E-commerce companies to write to govt against draft rules

The e-commerce giants are already barred from controlling companies that sell on their platform

Anirudh Laskar
Updated29 Jun 2021, 05:49 AM IST
The proposed rules aim to further restrict how e-commerce firms function
The proposed rules aim to further restrict how e-commerce firms function(Photo: Bloomberg)

Amazon.com and Walmart Inc.’s Flipkart unit plan to oppose the new draft e-commerce rules that these companies believe will be detrimental to Indian customers who are increasingly embracing online shopping and the industry’s growth, three people familiar with the matter said.

The two companies plan to write to the government after the ministry of consumer affairs proposed last week a set of new rules—Consumer Protection (e-commerce) Rules, 2020—that are to be implemented after factoring in industry views.

The government’s move is expected to further tighten regulations on Amazon.com and Flipkart amid complaints by traders and small businesses that the two dominant e-commerce platforms are flouting local laws. The proposed rules aim to further restrict how e-commerce companies function, including barring affiliated entities from selling on the platforms and restricting flash sales.

The e-commerce giants are already barred from controlling companies that sell on their platform

The e-commerce giants are already barred from controlling companies that sell on their platform, entering into exclusive arrangements with companies for online sales of products such as smartphones, and discounting goods.

The two also plan to oppose a proposal that foreign products can’t be sold online unless the firm whose product is being sold is registered with the Department for Promotion of Industry and Internal Trade (DPIIT).

Emails sent to Amazon and Flipkart did not elicit any response.

Propelled by rapidly-growing smartphone usage, the Indian e-commerce market is expected to grow more than fivefold to $200 billion by 2026 from $38.5 billion in 2017, according to India Brand Equity Foundation. Flipkart, Amazon, BigBasket, Zomato, Swiggy, Nykaa and Paytm Mall are some of the top e-commerce firms in India.

“The draft rules will jolt the e-commerce ecosystem if implemented. It will not only unfairly hurt the interest of consumers, especially the online population, but also drastically unlevel the playing field between online and offline companies,” said one of the three people cited above.

The draft proposal says the rules will apply to all e-commerce entities that are not established in India. “Every e-commerce entity, which intends to operate in India, shall register itself with DPIIT. Also, no e-commerce entity shall permit usage of the name or brand associated with that of the marketplace e-commerce entity for promotion or offer for sale of goods,” according to the proposed rules.

This means Walmart, the controlling shareholder of Flipkart, can’t sell its own branded shirt in India through Flipkart without first getting registered with DPIIT. “It is impractical to ask each and every company in foreign countries across the globe to get an Indian registration first to be able to sell any product here,” said the legal head of an e-commerce firm, one of the three people cited above.

The definition of e-commerce entity also includes delivery and pickup agents under the proposed rules.

“Delivery agents are governed by other Acts. For any issues related to the sales agreement for any product between the customer and the company, the delivery agent cannot be penalized. It is unfair,” the person said.

“This proposal will only discourage people from being in the job of delivery or pickup, which, in turn, will not only make online-purchase cycles longer and patchy but also hurt employment numbers that e-commerce players in India have enabled,” said the second person, also requesting anonymity.

The proposals will hurt consumer interest, said Pradeep S. Mehta, secretary-general of CUTS International, a consumer and public policy think tank.

“The evolving e-commerce ecosystem has contributed significantly to consumer welfare in India. Tech-friendly consumers are now able to order groceries at home instead of going to crowded bazaars, while others are able to get their needs serviced by neighbourhood stores. The present policy approach tends to micro-manage e-commerce. It will adversely affect the ecosystem, which in turn would go against consumer interests,” Mehta said.

The government also wants to ensure none of the related parties and associated enterprises of e-commerce firms are listed as a seller on their platforms. The e-commerce firm also has to ensure related parties do nothing that the e-commerce entity cannot do by itself.

This proposal discourages e-commerce players from forming joint ventures in India that are primarily meant to ensure faster product delivery to consumers. Amazon.com in India has joint ventures such as Cloudtail and Appario for managing the sales of hundreds of products online to ensure faster delivery. These two JVs alone contribute a quarter of Amazon’s revenues from online sales in India.

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First Published:29 Jun 2021, 05:49 AM IST
HomeIndustryRetailE-commerce companies to write to govt against draft rules

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