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IAMAI and IndiaTech find proposed e-commerce rules burdensome, unfair to online retailers

The two associations contended that the proposed changes would lead to over-regulation, hurt smaller entities, and impact service-providing platforms that do not deal with retail goods.  

The Internet and Mobile Association of India (IAMAI) submitted that the proposed amendments to e-commerce rules are a deterrent for the growth of the industry, and IndiaTech.org said that the rules have unintended ramifications on service e-commerce platforms like ride-hailing and food delivery apps. Both groups also suggested that the proposed amendments create an unfair playing field between offline and online retailers.

The government on June 21 proposed amendments that give the existing Consumer Protection (E-Commerce) Rules, 2020 more teeth. The proposed changes include new rules to address abuse of FDI regulations, the establishment of a grievance redressal mechanism, new display and labelling criteria for foreign goods, the prohibition of flash sales, restrictions on promotions, fall-back liability, among other things.

Read: Summary of the proposed amendments to E-Commerce Rules, 2020

Why this matters? Both Swadeshi Jagran Manch and Confederation of All India Traders have also submitted feedback. In addition to praising the proposed rules, they submitted suggestions to further double-down on e-commerce platforms. The submissions by IAMAI and IndiaTech, on the other hand, take a different stance and ask for the rules to be diluted. The two different perspectives highlight the complexity of the issue at hand.

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What IAMAI submitted?

“Based on feedback from its members, IAMAI has stated that the proposed amendments to the Consumer  Protection (E-Commerce) Rules, 2020 will lead to over-regulation, impede innovation and serve as a disincentive to e-commerce consumers.” — IAMAI press release

Should be confined to protect the interests of consumers: IAMAI submitted that some of the proposed rules currently “fall under the jurisdiction of Competition law, legal metrology law, intermediary law etc.” and the rules should rather be confined to protect the rights and interests of the consumers.

Seeks to regulate the entire e-commerce supply chain: “The amendments seek to regulate the entire e-commerce supply chain, many elements of Platform to Business (P2B) and Business to Business (B2B) e-commerce which are beyond the remit of the parent Consumer Protection Act (CPA),” IAMAI stated. The association added that “the amendment to the definition of e-commerce entities goes over and beyond the definition of e-commerce entities provided under other delegated legislation such as the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019.”

Fails to provide a level playing field for online and offline retailers: IAMAI stated that the proposed rules place several restrictions and an increased compliance burden on e-commerce platforms but the same is not be applicable to brick-and-mortar stores. IAMAI also added that the proposed rules will significantly “increase the compliance burden on MSMEs as well as for start-ups who are not even in the e-commerce business, but provide services to e-commerce.”

Will lead to overregulation: IAMAI submitted that “clauses related to cross-selling, fall back liability, re-registration with the Department of Promotion of Industry and Internal Trade will only lead to over-regulation of the sector and impede innovation and access of small sellers to marketplace platforms.”

Fall-back liability dilutes safe harbour provisions: “The concept of ‘Fall Back liability’ dilutes the intermediary safe harbour under the provisions of the IT Act as well as the arm’s length requirements provided under the FDI Policy. It will open floodgates for unscrupulous claims against e-commerce entities,” IAMAI stated.

Prohibition on flash sales should be clarified: “Flash sales should be very clearly and explicitly defined from a customer/consumer standpoint, to avoid any ambiguity both in letter and spirit, to ensure consumers do not suffer on account of not benefiting from flash sales,” IAMAI opined. The association also pointed out that offline retailers can offer flash sales, “therefore there is no reason to restrict these flash sales on an e-commerce platform.” Relevant authorities such as CCI must ensure that flash sale models are not abused both in offline and online worlds, IAMAI submitted.

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Prohibition on flash sales might be counterproductive: “Disallowing flash sales could impact any spot discounts that even the seller/ service provider may want to offer as there is no carve-out,” IAMAI pointed out. “At the end, such sales are beneficial to consumers only and increases their purchase capacity in-turn contributing to the growth of e-commerce businesses,” IAMAI submitted.

Mis-selling should not be the platform’s responsibility: IAMAI pointed out that the misselling provision “is in contradiction with sellers’ liabilities in e-commerce rules and the intermediary role that must be performed by all marketplace e-commerce entities under the FDI laws and the IT Act.” IAMAI submitted that it is the responsibility of the seller to ensure no mis-selling happens and e-commerce platforms should not be given this responsibility.

Restrictions on Brand-owned private labels problematic: IAMAI submitted that the restriction on platforms selling products with their brand name is problematic because “a simple product like Tata Salt can now be sold by this logic only on a non-Tata online platform.” “Therefore, same website name & brand name should be allowed for online sales,” IAMA stated.

Earlier rules were sufficient: Referring to the already existing E-Commerce Rules notified last year, IAMAI said that the earlier rules “were sufficient and better served the needs of the consumers.”

What IndiaTech submitted?

Ramifications on service-providing platforms need to be carefully considered: IndiaTech pointed out that the proposed rules “would have significant ramifications which would need careful consideration, especially in the case of e-commerce players who do not deal with retail goods and are involved in services of the likes of travel, cab-hailing, insurance, social media, gaming, financial services etc. many of which would be already governed by existing regulations/ regulators.”

“The Rules need to factor in that certain sectors are highly regulated at this time with regards to consumer safety and have separate regulators whose regulations may put the notified rules in direct conflict as regards certain disclosures,” Rameesh Kailasam, CEO, IndiaTech.org, told MediaNama.

May impact practicality and ease of business test: IndiaTech also submitted that various clauses in the proposed amendments “may hit the practicality and ease of business test.” The amended rules “will also cover by default, several ‘smaller’ entities as well, who would also be subjected to all the burdensome and onerous obligations and restrictions in these amendments merely due to their online presence, which was necessitated by the pandemic. It would be extremely business-unfriendly for MSMEs to get negatively impacted by these amendments,” Kailasam said.

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Will lead to an uneven playing field between online and offline retailers: IndiaTech pointed out that aspects like flash sales and cross-selling are practised in both the offline world and online world and regulating only the online world may lead to an uneven playing field as well as “an unintentional discrimination even when the market and consumers remain the same.”

“While the intent is well understood which is to ensure there is non-misuse of technology, a consumer is similar be it offline or online and would require protection of similar nature,” Kailasam said.

Fall-back liability incompatible: IndiaTech submitted that the concept of fall-back liability is “incompatible with the definition of ‘marketplace e-commerce entity’ which covers only e-commerce entities that ‘facilitate’ transactions between buyer and seller.” IndiaTech added that this creates a level playing field issue because “in the offline commerce world, a shopping mall cannot be and is not held liable for the delivery of a good or service or even fulfilment of an order by a specific shop located in the mall.”

Creates confusion on where to raise complaints: “The rules also have the potential to create unnecessary confusion for the end consumer as regards the product or service being offered and the place where the complaint has to be raised. For instance: when you buy a product in an offline market and the product is faulty, a consumer would raise a complaint against the manufacturer or the end service provider of the product,” Kailasam said.

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