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E-Commerce Policy in India: How Would It Impact Online Retailers?

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A recent report released by a fintech firm FIS revealed some startling data about India’s e-commerce space. One of the key highlights of the report was the estimation done on the growth of the e-commerce market in the country.

According to it, the Indian e-commerce space is speculated to grow by 84% (to $111 billion ) by 2024 aided by increasing digitization as well as the entire pandemic situation. In fact, the major chunk of this 84% growth will take place through mobile shopping!

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If you look from the perspective of the shoppers or consumers, the grass is obviously greener. The shops you find on different floors of a shopping mall are now in the palm of your hands.

Voila!

Not your time, energy, efforts but some percentage of your money also gets saved through online shopping.

But, let us spin-flip coin for once and try to understand the side of brick-and-mortar retailers who have been raising their voice against the e-commerce giants for quite some time now.

The brick and mortar retailers believe that e-commerce giants like Flipkart and Amazon come up with unethical coupon discounts or offers over their platforms. Practices like this turn away a majority section of the consumers towards e-commerce giants.

So as to seek equality in terms of exposure to the consumers, the Confederation of All India Traders (CAIT) has taken its plea to the Commerce Ministry in the past. It had alleged the e-commerce retailers of volition FDI rules and taking advantage of the loopholes in the same.

Yes!

The entire matter has brought the brick and mortar retailers against the e-commerce giants and finally, the government had to intervene with a solution in the form of Consumer Protection (E-commerce) Rules 2020.

Let us jump into the details of it all!

E-Commerce Rules 2020: Application and Scope

The new e-commerce rules or the Consumer Protection (E-Commerce) Rules of 2020 came into effect on 23 July 2020 and the draft was aimed at bringing a legal framework for protecting the cause of consumers.

In today’s time when most things are available only with a few clicks and you are not bound with limitations such as location, distance, opening hours, etc it becomes pivotal to have an elaborate framework of regulations to skip unfair trade practices in the e-commerce space of India.

Application of the Rules

For analysis of the E-commerce Rules drafted last year, let me first tell you its application as well as scope.

The scope of the E-commerce policies are applicable to:

  • All the e-commerce marketplaces and online inventory entities
  • All the goods or services either bought or sold on online platforms, including digital products as well.
  • Every e-commerce retailers (which includes both multiple brands or single-brand retailers)
  • All the unfair and unequal practices of trade carried out on any e-commerce platform

For those who are unaware, the term ‘inventory entities’ implies those entities which own a list of goods and services in order to sell them directly to the consumers.

One of the most striking points, if we talk about the scope of these e-commerce rules, is that it applies to all the e-commerce platforms that are not headquartered in India but offer their services to Indian consumers.

The offshore e-marketplaces that operate in India and offer their goods or services to Indian consumers are required to tick the following conditions:

  • A company that is incorporated in India or a company incorporated outside of India but has does its business activity here in the country through online mode.
  • Or, a branch/ office present in any foreign country but it is controlled by a person living in India.

The e-commerce marketplaces falling into any of the above categories are obliged to follow the E-commerce Rules of India.

Explanation: What Are The Rules of E-Commerce?

Dear Readers, before I begin with the in-depth explanation of the key obligations that are inked in India’s draft e-commerce policy of 2020, you must know that there are a different set of rules for e-commerce entities and the sellers who offer their goods or services on any e-marketplace.

In the following section, you will get to know about the set of rules formulated for both parties.

For E-commerce Entities

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Prevention of Unfair Trade Practices:

All the e-commerce platforms need to ensure that no unfair trade practice takes place and no misleading advertisement is displayed on their respective online platforms.

Take Consent Of The Consumers:

According to the policy, e-commerce entities are required to take consent from their consumers for the purchase of any products that are offered on their platform. Generally, even before this rule of consent was mandated, the consumers had to accept the terms and conditions of the concerned e-commerce platform at the time when they created their account.

Hence, the implication of this rule is still hazy!

No Price Manipulation:

The e-commerce entitled are strictly not allowed to manipulate the prices of the products or services in order to make unnecessary profits. The main purpose to put forward this rule was to ensure that all the sellers are provided with the same playing field. A particular seller must not be favoured through practices like cash backs offers, discounts, free goodies, etc.

The rule of price manipulation has already been introduced by the centre under its FDI policy!

A No To Consumer Discrimination:

It is the duty of the e-commerce entities to make sure that no discrimination based on the ‘same class’ or ‘same category’ of the consumers takes place on their respective platforms. Further, the e-commerce entities are required to tell about their relationship with all the sellers using their platform to offer goods and services.

Charges On Order Cancellation:

Even if any consumer cancels a confirmed order, he/ she must not be charged with any cancellation fees. And, if the cancellation charges are imposed by any e-commerce entities then they will have to pay the cancellation charges whenever an order is cancelled form their behalf and not by the consumers.

Refund Must Be Initiated On Time:

The e-commerce entities need to make sure that they handle all the refund requests within a reasonable time period. This rule was introduced because some of the online marketplaces take an unnecessary amount of time to initiate the refunds or act too late on the refund requests made by the consumers.

