By Rahul Nath Choudhury
The ministry of consumer affairs proposed a series of amendments to the Consumer Protection Rules 2020 and sought feedback from stakeholders. Amendments have been proposed in almost all the sections of the original policy announced last year. E-commerce is an emerging sector in India with a market size of $40 billion and more than 200 million online sellers. The e-commerce sector in India is predicted to grow at a rate 27% CAGR between 2019 and 2024 and is expected to reach $99 billion by 2024. If the proposed amendments are implemented, it will significantly affect the e-commerce industry. In this context, here are the four major takeaways from the proposed amendments.
The amendments propose mandatory appointment of a grievance officer who will be responsible for ensuring compliance of the information, data or any other communication given by the third-party seller in an e-commerce website. This will overburden the e-commerce marketplace which just acts as a facilitator or mediator between the buyers and sellers. There are thousands of sellers registered on a website and millions of products are sold every day.
The e-commerce industry has been attracting a lot of public attention because of high profile players such as Amazon, Flipkart, and Reliance Industries. The Covid-19 pandemic and the lockdown measures adopted to curb its spread have created an environment congenial to exponential growth of this sunrise sector.
Compliance burden on e-commerce players
Stringent compliance will not only burden the online sellers, but also substantially delay the whole process. Delay in fulfilment of the orders will discourage consumers to order online. One can bear a delay in the process for durable items, but for perishable products like fruits and vegetables, it will be difficult to find buyers. Small eateries selling through platforms like Swiggy will find operational difficulty. Further the rule is also discriminatory as there is no such requirement for offline sellers. So, instead of creating a level playing field, the proposed policy panelises the e-commerce sector.
The policy further discriminates against e-commerce companies by proposing a ban on flash sales or offering discounts. This is unfair not only for the companies, but also for consumers. It is an established fact that consumers are attracted to discounted sales. A survey conducted by the author in major cities validated this information. The sales figures during special sales are also testimony to this. Special sales are offered all over the world on different occasions such as black Friday. This type of sale is beneficial to both sellers, buyers, and agencies like courier services. It also helps the state exchequer earn huge amounts of revenue within a very short span of time.
More restrictions in the offing
The e-commerce companies are barred from selling any product or services through a party/enterprise related to it. It will be setback for the companies. A significant share of their sales comes from enterprises indirectly promoted by these online giants. Cloudtail for Amazon and WS retail and a few others in the case of Flipkart are examples. This clause puts additional weightage to India’s FDI policy that mandates online marketplaces to maintain distance from the third-party sellers. If implemented, major online players will have to restructure their model by reviewing their transactions with major sellers. It will possibly create a few more indirect units.
The government proposes to amend the existing clause on the country of origin. It requires the marketplaces to mention the origin of goods at the pre-purchase stage, at the time of goods being viewed for purchase, and provide suggestions of alternative items produced domestically. This is a protectionist measure. Mandating an online marketplace to follow such practices discourages imports. This prohibits consumers from availing goods and services of their choice and maximising their satisfaction. This clause is also biased against online sellers as no such rule prevails in the case of offline sellers. It is difficult to understand how displaying a little more information will boost domestic industry.
The changes to the existing e-commerce rules may add to the confusion among stakeholders. The e-commerce sector in India is already regulated by a handful of policies like IT Act 2000, Payment Data Storage 2018 among others. In addition, the department of industry and internal trade (DPIIT) is formulating a separate e-commerce policy. India’s Data Protection Bill that is expected to be enacted soon will also be applied to the e-commerce sector. All these will be confusing for the industry.
It is important to regulate every sector of the economy, but regulation should not discourage the players and hamper the growth of the sector. The government should protect the interest of both domestic and foreign players and also the interest of the consumers. Policies should encourage more enterprises to invest rather than troubling them with unnecessary hurdles. It should offer an environment to do business with ease and not fabricate complexities and confusion. Most importantly, policies should be devised to promote the entire industry, not of a few selected players.
(The author is an economist based in New Delhi. Views are personal.)