Draft e-Commerce Rules

In News

Recently ,Key provisions of the Draft e-Commerce Rules have been stridently opposed by the Industry department and Corporate Affairs ministry .

About

• The Niti Aayog vice chairman who has warned that they “will severely harm Ease of Doing Business and impact small businesses.
• These include:
  • The fallback liability of sellers,
  • The proposed ban on flash sales, and 
  • The need for definitional clarity of terms, such as “cross-selling” and “mis-selling” in the draft rules.

Issues and Criticisms

• Overreach: 
  • The most significant criticism from within the government is related to the perception of “overreach” by the Consumer Affairs Department — venturing into areas where other departments such as the Department for Promotion of Industry and Internal Trade (DPIIT) and the Ministry of Electronics & Information Technology (MeitY) are already working.
• Some contrary rules:
  • Several contradictions in the draft rules that have triggered confusion among sectoral players have also been flagged, including some provisions that run contrary to the rules governing the sector issued earlier by the DPIIT.
• Broad definition of “related party“:
  • The “broad definition” of ‘related party’ has been flagged — as one “that can potentially include all entities such as those involved in logistics, any joint ventures, etc.”,
  • This definition vastly expands the remit of the new rules.
    • The definition needs some more clarity, otherwise it will be difficult not only for foreign players like Amazon and Flipkart, but even homegrown companies like Tata and Reliance to have their various brands such as 1mg, Netmeds, Urban Ladder, Milkbasket, etc. sell on their super-apps.
• Some joint ventures will also face problems:  
  • The joint venture between the Tata Group and Starbucks, which would be considered a related party under the proposed provisions, and would not be able to sell products on a Tata super-app.
    • The draft rules say every e-commerce marketplace must ensure that nothing is done by related parties or associated enterprises that the e-commerce entity itself cannot do. Sources said the provisions might be changed to have certain exclusions in the definition to accommodate these concerns. 
• Fall back liability:
  • It has been highlighted that in some cases, provisions such as fall-back liability is counter-effective to the DPIIT’s policy for foreign funding of e-commerce companies that disallows these firms from having control over their inventory.
  • The concept of ‘fall back liability’ may be examined in view of Product Liability provision as per Section 2(34) and Chapter VI of the Consumer Protection Act 2019. 

• Flash Sale:

• Government’s original proposal indicated a blanket ban on all flash sales but a clarification later said it won’t apply for ‘conventional’ flash sales.
  • These are typically pre-decided sale events for new smartphones with limited stocks at a discount. It is not clear what’s a conventional flash sale.
• The definitions of Cross Selling, Miss-selling and Flash Sale may be reexamined. 
• These concepts are addressed under the ethical and responsible e-Commerce. 

• Strict Regulations:

• Some of the proposed provisions like having a compliance officer, adherence to law enforcement requests, etc., follow in the footsteps of the Information Technology (Intermediary) Rules, 2021 issued by MeitY. 
• These IT rules are facing legal challenges in several courts, including the Delhi High Court, Bombay High Court, and Karnataka High Court.

(Image Courtesy: ET )

Conclusion

• These rules appear to blatantly limit consumer choices further.
• There is an urgent need to incorporate concerns of all the stakeholders.

Sources: IE