Recent Changes In E-Commerce Policies/ Rules

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Written By: Hrishika Rawat

The Amendment Rules appear to tighten the noose even more around e-commerce businesses, incorporating several demands from offline traders and sellers on e-commerce platforms who have been involved in several legal fights with e-commerce entities. Some of them have been brought before the CCI as anti-competitive practices.

As part of this fight, the Delhi Vyapar Mahasangh (“DVM”) approached the Competition Commission of India (“CCI”) last year, requesting an inquiry into Amazon and Flipkart for alleged anti-competitive actions like:

  1. exclusive tie ups with smartphone manufacturers;
  2. preferential treatment to certain allegedly related sellers such as Cloudtail, Appario (for Amazon) and WS Retail (for Flipkart);
  3. deep discounting practices;
  4. preferential listing/promotion of private labels.

A leaked copy of the upcoming draft e-commerce policy, which The Economic Times has reviewed, said the government will, from time to time, notify which parties fall under the definition of associates and related parties. Industry leaders said this will give rise to uncertainty.
“Actions and things that cannot be done by the platform entities can also not be done by any of its associates and related parties,” read the draft e-commerce policy, without divulging any further details.

Are there any changes that could impact the shopping experience of users?

To begin with, the Consumer Affairs Ministry’s draught rules aim to prohibit e-commerce companies from conducting “special flash deals.” While traditional e-commerce flash sales are not prohibited, specialized flash sales or back-to-back deals “which limit customer choice, raise prices and hinder a level playing field” are not permitted, according to the draught guidelines.

The guidelines also intend to prohibit e-commerce companies from “manipulating search results or search indexes,” in response to a long-standing demand from sellers and dealers for equal treatment across platforms.

What else do these new rules change for consumers?

E-commerce enterprises would also be prohibited from disclosing personal information about customers to anyone without their express and affirmative consent. No organization may automatically record consent, even in the form of pre-ticked checkboxes.

In addition, the enterprises will be required to give domestic alternatives to imported items, further bolstering the government’s push for made-in-India products.

What changes for e-commerce companies?

Any online retailer must first register with the Department of Industrial and Internal Trade Promotion (DPIIT).

The proposed rules would make it illegal for a marketplace e-commerce entity’s logistics service provider to treat sellers in the same category differently.

Parties and connected enterprises related to e-commerce companies will not be allowed to be listed as sellers on the particular platform, according to the DPIIT’s foreign direct investment policy for e-commerce platforms.

An e-commerce platform’s “associated enterprise” is defined as any entity with a common ultimate beneficial ownership of 10% or more.

India’s e-commerce FDI rules

They prevent group businesses or entities in which marketplaces have control of inventory from selling on their platforms, among other things, and they don’t allow online marketplaces to keep their own inventory or affect the pricing of items offered.

“If this new policy goes through, there will be no business certainty (in e-commerce),” said a top executive at a leading e-commerce marketplace who didn’t want to be identified. If the government can, at any time, change its definition of related parties, forcing us to restructure our businesses, that does not create a very conducive environment.”

He went on to say that India should instead utilize its e-commerce strategy to identify related parties and adhere to it for at least the next few years, providing big marketplaces the confidence to keep spending billions of dollars in the nation, as they have for the past decade or so.

Officials from the government declined to comment. They claimed that making the draught public would follow proper procedure and that opinions from industry advocacy organizations, corporations, and other interested parties would be sought.

Discounting likely to become a raw deal for e-tailers

Press Note 2 prohibits e-commerce businesses from influencing the pricing of items offered on their platforms, either directly or indirectly. Companies, on the other hand, had a route out. While some partnered with third-party agencies to fund discounts to sellers on behalf of e-tailers, others rewarded their merchants for paying for the reductions out of their own pockets.

The government has said now the companies will have to transparently declare the methodology used for discounts offered on their platforms. “E-commerce operators must ensure they bring out clear and transparent policies on discounts… the basis of discount rates funded by platforms for different products/suppliers and implications of participation/non-participation in discount schemes, so as to ensure fair and equal treatment,” the draft said.

The proposal also makes no mention of the question of nation of origin. The purpose of showing the nation of origin on a product is to ensure that consumers make educated decisions when purchasing a product, a move that was intended to promote the government’s Make-In-India push.

Conclusion

Overall, the Amendment Rules appear to add to the current legal morass surrounding e-commerce entity regulation. At least three distinct legislation and authorities now regulate/seek to probe e-commerce firms, including the FDI system, the CCI, and these proposed CPA Rules. Given the pro-competitive impacts that activities like exclusive agreements, cross-selling, and self-preferencing can have, a case-by-case review appears to be preferable to the ex-ante regulation that the Amendment Rules aim to establish.


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