How Centre’s draft rules for e-commerce firms affect shoppers

The Centre recently proposed changes to e-commerce rules under the Consumer Protection Act. One of the first changes in the draft rules issued by the consumer affairs ministry is a ban on ‘specific flash sales’. The rules also introduce the concept of ‘fallback liability’, which will strengthen consumers’ hands. The concept of recording automatic consent and pre-ticked checkboxes will also be stopped. Any online retailer will first have to register with the Department of Promotion for Industry and Internal Trade.

The rules will also require e-commerce companies to employ grievance officers, chief compliance officers and nodal contact persons for ‘24*7 coordination with law enforcement agencies.

These new rules are expected to have an impact across e-commerce in India. The country predicts its e-retail market will be worth $200 billion by 2026.

Companies have until July 6 to respond to the proposals.

Ban on Flash Sales

The draft rules prohibit an e-commerce entity from organising “specific” flash sales.

A flash sale is defined as sale of goods at greatly reduced prices, lasting for only a short period of time (often during holiday/festival periods). As per the proposals, conventional flash sales will not be banned, only specific flash sales or back-to-back sales, “which limit customer choice, increase prices and prevent a level playing field”. What this means is that the ban will apply in cases where technology is used to enable only seller/s managed by the e-commerce company to sell goods or services on its platform.

Fallback Liability

Fallback liability will allow consumers to approach an e-commerce company if sellers on the platform fail to deliver goods or services due to negligent conduct. Often e-commerce platforms direct consumers to respective sellers to solve grievances. This proposal seeks to address that issue.

Grievance Redressal Mechanism

E-commerce entities will have to publish on their websites and apps the names and contact details of their grievance officers, as well as the mechanism that can be used by consumers to register their complaints. They will also have to appoint chief compliance officers and nodal contact persons and mandatorily register with the National Consumer Helpline.

Made-in-India Push

An earlier version of the draft required e-commerce platforms to list details of importers. The current draft calls for additional disclosures – for example the country of origin. The companies will also be required to suggest local alternatives, to ensure the ranking doesn’t discriminate against domestic goods.

Big Losers

Walmart-owned Flipkart and Amazon will be particularly impacted if these draft proposals are implemented. The draft contains clauses that say e-commerce firms must ensure none of their related enterprises are listed as sellers on their websites, and that no affiliate entity should sell goods to an online seller operating on its platform. Amazon holds an indirect stake in two of its top sellers.

Indian retailers allege the companies use their wholesale units to indirectly list products on their websites through select sellers, bypassing foreign investment restrictions that prohibit direct sales.