e-commerce portal rules

e-commerce portal rules

Subject: Economy

Context- The Department of Consumer Affairs is in the process of bringing in revised e-commerce rules.

• The e-commerce rules were first notified in July, 2020 and later amended in May, 2021. A fresh revision is expected soon.

Concept-

About Draft Consumer Protection (E-Commerce) Rules, 2021:

Key Features:

• Definition of E-Commerce Entities: The Draft Rules expand the definition of an e-commerce entity to include two new categories—
  • Entities engaged by an e-commerce entity for the fulfilment of orders, and
  • Related parties (as defined under the Companies Act, 2013) of an e-commerce entity. None of an e-commerce entity’s related parties can be enlisted as a seller for sale to consumers directly. This “broad definition” of ‘related party’ can potentially include all entities such as those involved in logistics, any joint ventures, etc.
• Clause of country of origin: E-commerce entities offering imported goods/ services to ‘incorporate a filter mechanism at a pre-purchase stage to identify goods based on country of origin. Every time, they have to offer local alternatives to ensure a fair opportunity to domestic goods
• Fallback Liability: In case of non-delivery of goods or services by a seller on a marketplace platform, which causes loss to the consumer, the marketplace will be subject to a fallback liability.
• Abuse of Dominant position in a market: An e-commerce entity is not allowed to abuse its dominant position in any market.
• Requirement to appoint certain personnel: All e-commerce entities are required to appoint:
  • Grievance Officer to address consumer grievances,
  • Nodal person for coordination with law enforcement agencies,
  • Chief Compliance Officer for ensuring compliance with the Consumer Protection Act and Rules.
• Flash Sale: The Draft Rules prohibit specific/ back to back flash sales — defined as “sale organized by an e-commerce entity at significantly reduced prices, high discounts or any other such promotions”.
• Misleading Advertisements: An e-commerce entity should not allow misleading advertisements on its platform.

Criticism of the Draft Rules:

• Infringing on other Ministries’ Mandate: The perception of “overreach” by the Consumer Affairs Department — venturing into areas of other departments such as the Department for Promotion of Industry and Internal Trade (DPIIT) and the Ministry of Electronics & Information Technology (MeitY)
• Contradictory to Information Technology Act, 2000: It takes away the immunity granted specifically to marketplaces under the IT Act.
  • Similarly, the Ministry of Corporate Affairs feels that rules related to the abuse of competitive position are unnecessary since there is already a robust Competition Commission that oversees such issues.
• Restrains Commercial Activities: The proposal also refrains related parties from commercial activities on platforms.
  • The definition of related party certainly 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 sell on their super-apps
  • For instance, Starbucks, an official partner of Tatas cannot sell coffee on Tata super- app.
• Ban on Flash Sales: Even offline retailers conduct flash sales during festivals or to clear out inventory.
  • Also, consumers benefit immensely from these flash sales via reduced prices and greater choice.