Draft e-commerce policy likely to install regulator

Draft e-commerce policy likely to install regulator

News:

The government plans to introduce a new policy to boost growth in the e-commerce industry by

Important Facts:

Need of Single Legislation for e-commerce:

• E-commerce activities are governed by a number of Regulations and Acts of the Government for instance Information Technology Act 2000, Consumer Protection Act, 1986, The Bureau of Indian Standards (BIS) etc., leading to mismanagement.
• According to a new e-commerce draft policy, India is mulling a single legislation to address all aspects of e-commerce regulation, and it is also exploring the idea of setting up a single regulator to consider all sector-related issues.
• Currently, while the DIPP formulates and notifies FDI policies, including those on e-commerce, any violation of such rules is dealt under the penal provisions of the Foreign Exchange Management Act (FEMA). This Act is administered by the Reserve Bank of India, and the ED is its enforcement authority.

Prevailing issues with E-Commerce model

• India’s retail market is dominated by small corner shops, which are now threatened by the e-commerce giants.
• The move comes amid growing demand in the space action against e-commerce players, including Amazon and Flipkart, for alleged violation of foreign direct investment (FDI) policies.
• Apart from FDI violations, online sellers, most notably the AIOVA (a community of around 2,000 online sellers) had alleged that ecommerce firms are violating existing marketplace rules of government.
• Small traders have been complaining that e-commerce firms have been indirectly influencing the retail market with selective discounts and incentives dished out through vendors, who are related parties.

Policy Proposals:

• The regulator will ensure consumer protection and compliance with foreign investment caps in e-commerce.
• The proposed regulator will also oversee issues like consumer protection and full disclosure by e-commerce entities on the purpose and intent of their operations.
• It has also suggested direct and indirect tax incentives as well as according infrastructure status to data centers to encourage domestic data storage.
• To encourage micro, small and medium enterprises, the draft e-commerce policy recommends allowing them to follow inventory-based models for selling locally produced goods through an online platform.
• Companies has been asked to refrain from doling out preferential treatment to larger sellers, the policy put a cap on how much one vendor can sell on a particular platform.
• The tightened guidelines which is expected to have a major impact on top e-commerce players in the country, also banned them from selling exclusive-only products on their platforms, a move aimed at curbing the alleged practice of influencing prices.
• Policy bar online retailers from selling products of companies in which they own stakes. They also disallow exclusive tie-ups between e-commerce firms and vendors. Also, if a vendor sells more than 25% of its ware through any e-commerce marketplace, the latter will be deemed to have an inventory model in which FDI is not allowed.
• The new regulations build on existing rules under which foreign investors can acquire 100 percent of e-commerce companies, with the exception of a model based on inventory from which they are barred.
• In addition, the government has ruled out any review of the revised FDI norms.

Significance:

• The new policy would boost the sector, promote exports and ensure fair play, a senior government official said on condition of anonymity
• Both online and offline traders in the country will now be able to sell their goods on e-commerce platforms in a transparent manner.
• New rules will appease small traders and farmers who fear that U.S. companies are making a back door entry into India’s retail market and could squeeze out small corner shops that dominate Indian retailing.
• Predatory pricing policies and deep discounting by e-commerce players will no longer occur.