Although the move has a limited scope confined to consumer protection, proposed changes could have far-reaching consequences for the e-commerce business in India.
New Delhi: The Union government has revived its 20-month-old proposal to protect customers against unfair practices by e-commerce marketplaces such as Amazon and Flipkart by amending consumer protection rules to bar these firms from selling their private labels on their platforms, make them liable for frauds committed by a seller, and prohibit them from having their own logistics chain for supply-chain management, three people aware of the matter said.
Although the move — initiated by the ministry of consumer affairs, food and public distribution — has a limited scope confined to consumer protection, proposed changes could have in India, the people added, requesting anonymity. While two of the three people mentioned above are government officials, the third person is an executive in an e-commerce company.
The move to amend the Consumer Protection (E-Commerce) Rules, 2020 was first initiated by the department of consumer affairs in June 2021 after the government received complaints from “aggrieved” consumers and traders against “widespread cheating and unfair trade practices” by e-commerce entities, they said. On June 21, 2021 the government proposed several amendments in the rules and sought stakeholders’ view. The original consumer protection rules for e-commerce was notified by the centre on July 23, 2020.
The proposal was put on backburner after some arms of the government — during interministerial consultations — expressed concerns that some of the changes in the rules would go beyond consumer protection and impede the flow of foreign investments in the sector, one official said, adding that the proposal has been revived now with suitable modifications.
A second official confirmed that the matter is under consideration, but not yet finalised. Email queries sent to the department of consumer affairs, the department for promotion of industry and internal trade (DPIIT), and the ministry of finance, elicited no response. Amazon and Walmart-owned Flipkart also did not respond to email queries on this matter.
The department of consumer affairs proposed amendments in June 2021 after domestic brick-and-mortar retailers felt threatened by rapid growth of e-commerce through anti-competitive practices deep discounts and predatory pricing. Small sellers on the platforms also complaint against e-commerce entities, which are supposed to function as marketplaces to facilitate purchases, giving preferential treatment to associate sellers, impinging the free choice of consumers. E-commerce entities lobbied against the department’s move to amend the rules and the matter was put on the backburner until recently.
The third person mentioned above said the proposed changes in the rule will alter the basic model of e-commerce with devastating impact on existing marketplaces. Any move to ban related party ventures would make logistics arms of Amazon and Flipkart illegal and kill their technology-intensive supply-chain system, which is the lifeline for both the e-commerce giants and small businesses selling goods on their platforms, he said. According to an industry estimate, the two foreign giants have together invested over $10 billion in their supply-chain logistics.
“The government must protect consumers and any such move will be supported by the industry. But many of the proposed changed are restrictive and seems to go beyond the consumer protection. If the intent is to drive global players out of the business, the government should ban FDI in the sector,” he added.
According to the first official, e-commerce is still an evolving business. “There have been instances of Amazon and Flipkart indulging in unfair practices detrimental for the consumer interests. For example, they apply AI (artificial intelligence) to push products of their partners or their own private labels. They shrug off their responsibilities if customers are duped by business entities selling products on their platforms,” he said.
Experts say that there should be a balanced approach. Rohit Arora, CEO and co-founder of fintech firms Biz2Credit and Biz2X, said the government is trying to protect small businesses from uncompetitive flash sales as well as money charged by their end-to-end logistics services. “The key is that government should be able to have policies which make SMEs competitive in terms of access to credit and markets. Also, constant change in policies leads to more uncertainty around attracting FDI in sectors like logistics and e-commerce which is a big growth engine for India.”
The amendments are also targeted to check the menace of flash sales. Often e-commerce entities resort to anti-competitive flash sales that involve instant, heavily discounted, time-bound sale offers. While proposing changed in the rules on June 21, 2021, the ministry of consumer affairs said in a statement that “conventional flash sales by third party sellers are not banned” on e-commerce platform. “But, certain e-commerce entities are engaging in limiting consumer choice by indulging in “back to back” or “flash” sales wherein one seller selling on platform does not carry any inventory or order fulfilment capability but merely places a “flash or back to back” order with another seller controlled by platform. This prevents a level playing field and ultimately limits customer choice and increases prices,” it added.
According to industry estimates e-commerce currently accounts for 6% of India’s about $900 billion retail sector. It is estimated to become $170 billion industry by 2027.
Source:-https://www.hindustantimes.com/india-news/govt-revives-tweaks-to-curb-unfair-e-tail-practices-fix-liability-101678213309629.html