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Swadeshi push, no flash sales: How draft e-commerce rules will impact Amazon, Flipkart, others

India is set to tighten laws governing e-commerce companies as it looks to create a more level-playing field between online and offline retailers.

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New Delhi: In a sign that the Narendra Modi government plans to increase scrutiny on e-commerce platforms operating in India, a new draft of the consumer protection rules proposes to ban flash sales, increase compliance requirements, and fix liability on these platforms for failure of the sellers registered with them to deliver the promised goods.

These new draft rules are a more stringent version of the earlier version released in 2020 by then consumer affairs minister Ram Vilas Paswan.

Stakeholders have been given time till 6 July to provide their comments, following which the rules will be finalised. These rules will be in addition to the e-commerce policy currently being finalised by the Ministry of Commerce and Industry. Both the commerce ministry and the consumer affairs ministry are now headed by Union minister Piyush Goyal.

Here is a look at what are the new provisions and what will be their implications for consumers and e-commerce players.

Also read: Modi govt proposes ban on mis-selling, fraudulent flash sales on e-commerce platforms

Ban on flash sales

The rules specifically prohibit an e-commerce entity from organising flash sales.

Flash sales have been defined as a sale conducted at significantly reduced prices, high discounts and with an intent to draw a large number of consumers.

However, in a clause that may provide a way out to the e-commerce companies, the rules say the ban will apply in cases where technology is used to enable only a specific seller or group of sellers managed by the e-commerce company to sell goods or services on its platform.

At a press briefing Tuesday, officials from the consumer affairs department also stressed that the aim behind the rules was not to stop discounts offered by e-commerce platforms to consumers. However, one will have to wait and watch to see how major e-commerce platforms like Amazon and Flipkart proceed with their mega seasonal sales.

The Swadeshi push

The earlier version of the draft required the e-commerce platforms to only list the details of the importer of the goods. However, the current draft requires these companies to make some additional disclosures. It requires the platforms to identify goods based on their country of origin, provide suggestions of alternatives among domestically manufactured goods and ensure the ranking doesn’t discriminate against domestic goods.

Consumer protection: Fallback liability & grievance redressal

An e-commerce entity will have to prominently publish on its website and app the name and contact details of the grievance officer as well as the mechanism that can be used by consumers to register their complaints.

In addition, companies have been specifically barred from promoting misleading advertisements on their platforms. They have also been asked to become a part of the National Consumer Helpline and not share data collected by them with sellers.

A marketplace e-commerce entity will also be subject to a fallback liability, according to the draft rules. This means if a seller registered on the platform “fails to deliver the goods or services ordered by a consumer due to negligent conduct, omission or commission” causing loss to the consumer, the liability will be on the marketplace.

Increased compliance requirements for e-commerce firms

E-commerce entities have to mandatorily register with the Department for Promotion of Industry and Internal Trade to operate in India. They also have to appoint a chief compliance officer who will be responsible for compliance with the laws and a resident grievance officer to address customer grievances.

These entities will also need to provide available information to government agencies within 72 hours of such information being sought for cases related to any offences under law.

Industry concerns 

Akshay Hegde, co-founder and managing director of ShakeDeal, a B2B e-commerce and supply chain company, pointed out some “grey areas” in the new rules.

“Though the proposed changes say that conventional flash sales by third party sellers are not being targeted, there is a lot of grey area because of the intricate operating structures created by big e-commerce players, which enable them to circumvent restrictions on inventory control by them. Even if the proposed changes come into effect, unless there is clarification on this grey area, the intended fair and level-playing field will remain elusive,” he said.

Vijayaraghavan Venugopal, CEO and co-founder of Fast&Up, a nutrition brand, said it’s still unclear if brand-owned websites can still go for flash sales. He added that it will be interesting to see how the proposed consumer ministry rule evolves.

Also read: Flipkart looking to raise $3 bn as competition from Amazon, Reliance, Tata heats up


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