Grievance Redressal Officer

The appointment of a grievance redressal officer is now mandatory on all e-commerce websites. The sole purpose of having a grievance redressal officer is to make sure the consumer grievances are handled through a proper channel. Further, the grievance redressal officer needs to reply to the complaints of the consumers within 2 days or 48 hours.

Appointment Of Nodal Person Of Contact

Well, you do not need to get puzzled with this fancy term ‘Nodal Person Of Contact’. The term is basically used to denote an alternate senior authority or legal department (in-house) that looks after the proper implementation of all the regulations of the Consumer Protection Act and the E-commerce Policy.

For Sellers

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A Written Contract

As per the E-commerce Policy, the sellers now need to sign a properly written contract with an e-commerce platform if they wish to sell their products or services online. Further, both the parties of the contract, namely the seller and the concerned e-commerce platform need to follow it.

No Misleading Ads

No seller is allowed to post reviews about any of its own goods and services on the e-commerce platform. Further, any seller cannot refuse to take back the products returned by a consumer (if it is defective/wrong product/does not deliver the features as mentioned in the description).

Disclosure Of Important Details

The sellers are required to disclose some important information (on the concerned e-commerce platform) such as their legal name, address, applicable GSTIN, PAN, customer care number, the breakup of the price, taxes, handling and conveyance charges, etc, of their products.

How E-commerce Rules 2020 Improved Complaint Redressal

In one of the recent interviews the chief commissioner of Central Consumer Protection Authority, Nidhi Khare revealed that before the e-commerce rules were applied last, the number of customer complaints that were addressed were relatively low.

But, after the Consumer Protection (E-Commerce) Rules, 2020 were introduced last year, the redressal of consumer complaints have significantly improved. Not only this, she even mentioned that the number of complaints has declined and the process of addressing the issues has become quicker.

She even told about the Quality Council of India (QCI) that is assigned with the work of keeping a check on the non-compliance of rules by the e-commerce companies. In fact, the e-commerce entities that were found guilty of violating any of the above-mentioned rules were served with notice!

But, the story does not end here!

Yes, the government is all set to come up with a new draft of the e-commerce policy in 2021. The latest draft of the rules for all the e-commerce platforms is likely to be more strict for ensuring equal treatment of all the vendors.

Read the details of India's new draft e-commerce policy in the following section.

India’s New Draft E-commerce Policy

Even though the Consumer Protection (E-commerce) Rules were introduced last year, there have been several complaints pouring up from the vendors and brick-mortar sellers saying that the e-commerce giants are not complying with the regulations!

On top of that, the flourishing trend of e-commerce shopping calls for a stringent set of regulations for online marketplaces. Therefore, the centre has been trying to come up with a new draft of the e-commerce policy for quite a few months now.

To better understand the growing sales in the e-commerce space, have a look at the following graph!

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The final draft will be released soon after the government has to take consultations from the stakeholders. But, let us ponder over what is known so far through the unofficial data!

What Is Known So Far?

The details that are known through the unofficial draft are mentioned as following:

  • The government has mentioned that online marketplaces cannot be a particle to any single seller in any case. As this point was also mentioned in the e-commerce policy last year, several giants like Amazon and Flipkart went on to re-organize their structure of ownership in the case of several main sellers.
  • There were many complaints received from the end of traders that the online marketplaces use customer-related data/information for their personal advantage and at times launch private label products.

In order to keep a check on this practice, the draft mentions that the details collected by the online marketplaces cannot be used for any kind of advantage against the sellers/vendors.

  • The new draft of the e-commerce policy will be unique. Why? You ask! This is because for the first time the government has focussed on the use of technology for unfair trade practices. The draft mentions that the online marketplace must not use technology to give an advantage to their favourite or preferred choice of sellers.
  • The draft makes a sticker mention about the price manipulations. It said that the e-commerce companies now have to be totally transparent when it comes to the declaration of methods used for giving discounts as well as offer on their respective platforms.

Further, a Group of Secretaries created for addressing the challenges of implementation of new policies would analyze how to keep a balance between the above-mentioned rule and the digital space.

The new set of policies would be more clear for the public once an official draft is released from the government’s side.

But, from whatever is known so far, the experts believe that the foreign investors might not be very cheerful if all the rules and regulations will be applied strictly in the e-commerce space. But, if we look at another side of the coin, India presents such a lucrative market for the global investors that wouldn’t be able to completely turn their backs even if the e-commerce rules will be strict.

Conclusion

One of the major points of concern that the traders association has been cribbing about is the deep discounts given on the e-commerce platforms and the government is likely to take a firm stand on it through the upcoming new draft on e-commerce policy.

Further, with increased digitization, the possibility of consumer data being misused has also gained buzz. Keeping this in mind, the government is pressing on the storage of all the data locally in India.

The fresh set of rules might be easy to digest for e-commerce entities that are from India but the foreign (foreign-funded) e-commerce platforms like Flipkart or Amazon might have to face a tough time complying with the new policies.

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author

Shivani