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The Centre has proposed additions and changes to the Consumer Protection (E-commerce) Rules, 2020. This has caused confusion among e-commerce firms and stakeholders. Mint explains what the new rules entail

What are the new draft e-commerce rules?

On 21 June, the consumer affairs ministry proposed amendments to the e-commerce rules to address complaints against “unfair trade" practices followed by e-tailers. The government is aiming for a tighter regulatory framework, arguing that the amendments are largely meant to protect consumer interest, adding another layer of compliance for e-commerce firms. The rules are open for comments and industry suggestions till 6 July. These apply to large marketplaces such as Amazon, Flipkart, Myntra, and to food aggregators Swiggy and Zomato, as well as single brand e-commerce sites and big tech, including Facebook Marketplace.

What do the proposed rules entail?

The ministry has proposed that e-commerce firms should register with the department for promotion of industry and internal trade (DPIIT), and sought to tighten the nozzle on ‘flash sales’. They also need to submit information to law enforcement agencies within 72 hours during investigations and stop all related parties from selling on their marketplaces. This could affect how online marketplaces function and work with sellers, who have been accused of giving preferential treatment to entities they hold indirect stakes in. DPIIT’s Press Note 2 of 2018 prohibited e-commerce firms from owning or controlling seller inventory.

Tightening the noose
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Tightening the noose

Do rules prohibit flash sales on online marketplaces?

The ministry said no e-commerce company shall organize sales at significantly reduced prices, high discounts or any other such promotions or attractive offers for a predetermined period of time on selective goods and services to draw a large number of consumers. Conventional flash sales are not banned.

What is creating the confusion?

The amendments have come as a surprise for the e-tailing industry, even as large e-tailers, including Flipkart and Amazon India face investigation from the Competition Commission of India. E-commerce firms are unclear what the Centre means by ‘conventional flash sales’, the liability of a marketplace for sellers, and the government’s definition of ‘deep discounting’. Further, not allowing ‘related parties’ to sell on their own marketplace may lead to more complex supply chain structures and creation of more indirect units.

What is the likely impact?

Marketplaces and stakeholders are expected to hold discussions with all major industry bodies this week to seek further clarity and submit their responses. The rules come at a time when DPIIT is working to release a separate e-commerce policy and the IT ministry is working on the Personal Data Protection Bill, leading to multiple ministries governing operations of e-commerce firms in India. This is likely to create fresh regulatory bottlenecks, overlaps, and ambiguities in terms of law for e-commerce players in the country.

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