Modi govt proposes ban on mis-selling, fraudulent flash sales on e-commerce platforms; seeks public comments

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June 21, 2021 10:14 PM

E-commerce entities are also required to provide information not later than 72 hours of the receipt of an order from a government agency for prevention, detection and investigation and prosecution of offences under any law, as per the proposed amendments.

ecommerce sites, online shopping, modi govtThe proposed amendment defines 'flash sale' as that organised by an e-commerce entity at significantly reduced prices, high discounts or any other such promotional offers for a predetermined period of time.

The Centre on Monday proposed amendments to the Consumer Protection (E-Commerce) Rules, 2020 and sought public comments on banning fraudulent flash sales and mis-selling of goods and services on e-commerce platforms, and also on making registration of these entities mandatory with DPIIT. Ban on misleading users by manipulating search results, and appointment of chief compliance officer and resident grievance officer are some of the other amendments being proposed.

E-commerce entities are also required to provide information not later than 72 hours of the receipt of an order from a government agency for prevention, detection and investigation and prosecution of offences under any law, as per the proposed amendments.

The Consumer Protection (E-Commerce) Rules, 2020 were first notified in July last year. Their violations attract penal action under the Consumer Protection Act, 2019. “Views/ comments/ suggestions on the proposed amendments may be sent within 15 days (by July 6, 2021) by email to js-ca@nic.in,” Anupam Mishra, joint secretary in the consumer affairs ministry, said in a public notice. Separately in a statement, the government said following the notification of the e-commerce rules, it has received several representations from aggrieved consumers, traders and associations “complaining against widespread cheating and unfair trade practices being observed in the e-commerce ecosystem.”

Among the key amendments, the government has proposed a ban on mis-selling of goods and services offered on such platforms. Those engaging in ‘cross-selling’ will have to provide adequate disclosures to users displayed prominently. The government also seeks to ban ‘flash sales’ on e-commerce platforms “if such sales are organised by fraudulently intercepting the ordinary course of business using technological means with an intent to enable only a specified seller or group of sellers managed by such entity to sell goods or services on the platform.”

However, the ministry clarified, “Conventional e-commerce flash sales are not banned. Only specific flash sales or back to back sales which limit customer choice, increase prices and prevent a level playing field are not allowed.”

It also said conventional flash sales by third-party sellers are not banned on e-commerce platforms. “…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,” it said.

Such sales will not be allowed as this prevents a level playing field and ultimately limits customer choice and increases prices, the ministry added. The proposed amendment defines ‘flash sale’ as that organised by an e-commerce entity at significantly reduced prices, high discounts or any other such promotional offers for a predetermined period of time.

Cross-selling means sale of goods/services which are related or complimentary to a purchase made by a consumer at a time from any e-commerce entity with an intent to maximise the revenue of such entity. ‘Mis-selling’ means an e-commerce entity selling goods/services by deliberate misrepresentation of information. The government said it will not allow e-commerce entities that hold a dominant position to abuse its position.

On registration of entities, the government has proposed that every e-commerce entity which intends to operate in India has to register itself with the Department for Promotion of Industry and Internal Trade (DPIIT) within such a period as prescribed by DPIIT for allotment of a registration number. Currently, e-commerce entities are registered under the Companies Act, Indian Partnership Act or Limited Liability Partnership Act and not separately with DPIIT.

The government has proposed that e-commerce entities should ensure that such registration numbers and invoice of orders are displayed prominently to its users in a clear and accessible manner on its platform. It has also proposed a ban on display and promotion of misleading advertisements. E-commerce entities offering imported goods/services will also have to mention the name and details of the importers and the ‘country of origin’.

Besides, it has proposed ‘ranking’ for goods and services offered on the platforms while ensuring that the ranking parameters do not discriminate against domestic goods and sellers. To ensure that consumers are aware about the expiry date of the products they are buying on the e-commerce platform, all sellers will have to mention ‘best before or use before date’ to enable consumers to make an informed purchase decision.

To ensure that the domestic manufacturers and suppliers get a fair and equal treatment on the e-commerce platform, it has been proposed that where an e-commerce entity offers imported goods or services, it shall incorporate a filter mechanism to identify goods based on country of origin and suggest alternatives.

The government has also proposed ‘Fall-back liability’ for every marketplace e-commerce entity in order to ensure that consumers are not adversely affected in the event where a seller fails to deliver the goods or services due to negligent conduct by such seller in fulfilling the duties in the manner as prescribed by the marketplace e-commerce entity. According to the ministry, the proposed amendments aim to bring transparency in e-commerce platforms and further strengthen the regulatory regime.

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