The Consumer Affairs Ministry on Tuesday said that the provision of mandatory registration for e-commerce entities with the Department for Promotion of Industry and Internal Trade (DPIIT) has been proposed to bring in accountability and encourage genuine players in the e-commerce space. The Ministry added that prohibition on certain kinds of back-to-back flash sales have been proposed to safeguard consumer interests and bring in an enabling provision for them to be able to make complaints against unfair trade practices.

The Ministry said that it has proposed substantive amendments in the Consumer Protection e-commerce Rules after receiving complaints that e-commerce entities were manipulating search results to promote certain sellers, give preferential treatment to some sellers, indirectly operating the sellers on their platform and impinging the free choice of consumers.

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Replying to queries on the Ministry’s proposed amendment to prohibit flash sales, Nidhi Khare, Additional Secretary, Department of Consumer Affairs told mediapersons, “Players will be able to continue to do their conventional discounted flash sales. The proposed amendments refer to specific flash sales in which a particular seller or a group of sellers is buying whatever is being offered on the e-commerce marketplace entity during the flash sale. So the consumers get a very limited choice and it also makes other businesses, especially MSMEs uncompetitive.”

“We are observing that these practices are increasingly coming into notice even in the western countries where shell companies, which are controlled by the e-commerce marketplace, are formed just for fronting these activities. In these cases, a seller does not carry any inventory or order fulfilment capability but merely places a “flash or back-to-back” order with another seller controlled by the platform. So these are fraudulent practices that are limiting competition and making other sellers unviable,” she added.

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Officials said that the Ministry will not be regulating e-commerce entities as that comes under the purview of DPIIT which is in the process of finalising the e-commerce policy. “We are not saying that we will begin investigating every flash sale or regulating every flash sale. We are not asking for any disclosure from companies on flash sales. The aim is to bring in an enabling provision for consumers to be able to make complaints if they felt they were cheated. We can take suo-moto cognizance. We are also looking at bringing in third-parties for data-mining and use of tools such as AI,” Khare added.

The Ministry said that the concept of “fallback liability” for marketplace e-commerce platforms has also been proposed to further strengthen these regulations as the space has evolved considerably. The new draft for e-commerce rules have also proposed other amendments which include that e-commerce entities will need to ensure that related parties and associated enterprises are not enlisted as sellers for sale to consumer directly and use of marketplace brand’s entity for promotion and sale of goods will not be permitted, which are likely to also tighten rules against sale of private labels.