Ever since Sachin Bansal and Binny Bansal started Flipkart in 2007, there is no looking back for eCommerce in India. Today the Indian eCommerce has an approximate valuation of 84 Billion US Dollars and growing exponentially. To make this market fair for all the players and safer for the customer Ministry of Commerce and Industry needs every eCommerce business to comply with certain rules and regulations.
The Consumer Protection (E-Commerce) Rules, 2020 were notified by the Central Government with effect from July 23, 2020, to prevent unfair commercial practices in e-commerce. However, since the regulations were announced, the government has received some complaints from unhappy customers, traders, and trade groups, alleging rampant cheating and unfair trading practices in the e-commerce industry. This time the new e-commerce rules could jolt foreign, local players. The Government of India has published a document of proposed modifications to the Consumer Protection (E-commerce) Rules, 2020 to safeguard consumers’ rights, prevent their abuse, and foster free and fair competition in the market. The proposed modifications aim to increase transparency in e-commerce platforms and enhance the regulatory system to combat unfair trade practices that are currently in use.
What are the new e-commerce rules?
To combat suspected infringement of foreign direct investment (FDI) regulations and anti-competitive practices by big e-commerce marketplaces like Amazon and Walmart-owned Flipkart, the government is considering extending restrictions put on them to their affiliates and connected parties. The requirements come as these U.S. corporations face accusations from traders that they are circumventing foreign investment limits in the industry, and they might complicate Amazon and Flipkart’s operating environment even as they fight antitrust claims in
court. The businesses deny any misconduct on their part. This is the second major modification request from the government in the recent years. New Delhi suggested tighter e-commerce laws in 2018, which, when implemented in early 2019, caused Amazon and Flipkart to delist hundreds of thousands of products from their marketplaces and made their investments in connected businesses much more indirect.
How are the new e-commerce rules will affect different players and verticals?
1. Sellers
Many eCommerce websites offer an affiliate program where the website pays the affiliate some commission for helping to increase traffic or boost sales. As per the new rules, e-commerce businesses must make sure that none of their “related parties and associated enterprises” are registered as sellers on their websites, and that no linked company sells products to an online seller on the same platform. According to insiders and attorneys, the revisions might influence Flipkart and Amazon’s corporate structures. Amazon owns indirect holdings in two of the most popular vendors on its marketplace. In February, a Reuters investigation revealed that Amazon aided a tiny number of online retailers by lowering their costs and designating them as “special merchants.” According to Reuters, some of Amazon’s top sellers used to buy products from Amazon’s wholesale operation in India before reselling them on the site, a practice that might be affected.
2. Ban on Flash Sales
What are flash sales?
A flash sale is a discount or promo that is only available for a short period of time given by an online store. Because the supply is limited, the discounts are typically bigger or more substantial than regular promotions. Consumers are enticed to buy at the moment by the time constraint and restricted availability. During the flash sale when eCommerce websites provide large discounts on their products, they have generally experience the highest increases in orders placed. According to the new rules, Flash sales – in which substantial discounts are offered – should not be held by e-commerce businesses if they are organized illegitimately to benefit a small group of vendors. Ministry of Consumer Affairs has proposed that e-commerce websites must not be allowed to host flash sales or Back-to-back sales, which constrain customer choice, raise prices, and create an unequal playing field, in the country. Indian traders criticized these U.S. firms for working with select sellers to offer certain smartphones and other products during these flash sales, this allegation has been denied by the eCommerce giants.
3. Restriction on in-house /private labels
In India, e-commerce firms are not allowed to stock or sell products directly to consumers. To escape this eCommerce players have created a labyrinth by collaborating with local businesses that function as inventory-holding entities. In recent years, both Indian and international players have established substantial private label offers that have helped them increase overall profitability. To fill this loophole according to the new regulations, brands linked with the e-commerce business will be prohibited from promoting or selling on their platform. Which may make it illegitimate for e-commerce firms to have their in-house labels. This is perceived as harming private labels, which are brands owned or licensed by corporations like Amazon to specific merchants who then advertise them on their websites. It is mentioned in the proposal, “Ensure that nothing is done by related parties or associated enterprises which the e-commerce entity cannot do itself,”
4. Imported Products
The proposal states that imported items should be identified by their “country of origin” on websites selling them. They should also provide a filter and share suggestions to guarantee a fair chance for local goods. These new rules can help the local players to up their visibility and reach out to more customers on the eCommerce platform.
Apart from the above-mentioned policies, each marketplace e-commerce business has fall-back liability measures in place to guarantee that consumers are not affected if a seller fails to provide goods or services owing to the seller’s negligence in performing the duties and responsibilities in the way specified by the marketplace e-commerce entity. The Ministry would be viewing suggestions on the amendments till 6th July 2021
