Level playing field: E-commerce players seek clarity on draft new rules

By: |
July 22, 2021 4:00 AM

The firms said activities such as cross-selling and flash sales are all freely prevalent in the offline commerce sector, but are sought to be restricted under these amendments

E-commerce companies typically make representations to the government via varied industry bodies.E-commerce companies typically make representations to the government via varied industry bodies.

A clutch of e-commerce players have communicated to the government that the draft new e-commerce rules fail to provide a level playing field between online and offline retail and many proposed clauses extend beyond the realm of the consumer protection Act (CPA). The submissions which are part of a written representation made via industry body IAMAI (Internet and Mobile Association of India) on Wednesday said that the amendments, if finalised, will also significantly increase the compliance burden on MSMEs and startups that provide services to e-commerce companies.

The comments have been made in response to the stakeholders inputs sought by the consumer affairs ministry that issued the rules. The extended deadline to submit the same ended on July 21.

E-commerce companies typically make representations to the government via varied industry bodies. FE has reviewed a copy of the filing submitted by IAMAI that counts Amazon, Flipkart and Paytm among its members. It has been learnt that other industry associations like Ficci, CII will also send their inputs.

“…in their current form, the amendments, seek to regulate aspects of the e-commerce sector that have no bearing on consumers’ interests at all, and in doing so, could impact consumer interest negatively. The amendments also include many elements of Platform to Business (P2B) and Business to Business (B2B) e-commerce which are beyond the remit of the parent Consumer Protection Act (CPA),” the IAMAI representation said. The association has recommended that the consumer protection (e-commerce) rules should focus only on aspects related to protecting the rights and interests of the consumers or prevent unfair trade practices as specified in the CPA. The consumer protection framework should not seek to bring within its ambit Competition Law or Legal Metrology Law.

The submission stated that activities such as cross-selling and flash sales are all freely prevalent in the offline commerce sector, but are sought to be restricted under these amendments. “It is the same consumer who shops from online as well as offline, so the same set of Rules should apply to both channels,” it said. With particular reference to the clause related to cross selling, it has been pointed out that the amendments do not provide any clarity as to what goods and services can amount to a related or adjacent purchase. “Further, the objective of any seller on an e-commerce platform (as is also the case in offline) is revenue maximisation, hence the definition that cross sales conducted with the intent of maximising revenue is vague and arbitrary…This provision also treads upon the scope provided under the Information Technology Act by requiring additional display compliances.”

Companies also want more clarity on flash sales. They argued that a better understanding is needed on what the phrases “significantly reduced prices”, “high discounts” and “fraudulently intercepting the ordinary course of business” mean. The move to restrict flash sales, they suggested, is against the theme of the CPA as offering reduced prices and discounts to the customers is in line with the spirit of the act.

Firms further sought a review of the prohibitions proposed in relation to associated enterprises and related parties. “A similar provision is not made applicable to brick and mortar stores like a mall entity is not prohibited from leasing spaces to related entities,” they said.

The 20-page document underlined the impact of various other clauses including expansion of definition of e-commerce entity, registration with DPIIT, fall-back liability mechanism and data sharing.

Experts had earlier said that the new draft e-commerce rules have the potential to stunt the business growth of the firms as the proposed amendments attempt to curb broad discounts, restrict the expansion of private labels, strategies companies often bank on to get more users. The e-commerce sector has grown manifold amid the pandemic as demand for online shopping boomed. Analysts at Goldman Sachs estimate Indian e-commerce to reach $112 billion in GMV (gross merchandise value) by FY25, growing at a 29% CAGR over FY20-25.

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