The Department of Consumer Affairs is reportedly reviewing some components of the draft e-commerce rules 2021 amid feedback from industries and government sectors. The department previously activated the Consumer Protection (E-Commerce) Rules, 2020 under the Consumer Protection Act, 2019. Additionally, the Department for Promotion of Industry and Internal Trade (DPIIT) has established an advisory committee for the Open Network for Digital Commerce (ONDC) project. This initiative aims to counter digital monopolies by making e-commerce processes open source, thereby being accessible to all online retailers.
Primary Conditions of the Draft e-Commerce Rules 2021
The draft e-commerce rules highlight several critical aspects, including mandatory registration, limiting Flash sales, appointing a Compliance Officer, restricting related parties, identifying goods’ country of origin, and reporting cybersecurity issues.
Online retailers need to register with the DPIIT, Ministry of Commerce and Industry. Conventional e-commerce Flash sales are acceptable, but those that could limit customer choice, increase prices, or prevent fair competition are not permitted.
E-commerce platforms must also appoint a Chief Compliance Officer (CCO) for round-the-clock coordination with law enforcement agencies. In addressing concerns of preferential treatment, the rules suggest none of the related parties should use any consumer information from the online platform for unfair advantage.
Businesses also need to identify products based on their country of origin and provide a filtering mechanism before purchase. They have to offer alternatives to imported items to provide fair opportunities for domestic sellers. All e-commerce entities must disclose information within 72 hours upon an authorized government agency’s request, especially in cases of potential legal breaches, including cybersecurity issues.
Concerns Around the Draft Rules
Several concerns arise from the draft rules. The definition of related party is broad and could potentially include logistic entities, joint ventures, etc. This can make operations challenging for both foreign and local companies in selling their brands on their super-apps.
The fall-back liability issue has received significant industry attention. While the Foreign Direct Investment (FDI) policy restricts companies from controlling the inventory sold on their platforms, the fall-back liability clause holds e-commerce companies accountable if a seller fails to deliver goods or services due to negligent conduct.
The NITI Aayog expressed concerns that certain draft rule provisions are beyond the consumer protection realm, creating a perception of overreach by the Consumer Affairs Department.
Additionally, there is a tight regulation case where some proposed provisions like having a compliance officer and adhering to law enforcement requests follow the Intermediary Rules, 2021, which are currently facing legal challenges. This represents the government’s increasing intent to enforce greater oversight over online platforms.
In summary, while the draft e-commerce rules aim to protect consumers and ensure fair competition among online retailers, certain regulations may need improvement based on industry feedback to promote a fair and competitive market environment.
Last Modified: February 13, 2024