Draft e-Commerce Rules


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    Recently ,Key provisions of the Draft e-Commerce Rules have been stridently opposed by the Industry department and Corporate Affairs ministry .


    • The Niti Aayog vice chairman who has warned that they “will severely harm Ease of Doing Business and impact small businesses.
    • These include:
      • The fallback liability of sellers,
      • The proposed ban on flash sales, and 
      • The need for definitional clarity of terms, such as “cross-selling” and “mis-selling” in the draft rules.


    Draft Rules for e-Commerce

    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. 

    • Ban on Flash Sale: The draft rules seek to ban “specific flash sales” by e-commerce entities. 
    • Fall-back Liability: The rules have also introduced the concept of “fall-back liability”, which says that 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.
    • Restricting Manipulation: The rules also propose to restrict e-commerce companies from “manipulating search results or search indexes”.
    • Consumer Consent: E-commerce companies will also be restricted from making available to any person information pertaining to the consumer without express and affirmative consent. 
    • Provide Domestic Alternatives: Further, the companies will have to provide domestic alternatives to imported goods, adding to the government’s push for made-in-India products.
    • National Consumer Helpline: The draft amendment also proposes to ask e-commerce firms to mandatorily become a part of the National Consumer Helpline.
    • Mandatory Registration: Any online retailer will first have to register itself with the Department of Promotion for Industry and Internal Trade (DPIIT).
    • No Differential Treatment: The rules propose mandating that no logistics service provider of a marketplace e-commerce entity shall provide differentiated treatment between sellers of the same category.
    • Associated Enterprise: Any entity having 10 percent or more common ultimate beneficial ownership will be considered an “associated enterprise” of an e-commerce platform.
    • Time-bound Information: The draft rules propose that the information sought by the government agency will have to be produced by the e-commerce company “within 72 hours of the receipt of an order from the said authority”.



    Issues and Criticisms

    • Overreach: 
      • The most significant criticism from within the government is related to the perception of “overreach” by the Consumer Affairs Department — venturing into areas where other departments such as the Department for Promotion of Industry and Internal Trade (DPIIT) and the Ministry of Electronics & Information Technology (MeitY) are already working.
    • Some contrary rules:
      • Several contradictions in the draft rules that have triggered confusion among sectoral players have also been flagged, including some provisions that run contrary to the rules governing the sector issued earlier by the DPIIT.
    • Broad definition of “related party“:
      • The “broad definition” of ‘related party’ has been flagged — as one “that can potentially include all entities such as those involved in logistics, any joint ventures, etc.”,
      • This definition vastly expands the remit of the new rules.
        • The definition needs some more clarity, otherwise it will be difficult not only for foreign players like Amazon and Flipkart, but even homegrown companies like Tata and Reliance to have their various brands such as 1mg, Netmeds, Urban Ladder, Milkbasket, etc. sell on their super-apps.
    • Some joint ventures will also face problems:  
      • The joint venture between the Tata Group and Starbucks, which would be considered a related party under the proposed provisions, and would not be able to sell products on a Tata super-app.
        • The draft rules say every e-commerce marketplace must ensure that nothing is done by related parties or associated enterprises that the e-commerce entity itself cannot do. Sources said the provisions might be changed to have certain exclusions in the definition to accommodate these concerns. 
    • Fall back liability:
      • It has been highlighted that in some cases, provisions such as fall-back liability is counter-effective to the DPIIT’s policy for foreign funding of e-commerce companies that disallows these firms from having control over their inventory.
      • The concept of ‘fall back liability’ may be examined in view of Product Liability provision as per Section 2(34) and Chapter VI of the Consumer Protection Act 2019. 
    • Flash Sale:
    • Government’s original proposal indicated a blanket ban on all flash sales but a clarification later said it won’t apply for ‘conventional’ flash sales.
      • These are typically pre-decided sale events for new smartphones with limited stocks at a discount. It is not clear what’s a conventional flash sale.
    • The definitions of Cross Selling, Miss-selling and Flash Sale may be reexamined. 
    • These concepts are addressed under the ethical and responsible e-Commerce. 
    • Strict Regulations:
    • Some of the proposed provisions like having a compliance officer, adherence to law enforcement requests, etc., follow in the footsteps of the Information Technology (Intermediary) Rules, 2021 issued by MeitY. 
    • These IT rules are facing legal challenges in several courts, including the Delhi High Court, Bombay High Court, and Karnataka High Court.

    (Image Courtesy: ET )


    • These rules appear to blatantly limit consumer choices further.
    • There is an urgent need to incorporate concerns of all the stakeholders.

    Sources: IE