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Draft e-commerce policy could add to compliance burden of stakeholders

Sangeetha Chengappa Bengaluru | Updated on March 16, 2021

Under pressure from national trade lobbies, the Government’s latest amendments to the draft national e-Commerce Policy is expected to add to the compliance burden of e-commerce firms as they revisit their existing business structures.

The draft policy is also likely to impact foreign direct investment in the sector.

‘Prevent bias’

The Confederation of All India Traders (CAIT) has been fighting against what it calls “gross and blatant violations of FDI policy and FEMA by e-commerce giants Amazon and Flipkart who have developed escape routes in Press Note 2 of 2018 for flouting the norms” urging the Government to take action against them.

As a result, the latest amendment says, “An e-Commerce operator operating in marketplace or hybrid mode shall manage its relationship with sellers on its platform in an agnostic manner and without being partial to any of its sellers.....shall ensure that information collected through platform is not used to obtain market advantage against sellers on its own platform.....shall ensure that algorithms used, are not biased and that no discrimination due to digitally induced biases is prevalent. Actions and things which cannot be done by the platform entities can also not be done by any of its associates and related parties.”

The new draft e-commerce rules seem to be rather convoluted and targeted indirectly at one or two of the top foreign e-commerce players in the country, observed Arvind Singhal, CMD, Technopak.

“The rules are neither in favour of the lakhs of merchants/sellers who need a choice of more marketplaces to sell their merchandise, nor in favour of consumers who need more choices of merchandise.”

Discouraging FDI

In order to prevent the emergence of monopolies or oligopolies in e-marketplaces, the policy must be conducive to attract more domestic and international players thereby creating more competition in the market. More e-marketplaces would give more choices to millions of sellers, and to hundreds of millions of consumers.

Providing unfair advantages to local sellers at the cost of making it difficult for foreign controlled e-commerce marketplaces to do business in India, will restrict buying choices for Indian customers on the one hand and discourage FDI in e-commerce on the other, as the new norms may bring down the ease of doing business for foreign firms.

“Several and frequent amendments to FDI rules for e-commerce could impact FDI in this sector. In the past, whenever there has been any policy change for this sector, Government believes that e-commerce entities tend to follow them in letter but not in spirit. This is what the Government plans to plug,” said Lalit Kumar, Partner, J Sagar Associates.

Published on March 16, 2021

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