Regulating e-commerce

| Updated on July 05, 2021

There should be stability in norms governing e-commerce; they should not shackle its growth

The e-commerce industry has played a critical role in the pandemic, not only in reaching essential goods and services to consumers, but also in helping businesses distribute their output. Besides providing consumers with convenience, better choice and price, the sector is also a big employer, expected to record employment growth of over 20 per cent over the next few years. The proposal to amend the Consumer Protection (e-commerce) Rules, 2020 is therefore welcome, as it shows that the Centre is paying close attention to the activities in this segment. But, while some of the suggested proposals will help improve supervision in the segment, others could hamper the e-commerce players with unnecessarily high compliance burden. Given the prominent part that these entities play in the economy by improving the reach of sellers and giving consumers choice and best prices, there is need for stable and equitable regulations.

The proposed amendments are ostensibly due to complaints from consumers and trader associations of cheating and unfair trade practices by market place e-commerce entities. The draft states that these entities “manipulate search results to promote certain sellers, give preferential treatment to some sellers, impinging on free choice on consumers.” But such marketing strategies that nudge customers to behave in a certain way, are employed by both off-line and online retail businesses; singling out online retail alone for imposing restrictions does not appear fair. Similarly imposing ban on flash sales wherein the seller does not carry an inventory and sources it from another seller is also not a good idea as these sales help the producers offload their products quickly and helps consumers get the product of their choice at a good price. The proposal to prevent e-commerce platforms from selling products of other manufacturers under their label is likely to hurt a number of small manufacturers who are able to derive the benefit of the e-commerce market place’s brand name. Some of the proposals such as asking e-commerce market places offering imported goods to suggest alternatives from domestic manufacturers will increase the cost of operations of these players.

A few proposals however, appear sound as they will make regulations of these entities easier. For instance, appointment of Chief Compliance Officer to coordinate with regulators and a resident grievance officer to address consumer complaints will improve coordination between these platforms and the regulators and consumers. But such positions can be limited to larger e-commerce market places, with turnover above a specified threshold, which account for bulk of the transactions in the country. This will ensure that smaller players do not face undue compliance burden. Similarly asking all e-commerce entities to register with the Department for Promotion of Industry and Internal Trade will help in bringing better accountability; monitoring of these entities can also improve.

Published on July 05, 2021

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