E-commerce companies call out lack of clarity in draft rules

Source: Indian Express

What is the news?

Government has decided to extend the last date for submission of comments on the draft ecommerce rules till July 21 from the earlier deadline of July 6. While the government did not disclose any reasons for extending the date, it is learnt that it has come as a result of the demand made by e-commerce players in their recent meeting with the Consumer Affairs Ministry.

What are the concerns expressed by e-commerce companies?

• On Fallback liability rule: According to the proposed rules, e-commerce firms will be held liable in case a seller on their platform fails to deliver goods or services due to negligent conduct, which causes loss to the customer.
  • Companies argue that with these various measures where an online marketplace operates from a distance when it comes to seller inventory, a provision like ‘fall-back liability’ could prove to be antithetical (opposite) to the way e-commerce business models have evolved.
  • This clause also raises another question: If an e-commerce firm exerts no sway over the inventory, then can it be held responsible for the actions of the seller?
• On flash sales: E-commerce companies have also sought clarification on the nature of flash sales that have been banned.
  • While the government, on June 21, clarified shortly after publishing the draft rules that conventional flash sales will be allowed, companies have sought more information on this regard. Companies have also pointed out that various measures, including one on flash sales, “appear to blatantly limit consumer choices further”.
• On definition of related party: Clauses pertaining to dealings with related-parties have also added to the confusion. Companies have sought that the definition of “related party” be shortened from the current wide-ranging entities that it could cover.
  • Under this clause, related parties of an e-commerce platform cannot be sellers on that platform. Contrary to expectations, doing so would tend to limit, not enhance, consumer choice on the platform.
• Giving weightage to traditional retailers: Finally, as per companies, such restrictive rules do not apply to the brick and mortar stores, which engage in discounts, end of season sales, and special tie-ups with manufacturers. Hence, imposing such restrictive regulations on e-commerce platforms signifies that the rules were designed giving greater weightage to the interests of traditional retailers, rather than consumers, or small and medium sellers on the platforms. Vagueness in some of the terms employed in the rules, which leaves room for discretion in implementation, also raises apprehensions of greater regulatory intervention.

Way forward
Concerns need to be addressed. Policy should aim to reduce information asymmetry, facilitate competition, and bring greater transparency in pricing. In trying to enhance consumer welfare, it should not end up decreasing it.