Not discounting consumer protection

Published: December 27, 2019 1:56 AM

Consumers benefit from discounts offered by e-commerce entities. But, the govt’s draft e-commerce rules favour kirana stores over the end-user by prohibiting these.

The draft rules have gone a step further and attempted to protect local traders by restricting e-commerce entities from indulging in certain activities.

By Ashwin Mathew & Nayanika Majumdar

The e-commerce industry has seen exponential growth in recent years. This is evidenced by the fact that the e-commerce market stood at $24 billion in 2017, and is expected to grow up to $84 billion in 2021 (Deloitte and Retailer’s Association of India’s Unravelling the Indian Consumer report, February 2019). Moreover, the industry is expected to reach $200 billion by 2026 (Indian Brand Equity Foundation’s Indian E-commerce Industry Report). This growth is attributable to factors like growing internet penetration (with an expected rise in interest users from 432 million in 2016 to 647 million by 2021, as per the Deloitte report), and increase in the number of smartphone users and online shoppers. One of the major factors for the success of e-commerce entities, such as Amazon and Flipkart, is the policy of deep discounts.

The issue of offering deep discounts has been addressed by the department for promotion of industry and international trade (DPIIT) in Press Note 3 of 2016 and Press Note 2 of 2018. The press notes insisted on maintenance of a level playing field by the e-commerce entities, and prohibited them from offering deep discounts. The brick-and-mortar counterparts of e-commerce entities are negatively impacted by deep discounts as the consumers prefer buying products from the latter, in the comfort of their homes and at cheaper rates.

In a meeting between local traders and Piyush Goyal, the Union minister of commerce and industry, the need for a level playing field, and the impact of anti-competitive practices and other discriminatory methods were discussed. The minister additionally stated that the government will support small traders and retailers. This was conveyed by a press release dated June 19, 2019. Efforts are being made to digitise kirana stores to give them a level playing field vis-à-vis e-commerce entities.

For instance, Reliance Industries’ retail subsidiary, Reliance Retail, is working on a technology platform which will take small retailers under its wings to form a part of Reliance’s ‘new commerce plan’. A Bengaluru-based start-up, Jumbotail, is helping kirana stores procure staples and consumer goods, and keep a stock of their inventory via a mobile app. Also, in September 2019, Flipkart brought 27,000 kirana stores onboard ahead of its Big Billion Day Sale.

On November 11, 2019, the ministry of consumer affairs issued a draft set of rules on e-commerce, titled the Consumer Protection (e-commerce) Rules, 2019 under Section 101(1)(zg) of the Consumer Protection (CP) Act, 2019. The draft rules aim for consumer protection by ensuring quality control, addressing the issue of counterfeits, and detailing a smooth return and refund procedure. For quality control, e-commerce entities must ensure that advertisements for goods/services are consistent with the actual characteristics of the goods advertised. On being informed of any counterfeit product(s) being sold on its platform, an e-commerce entity must notify the seller of the same. If the seller cannot prove the genuineness of the product, the listed product will be removed and consumers notified. In cases of late delivery or delivery of defective goods, the concerned e-commerce entity is required to accept the return of goods and effect all payments towards accepted refund requests within 14 days. Additionally, e-commerce entities must ensure that personally identifiable information of customers is protected, and that data collection, storage, and use is compliant with the Information Technology (Amendment) Act, 2008.

The draft rules have gone a step further and attempted to protect local traders by restricting e-commerce entities from indulging in certain activities. Illustratively, e-commerce entities are prohibited from influencing the price of goods/services displayed. This is in line with the regulation of the e-commerce industry, attempted by way of the aforementioned press notes. Provided that the draft rules were issued under the CP Act, one must see whether the CP Act envisages protection of local traders along with consumers.

The preamble of the CP Act, 2019, states that the act has been brought to protect the interests of consumers by undertaking certain measures. The statement of objects and reasons (SOR) of the Consumer Protection Bill, 2019, highlighted the need for a new act in the wake of drastic transformations since the enactment of the Consumer Protection Act in 1986.

The SOR also noted that factors like development of e-commerce provide new opportunities for consumers while rendering them vulnerable to new forms of unfair trade and unethical business practices. Consumers benefit the most from the deep discounts offered by e-commerce entities. Therefore, the draft rules, while attempting to prohibit such discounts, favour the kirana store over the end user. Can this be justified?

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