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Can the e-commerce industry self-regulate so that government role can be minimal? Commerce Minister Piyush Goyal asks

Goyal hinted that the government is struggling to decide on e-commerce regulation but the proposed alternative is no piece of cake either.

e-commerce

“Can the e-commerce industry come forward and say we are willing to self regulate so the interference of the government is minimum,” Piyush Goyal, Minister of Commerce and Industry and Minister of Consumer Affairs, asked at the Economic Times Startup Awards Ceremony on March 12.

Goyal pitched this idea while confessing that the government is grappling with a lot of questions when it comes to e-commerce regulations such as – should India have completely new e-commerce legalisation, should the government make benign rules or stricter rules, etc. Goyal also shed light on the status of the proposed amendments to the E-Commerce Rules.

Why it will be hard for the e-commerce industry to self-regulate

The e-commerce industry is vast and includes multiple stakeholders that might have opposing interests. For example, marketplaces like Amazon and Flipkart have different priorities compared to inventory-based e-commerce players like Reliance. For instance, earlier this year, Reliance called for tighter e-commerce rules for foreign marketplace platforms, whereas Amazon and Flipkart advocated for lighter norms.

While much of the criticism is generally pointed towards foreign platforms like Amazon and Flipkart, JioMart’s entry has shown how money and muscle power of domestic players also pose threats to the traditional retail model and small businesses. These threats are different from the threats posed by Amazon and Flipkart, indicating that different types of regulations are needed to address them.

The e-commerce industry also includes sub-categories like food delivery, quick commerce, ed-tech, and hotel aggregators, which need sector-specific regulations that might not necessarily apply to other e-commerce players.

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Given the vastness and varying interests of different stakeholders, it will be difficult for industry bodies to come up with self-regulation that satisfies the whole industry. But it is still possible for sectors within the e-commerce industry to do the same. For example, the ed-tech sector earlier this year announced the formation of a self-regulatory body that will prescribe a code of conduct and institute a grievance redressal mechanism.

Trader bodies might not be satisfied with self-regulation

In his interview, Goyal advocated for self-regulation that follows the spirit of the law and does not try to find loopholes. But even so, self-regulation is likely to be weaker than what industry bodies like the Confederation of All Indian Traders (CAIT), All Indian Online Vendors Association (AIOVA), and Swadesh Jagran Manch (SJM) are seeking. CAIT recently asked the government to form a unified e-commerce regulatory authority to regulate and monitor not only e-commerce trade but also issues incidental to e-commerce. Multiple trade organisations have also been calling for the government to roll out a robust e-commerce policy.

Piyush Goyal himself has been vocal about his disdain for large e-commerce platforms. Last year, when the Supreme Court refused to stop a probe by the Competition Commission of India into Amazon and Flipkart, he welcomed the decision saying “These companies tried even with their legal tricks to halt the investigation against them but it’s with extreme pleasure that I inform you that on the anniversary of Quit India Movement, Supreme Court has quashed their plea.”

“Big companies wield a lot of power owing to large amounts of money with them, they are trying their best to maintain their free will in the e-commerce market. To hurt our small business and traders. And after a while, it causes harm to our consumers in the long term. With their dominance, these entities are wiping out small shops which is not only a concern in India but across the world.” – Piyush Goyal after the Supreme Court ruling last year

Given these strong sentiments, it is unlikely that self-regulation will be comprehensive or strong enough to address the concerns of trader bodies and the government itself.

What is happening to the proposed amendments to E-Commerce Rules?

In June 2021, the government proposed amendments to the E-Commerce Rules in response to repeated antitrust complaints against e-commerce giants Amazon and Flipkart. The changes include new rules to limit who can sell on marketplace platforms like Amazon and Flipkart, 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

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Responding to a question on what is the current status of these proposes rules, Goyal indicated that government is still reviewing feedback submitted by various stakeholders before finalising any rules.

“[The public consultations] threw up a lot of new ideas, new thoughts, some limitations in those rules and some food for thought for all of us in government and bureaucracy.  And we’re working closely between the Industry Ministry, the Consumer Affairs Ministry and the Commerce Department in the Commerce and Industry Ministry because they also have an implicit interest for the export potential that will come in with digitalization. So within the three, we are looking at how we can make rules for an organized marketplace model, for an organized regular e-commerce model, or how the platform will be differentiated from the multi-brand retail model.” – Piyush Goyal

Multiple stakeholders including some of the e-commerce platforms, US lobby groups, and bodies like IndiaTech and IAMAI are unhappy with the proposed rules and called it burdensome. The proposed rules even faced objections from within the government. The finance ministry, for example, had a dozen objections including that the rules are excessive and would hurt job creation and tax revenue, while the government think-tank NITI Aayog worried that the rules could hurt small businesses.

Read: Proposed Amendments To The E-Commerce Rules – The Good, The Bad, And The Ugly

Not tinkering with FDI regulations: Piyush Goyal

One of the biggest allegations against foreign platforms like Amazon and Flipkart is that they are flouting Foreign Direct Investment (FDI) norms by not playing a neutral role as a marketplace and instead, giving preference to certain sellers that are affiliated with the platforms themselves.

While there have been multiple calls for the strengthening of FDI regulations, which the government has already done thrice in the past, Goyal indicated that they are working towards regulations that don’t tinker with the FDI rules.

Government’s ONDC initiative

While the government is still grappling with how to move ahead with regulations, it is going full steam ahead with rolling out the Open Network for Digital Commerce (ONDC), a digital project announced in 2020 to develop an open UPI-like architecture for the e-commerce industry.

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ONDC is supposed to be the government’s response to the growing influence of marketplaces like Amazon and Flipkart, which operate as walled gardens. Currently, different platforms have different rules, making it difficult for small sellers to adopt and sell online.  ONDC aims to set protocols for cataloguing, vendor discovery, and price discovery, and standardise the process of onboarding retailers onto e-marketplaces as well as the supply and delivery of products through online channels. It has been welcomed by trader bodies like CAIT and IT for Change because it is expected to provide uniform opportunities to all e-commerce entities, but questions still remain on whether it will address anti-competitive concerns.

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