New Delhi: The Modi government is revisiting the draft amendments to the Consumer Protection (E-commerce) Rules, made public in June, following backlash from several stakeholders in the domain as well as the Niti Aayog, ThePrint has learnt.
The provisions the Union Ministry of Consumer Affairs, Food and Public Distribution is looking to revise include those concerning liability for e-commerce portals, grievance redressal, and registration of firms in the sector, a government official said.
Apart from the issues flagged by e-commerce players, the official added, government think tank Niti Aayog has sent a memorandum to the Consumer Affairs Department, noting that some of the rules transgress on the jurisdictions of other government departments and agencies.
“Serious concerns have been expressed by major industry players like Tata, Flipkart and Amazon on various new amendments to the rules. There have also been multiple rounds of meetings between various industry stakeholders and minister Piyush Goyal, as well as officials from the ministries of commerce and consumer affairs, regarding multiple provisions of the draft e-commerce rules that are now being re-examined,” a senior official in the Department of Consumer Affairs who is familiar with the matter said.
The proposed amendments to the e-commerce rules seek to ban flash sales, increase compliance requirements, and fix liability on platforms for failure of the sellers registered with them to deliver the promised goods or services (“fallback liability”). The stringent provisions were seen as a sign that the Modi government plans to increase scrutiny on e-commerce platforms operating in India.
The Department of Consumer Affairs had set 6 July as the deadline for submission of views, comments and suggestions on the draft from the public and stakeholders, which was later extended to 5 August.
The government official said the “majority of the provisions flagged relate to the fallback liability clause and related parties/entities part of the new rules”. “They said these provisions would hinder the growth of their ongoing business model in the country while also damaging investment sentiment. There were also concerns that many provisions in the proposed rules are inconsistent with current FDI policy of the Department for Promotion of Industry & Internal Trade (DPIIT),” the official added.
However, the official said, “some provisions like data usage will remain unchanged”.
Pointing to the concerns raised by the Niti Aayog, the official said, “it flagged in a memorandum to the department that many of the provisions in the new e-commerce rules related to consumer protection such as grievance redressal and the flash sale fall within the domain of various ministries like commerce and IT, as also the Competition Commission of India (competition regulator, a government body), among others”.
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The ‘controversial rules’
Many e-commerce players have criticised the fallback liability rule on the ground that e-commerce FDI rules devised by the DPIIT don’t allow foreign-funded players to sell their own inventory or influence prices of goods sold by domestic platforms that can sell their own inventory.
Despite this, they say, the new rules will hold them liable for any discrepancies on account of the seller.
The definition of an e-commerce entity and “related parties” is another sore point.
The draft rules have tweaked the definition of e-commerce entity to include “any entity engaged for the purpose of fulfilment of orders placed by a user on its platform and any ‘related party’ as defined under Section 2(76) of the Companies Act, 2013”. The subsidiaries of a company, for example, would be considered “related parties” in this context.
What this means is that a packaging company associated with an e-commerce platform will be considered an e-commerce entity, and so will the platform’s subsidiaries.
According to the rules, e-commerce firms should ensure that none of the related parties and associated enterprises is enlisted as sellers for direct sales to consumers. They also say that related parties or associated enterprises should not do anything the e-commerce entity cannot do itself.
Industry players have argued that classifying them as ‘e-commerce entities’ will curtail their right to access the market through e-commerce.
The Internet and Mobile Association of India (IAMAI), an industry body, said the draft e-commerce rules will significantly increase the compliance burden on MSMEs and start-ups that are not in the e-commerce business but provide services to them.
It has also said the amendment to the definition “goes over and beyond the definition… provided under other delegated legislations such as the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019”.
The rules, they claim, dilute safeguards allowed under the IT Act and FDI policy.
Meanwhile, the Niti Aayog has pointed out that regulating “flash sales” doesn’t entail consumer welfare, adding that the reduced prices instead promote consumer interest. It has also suggested to the Department of Consumer Affairs that grievance redressal, including with respect to cybersecurity concerns and government investigations, be left to the CCI and the IT Ministry.
The memo, accessed by ThePrint, also notes that mandatory registration of an e-commerce entity with the DPIIT — as mandated under the draft rules — will create an additional compliance burden on the sector, which proved crucial during the pandemic, as compared to physical outlets.
However, the draft rules have their backers, including the Confederation of All India Traders (CAIT), which has criticised the Niti Aayog’s stand.
In a statement issued on 28 August, CAIT secretary general Praveen Khandelwal said “it is highly unfortunate that Niti Aayog… since inception has done absolutely nothing to support 8 crore traders of India and now when the government is trying to create a level playing field in the retail sector, the Niti Aayog is putting its nose in between and trying to derail the process”.
(Edited by Sunanda Ranjan)
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