DPIIT, MCA, etc have red-flagged provisions that will hit both businesses and consumers; hardline approach could backfire
That the draft e-commerce rules put out by the department of consumer affairs in June are severely constricting and unreasonable. Indeed, they appeared to have been framed to make it harder for not just the foreign players to do business but also some local ones. A few of the provisions—pertaining to related parties for instance—would make it impossible for large conglomerates, with their many consumer-oriented companies, to comply. And while one would think consumers’ interests would be uppermost in the minds of lawmakers, the draft rules disallow flash sales that offer high discounts and attractive deals.
It is not just e-retailers who have responded saying the conditions are onerous. The department for promotion of industry and internal trade (DPIIT) and the ministry of corporate affairs (MCA) have also expressed their reservations and flagged some anomalies, a report in The Indian Express, based on an RTI reply reveals. A recent report by Reuters had noted that the finance ministry had found the e-commerce proposals to be ‘excessive” and ‘without economic rationale’, raising about a dozen objections. The thrust of the numerous memos is that there is a need to re-examine many of the proposals. A key proposal is one that seeks to make the e-marketplace liable for the failure of a seller to fulfil any orders in the requisite manner. Indeed, holding the marketplace responsible for the actions of entities—thousands of them—that are not under its control is unreasonable. Even in the brick & mortar space, retailers do not accept responsibility for a flawed product. DPIIT suggests the duties of sellers be aligned with the framework in draft National E-Commerce Policy such that sellers don’t distort the market. It is not clear, though, how distortion will be defined.
Experts have pointed to several areas of regulatory overlaps and overreach that could vitiate the environment. While it might appear a few large e-retailers have cornered the online market, the space is already becoming competitive. Even otherwise, as the MCA has observed in a memo, provisions to the effect e-commerce firms should not abuse their dominant position are unnecessary and superfluous. This is a sensible view; the Competition Commission can oversee these issues. Some definitions too need to reviewed—mis-selling and cross-selling, for example—as the DPIITT has suggested, since they leave room for subjectivity and, therefore, for undue harassment.
If large e-retailers are to make a go of it, provisions that seek to expand the universe of related parties to include, inter alia, directors, shareholders with over 10% stake, those with a 5% shareholding in related entities, must go. It is also not clear why related parties, as also associated enterprises (AEs), cannot become sellers on the platform and must refrain from indulging in any activity an e-commerce entity is not permitted to do. AEs have been defined widely to include any entity with common shareholders of over 5% or more than 10% ultimate beneficial ownership. Such restrictions will choke businesses. The 2018 regulations allowed sales of private labels, but the rules have been tightened; private labels mean more manufacturing activity and choice for the consumer. Stifling businesses will only hurt the economy. We can’t invite foreign corporations to invest in India and yet be constantly suspicious of their intentions. The regulations need to be reasonable and fair; that is how we make it easier to do business. In this digital age, e-marketplaces are a good way for MSMEs. Taking the hard line with large e-retailers—foreign and local— could backfire; for small businesses to thrive, the government must let large e-retailers survive.