Centre mulls tweaking draft e-com rules amid row over vague definitions

Centre mulls tweaking draft e-com rules amid row over vague definitions

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After receiving negative feedback from industry players and certain sections in the government for its draft e-Commerce Rules published in June, the Department of Consumer Affairs is mulling to re-frame certain provisions like the definition of ‘related party’ and ‘e-commerce entity’ in the draft rules, reported Indian Express.

The IE report said the department has faced considerable criticism for stepping into the domains of the Department for Promotion of Industry and Internal Trade (DPIIT) and the Ministry of Electronics and Information Technology (MeitY) via the draft rules.

Industry players have also flagged certain sections in the rules which contradict the earlier ones issued by the DPIIT. They have also pointed to a lack of clarity on definitions of terms such as ‘related parties’ which could include anybody working with e-commerce organisation including even logistics operators.

“The definition of related party certainly 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,” a retail executive in Delhi told IE.

The draft rules mandate e-tailers to ensure that “nothing is done by related parties or associated enterprises that the e-commerce entity itself cannot do”.

As pointed by Tata Group in its complaint over the phrase to the government, the company under the draft clause cannot sell Starbucks products on the Tata super-app as it already runs an offline chain of bistros with the American firm.

Sources, however, told IE that the definition of related party is being worked on to address concerns of e-retailers.

As per the draft rules, the e-commerce firm will also be responsible and subject to a ‘fallback liability’ when a registered seller fails to deliver goods and services ordered by a consumer.

Many in the industry rue that the provision of ‘fallback liability’ is contrary to DPIIT’s rules for foreign funding of e-commerce companies that bar the companies from having control over their inventory.

While e-commerce sites like Amazon and Flipkart cannot control the inventory sold on their websites as per India’s FDI policy, the fact that they will be held responsible for any failure in delivery of product or services by sellers under the draft e-commerce rules is unfair, say industry players.

“Provisions like fallback liability are antithetical to the way e-commerce business models have evolved and they are even in contravention of the existing rules,” a senior industry official told IE.

An official of a Bengaluru-based e-commerce website told IE that the government must have decided to introduce the new rules through the Consumer Affairs Department in the wake of the protest against the DPIIT’s FDI policy by the US.

Industry players have also opposed the cross-indexing of rules against various government departments in the draft e-commerce rules.

Joining the chorus, the Niti Ayog has said that several provisions in the draft rules are “beyond the realm” of consumer protection.

Many provisions like having a compliance officer and adhering to law enforcement requests are said to be inspired from the Information Technology (Intermediary) Rules, 2021, provisions of which in turn are sub-judice in several Indian courts.

Many experts in the industry have said several provisions in the draft rules are against consumer interests.

“These rules appear to blatantly limit consumer choices further through provisions such as blanket ban on flash sales etc. despite the regulations being routed through the Ministry that is mandated to uphold consumer rights,” a retail sector analyst told IE.

While conventional flash sales are not prohibited under the new rules, the government seeks to ban back-to-back sales or specific flash sales which it claims “limit customer choice, increase prices and prevents a level playing field”.

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