New Delhi: Equal treatment of all sellers, clear and transparent policies on discounts, and elimination of sales of counterfeit goods — these are some of the guidelines proposed for e-commerce firms operating in India by a new draft policy that is under the Modi government’s consideration.
The government is reviewing regulations around India’s rapidly growing e-commerce sector and is in the process of finalising a policy, a draft version of which is available with some stakeholders.
If finalised, the norms will increase the regulatory scrutiny on e-commerce firms like Amazon and Flipkart while bringing in more safeguards for consumers and preventing the dominance of select firms.
The draft policy, a copy of which has been accessed by ThePrint, comes at a time when domestic trader associations are up in arms against large e-commerce operators flush with capital.
The Confederation of All India Traders (CAIT) has repeatedly alleged that e-commerce firms are flouting the April 2018 norms that regulate FDI investments in e-commerce companies. Instead of operating as a marketplace (where independent sellers sell their goods), they allege, these e-commerce marketplaces are operating on an inventory-based model (where a seller related to the e-commerce firm gets a preference over other sellers).
Earlier this year, complaints made by CAIT against e-commerce firms were forwarded by the government to the Enforcement Directorate (ED) and the RBI for “necessary action”.
There have also been concerns about alleged predatory pricing, which allows e-commerce companies to offer deep discounts to draw in more customers.
ThePrint reached the commerce ministry spokesperson by email, call and WhatsApp text for a comment on the draft policy, but was yet to receive a reply by the time of publishing.
Also Read: Over 22% of consumer complaints in India in last 4 years are linked to e-commerce sector
For a level playing field
Among other things, the draft policy seeks to empower the government to plug some of the loopholes in existing laws.
The norms also seek to curb the alleged practice of large e-commerce marketplaces providing preference to related sellers. The policy mandates that e-commerce operators should have an “agnostic” relationship with the sellers on its platform, and that information collected through the portal should not be used to obtain a market advantage against other sellers.
The government will notify who these related parties are, and they will be prohibited from undertaking activities prohibited for e-commerce marketplaces.
“E-commerce operators must ensure equal treatment of all sellers/vendors registered on their platforms and not adopt algorithms which result in prioritising select vendors/sellers,” the policy states.
“Inter alia, e-commerce operators must ensure to bring out clear and transparent policies on discounts, including inter alia the basis of discount rates funded by platforms for different products/suppliers and implications of participation/non-participation in discount schemes, so as to ensure fair and equal treatment,” it adds.
The draft also talks about how the government will ensure that digital monopolies are not formed in India “in the interest of the Indian consumer and the local startup ecosystem”.
Data protection
The draft policy delves into the importance of data protection and the government’s intent to penalise violations.
“Government may require adequate safeguards to be put in place to prevent misuse of data and access of data by unauthorised persons. Such safeguards may include regulating cross-border flow of data pertaining to Indians and transactions taking place in India and requirement of adequacy audits to be carried out by Indian firms,” the policy states. “Violation of safeguards shall be viewed seriously and attract heavy penalties.”
The draft sought to note that there is a tendency among one or two strong companies to emerge as leaders in the e-commerce space and exercise control over the repository of data collected.
“In this world, digital capital has come to be reckoned as one that matters no less than intellectual capital (Intellectual Property) or industrial capital (funds),” the policy states. “An entity that has access to maximum information about the market, is in a position to dominate it. This leads to subversion of competition.”
Blacklisting ‘rogue’ entities
The policy also proposes steps to curb piracy. It proposes setting up a body of industry stakeholders to identify “rogue e-commerce entities” who host predominantly pirated content. Once these are identified, the guidelines seek to task internet service providers, payment gateways and app stores with taking action against these firms.
Lalit Kumar, a partner at New Delhi-based law firm J Sagar Associates, said the policy is “progressive and growth-oriented” as it ensures a level playing field and provides for equal treatment of all sellers, besides restricting the use of “biased algorithms”.
He also lauded the fact that the guidelines set adequate measures for monitoring compliance and punishment for violations and to prevent misuse and mishandling of data.
However, he said it’s important that the meaning of associates and related parties should be provided upfront. “This will ensure certainty and continuity for the e-commerce sector. Open-ended and vague concepts will surely lead to doubts,” he said.
(Edited by Sunanda Ranjan)
Also Read: Why Indian definition of e-commerce needs to sync with its international trade discussions
Note: govt doesn’t think Reliance jio has played the same technique to capture the telecom industry