts, as this may impact the e-tailers’ flourishing online advertising businesses.

• Product listings to have the details of country of origin

E-tailers have to make certain that the product listings possess the details of country of origin. This is an – an onerous process since online ecommerce firms offer millions and millions of products which are listed on their platforms. However, what could make it even more difficult in implementing this is the process of recommending local alternatives every time a customer looks for an imported product/service. Furthermore, ranking local alternatives will also be arduous to implement and both the sellers as well as the E-tailers are not happy about maintaining the aforementioned details.

• Explicit consumer consent

Most often the E-tailers generally mention some products as non-returnable at pre-purchase stage and usually render free exchange services or refunds to customers. However, asking or getting to know the customer’s consent, explicitly can only lead to the strengthening of their online shopping experience.

• E-commerce entities should not indulge in mis-selling of products/services

Some of the online E-commerce giants operate the marketplace and are not involved directly in selling the products. However, these online e-commerce firms serve as a marketplace for platforms that render services that include travel, food delivery etc.

• No misleading by leveraging search result manipulations

Some of the biggest online e-commerce giants in the country are accused of promoting brands by modifying or manipulating the search results and the jury is still trying to determine how these algorithms function on online marketplaces in both India as well as abroad.

• E-tailers should not allow the usage of their name for brands

E-tailers should not allow using their names for brands as these types of practices may lead to unethical trade practice and have an impact on the customers’ interests. Private brands of some of the top online ecommerce giants, who possess the prefix of the e-commerce brand which are attached to these firms will be under probe if it leads to anti-consumer interest and be anti-competitive.

• Sponsored listing of products & services to be ‘distinctly identified’

This is considered in order to bring transparency for shoppers who shop online so that they get to know more details about the products they are about to purchase.

• Any e-commerce entity, holding a significant position in any kind of the market, should not be permitted to misuse its position

• Data to agencies within 3 days

It is important to provide data to agencies within a certain period, on condition that there is sufficient reasoning, which would be more compliant for both e-tailers and sellers.

CAIT urged Government not to dilute the draft of E-commerce rules

On 27^th June, CAIT – The Confederation of All India Traders urged the central government not to dilute the draft of e-commerce rules owing to any pressure of foreign-funded online companies. CAIT in its communication to the PM stated that it has been observed that voices of terming the rules as stringent is actually being created.

CAIT in a statement said that, “In the wake of expected pressure tactics of foreign funded e-commerce companies against the draft e-commerce rules… (we urged) him (Prime Minister) to ensure that no dilution is made in draft of e-commerce rules under any pressure.” “The draft rules after examining the suggestions and objections should be notified without any further delay,” it added.

The CAIT claimed that a myriad of shops in India have been closed. And this has occurred due to the unethical & business practices that violate the law followed by the foreign funded e-commerce firms.

“Traders of India are not against e-commerce but are of the considered opinion that e-commerce is the most promising business beside conducting business avenue of the future, and traders should also adopt it as a stream of their business beside conducting business activities in their physical shops,” it said.

Nangia Andersen LLP Partner Sandeep Jhunjhunwala said the proposed rules like appointment of a chief compliance officer, a nodal contact person and a resident grievance officer may go a long way in protecting consumer interests, but could create a “massive” compliance burden on corporations, especially those operating from outside India. Currently, the rules neither provide any threshold for applicability nor any timelines or validity for DPIIT (Department for Promotion of Industry and Internal Trade) registration, becoming onerous for emerging companies,” he said.

“Mis-selling of goods and flash sales have been strictly prohibited. Although these terms have been defined under the rules, they are subjective and open to interpretation. Therefore, each e-commerce entry will have to study the rules considering specific facts and circumstances to determine whether or not they are compliant with the law,” Jhunjhunwala said.   

Government’s renewed interest in e-commerce regulation comes on the heels on its recent actions taken against social media players not complying with the rules of the land. It would be interesting to see how long the tussle continues.