Indian govt plans stricter e-commerce rules

Here's a breakdown of the proposed bans and rules.

The Indian government on Monday (June 21) said it aims to bring transparency in e-commerce – thus suggesting certain bans and stricter rules as a response to “several complaints against widespread cheating and unfair trade practices being observed” in the ecosystem. 

If given a nod, the changes to the Consumer Protection Rules, 2020, will likely impact giants like Amazon India and Walmart-owned Flipkart as they expand their operations in the country.

Here are some of the proposed rules.

No private labels

E-commerce websites like Amazon and Flipkart may be banned from running in-house labels. The proposed rules state that marketplace e-commerce entities have to ensure that: 

  • none of its related parties and associated enterprises are enlisted as sellers for sale to consumers directly and that

  • nothing is done by related parties or associated enterprises which the e-commerce entity cannot do itself

No flash sales

The government has suggested banning “specific flash sales” or “back-to-back sales” of smartphones and other products – like the ones held during the festival season. E-commerce platforms offer deep discounts, promotions, and attractive offers on certain products during these sales, traditionally resulting in a major uptick in customer orders.

During such events, “one seller selling on platform does not carry any inventory or order fulfilment capability but merely places a “flash or back to back” order with another seller controlled by platform.” 

These, the ministry stated, limit customer choice, increase prices and prevent a level playing field. 

While the government has earlier framed rules to discourage deep discounting, this is the first time that a blanket ban on flash sales has been proposed, Economic Times reported. The earlier regulation, enforced in early 2019, put a ban on exclusive sales and put restrictions on discounts and cashback promotions. 

No mis-selling & a fair chance to domestic sellers

The ministry has suggested that all sellers on e-commerce entities clearly mention the “country of origin” of the products being offered as well as suggest alternatives to allow a “fair opportunity for domestic goods.” 

Further, platforms will be asked to provide a ranking for goods as well as ensure that the parameters do not discriminate against domestic goods and sellers.

An indication of “best before” or “use before” date has also been proposed so that consumers can make an informed purchase decision.

Those engaged in “cross selling” – sale of goods or services which are related, adjacent or complimentary to a purchase made by a consumer – will be asked to give “adequate disclosure to its users displayed prominently in a clear and accessible manner on its platform.”

No manipulation of search results

As per the proposed changes, e-commerce platforms may be banned from “misleading users” by “manipulating search results or search indexes having regard to the search query of the user.”

Fall-back liability

The ministry has also suggested a “fall-back liability” for marketplace e-commerce entities so that consumers are not unduly affected if a seller fails to deliver the goods or services due to “negligent conduct by such seller.”

Appoint a chief compliance officer and resident grievance officer

In order to ensure compliance, the government has further suggested appointing a nodal contact person for 24x7 coordination with law enforcement agencies as well as officers to ensure compliance with their orders.

This, the ministry stated, “would ensure effective compliance with the provisions of the Act and Rules and also strengthen the grievance redressal mechanism on e-commerce entities.”

According to a TechCrunch report, Amazon said that it is reviewing the proposed changes while Flipkart is yet to make a comment. 

The consumer affairs ministry is accepting comments on the proposed amendments from all stakeholders till July 6.