Regulating e-Commerce – UPSC GS3

Utility: Direct question can be asked on this topic.
  • 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.
What are the Consumer Protection (E-commerce) Rules?
  • 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.
What is the rationale behind notifying such rules and subsequent amendments?
  • 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.
What are the key changes that have been proposed?
  • 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.
What is the applicability of the rules?
  • 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.
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