Regulating e-Commerce – UPSC GS3

In December 2018, the Industry Department had published changes to its foreign direct investment (FDI) policy for e-commerce.

These changes were introduced to tighten loopholes exploited by online marketplaces in previous policies announced by the Centre.

Changes included curbing marketplaces from exercising control over inventory and restricting the relationship between the marketplace and sellers on its platform.

Government is now working on amending these rules to plug loopholes.

The Government had notified the Consumer Protection (E-commerce) Rules in July 2020, for online retailers registered in India or abroad but offering goods and services to Indian consumers.

Any violation of these rules attracts penal action under the Consumer Protection Act, 2019.

Representations from aggrieved customers, trader associations regarding widespread cheating and unfair trade practices of e-commerce giants.

Manipulation of search results to favour certain sellers.

Indirect operation of sellers by e-commerce platforms.

Registration mandatory: E-commerce companies would need to register with the Department of Promotion for Industry and Internal Trade (DPIIT).

Sharing of information:  E-commerce companies would also have to share information  sought by the Government agency within 72 hours of receipt of order.

Appointment of officers for coordination with law enforcement agencies: On the lines of IT intermediary rules, e-commerce companies will need to appoint a grievance officer, a chief compliance officer, and a nodal contact person “for 24×7 coordination with law enforcement agencies”.

Resident grievance officer must be a company employee and a citizen of India and serve as the nodal point of contact for law enforcement agencies.

Disallowing specific flash sales: The Government has called for disallowing “specific flash sales” on e-commerce platforms.

Push for domestic goods: E-commerce firms should mention the name and details of any importer from whom it has purchased such goods or services.

Data not to be misused: E-tailers cannot mislead consumers by manipulating search results on their platforms.

Selling goods & services to sellers not allowed: No marketplace e-commerce entity shall sell goods or services to any person who is registered as a seller on its platform.

Cross-selling details to be revealed: E-tailers engaged in cross-selling of goods or services will have to disclose to its users, by providing the name of the entity providing data for cross-selling, as well as the data used for cross-selling on the platform.

No differentiated treatment by logistics providers: No logistics service provider of a marketplace e-commerce entity shall provide differentiated treatment between sellers of the same category.

Final liability on the marketplace: In the event a seller fails to deliver a good or service, the final liability will fall on the e-commerce marketplace.

The rules will be applicable for all goods and services bought or sold over digital or electronic networks, including digital products.

They are valid for all models of e-commerce, including marketplace and inventory models, including multi-channel single brand retailers and single brand retailers.