Authored by: Arushi Raj
In an attempt to tighten controls on its fast-growing e-commerce, the Indian government in June this year announced the Draft E-commerce Rules under the Consumer Protection Act. However, soon after, these rules faced criticism from big players such as Amazon and Flipkart as well as opposition from within the government itself.
What are the Draft E-Commerce Rules?
On June 21, 2021, the Ministry of Consumer Affairs, Food, and Public Distribution released draft amendments to the Consumer Protection (E-commerce) Rules, 2020 under the Consumer Protection Act, 2019. These amendments are meant to increase obligations and liabilities for online retailers for goods and services purchased on their platforms.
What constitutes ‘E-commerce’ entities?
The Draft Rules define an “e-commerce entity” as an entity, in India or abroad, which conducts e-commerce business either through: (i) an inventory-based model, where the entity owns the inventory and sells it to the consumer directly, or (ii) marketplace model, where entity acts as a technology platform facilitating transactions between buyers and sellers.
What are the key provisions?
Under the draft rules, any online retailer will first have to register itself with the Department of Promotion for Industry and Internal Trade (DPIIT), Ministry of Commerce and Industry. Moreover, the rules have issued a ban on specific ‘flash sales’ or back-to-back sales and has introduced the concept of “fall-back liability”, which says that 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.
Further, the rules propose that E-commerce firms must ensure that none of their “related parties and associated enterprises” are listed as sellers on their shopping websites, and no related entity should sell goods to an online seller operating on the same platform. Additionally, as a way to promote Made-in-India products, the rules say that foreign e-commerce players must not make direct sales to consumers and companies will have to
provide domestic alternatives to imported goods.
Apart from this, the e-commerce sites are directed to ensure the appointment of a Chief Compliance Officer (CCO) and a nodal contact person for round the clock coordination with law enforcement agencies. In order to prevent preferential treatment, the rules restrict e-commerce companies from “manipulating search results or search indexes”. It also mandates that no logistics service provider of a marketplace e-commerce entity shall provide differentiated treatment between sellers of the same category.