Industry groupings seek major changes in draft ecommerce rules

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Industry groupings seek major changes in draft ecommerce rules

Industry associations, including those that count ecommerce majors Walmart-owned Flipkart and Amazon India as members, have sought the revision of a host of contentious clauses in India’s draft ecommerce rules including the deletion of those seeking to include related parties and logistics service providers within the definition of an ecommerce entity, ban flash sales and mandate the listing of local alternatives while selling imported goods or services.

In a submission to the department of consumer affairs on Wednesday, USISPF (US-India Strategic Partnership Forum) said that the draft proposals are “problematic and fail to take into consideration that not all marketplaces are alike and may not share similar relationships with buyers and sellers, negating the need for or effectiveness of prescriptive measures”. The submissions by the Internet and Mobile Association of India (IAMAI) and IndiaTech were also on similar lines.

The USISPF has sought the deletion of clauses to include ‘related parties and service providers for order fulfilment’ as ecommerce entities as well as those banning flash sales, registration requirements with DPIIT (Department for Promotion of Industry and Internal Trade) and the fall-back liability on online marketplace – where platforms have to be liable if a customer is unhappy with the products.

ET has reviewed the submissions made separately by each of the groupings.

The draft proposals were
first announced on June 21 triggering an immediate reaction with online platforms, brands and select sellers
criticising it. Offline traders and smaller online sellers have welcomed some of the proposals but have also demanded greater clarity.

Following an uproar from the industry, the government
extended the deadline for stakeholders to submit their feedback to Wednesday, July 21.

Onerous Clauses

Terming the mandate to classify goods and services based on the country-of-origin and, for online marketplaces to offer locally made alternatives to consumers at pre-purchase stage as “onerous”, the USISPF said it would lead to increased costs and impede innovation ‘without a clear policy justification, since it is not apparent why consumers would require such a filter mechanism’. It sought the retention of the current framework without further changes.

Last year, following a border clash between India and China, the Centre had directed etailers to
update product listings with information on the country-of-origin.

However, ecommerce companies and sellers are yet to comply as it’s cumbersome to update millions of listings online, according to industry executives who point out that a single product can include parts made in multiple places. Besides, a trader may buy an imported product locally.

“The proposed amendments deal with issues which have no nexus with aspects of consumer protection, and most of the suggested changes do not seem to further consumer interest being the core objective of the Consumer Protection Acts (CPA) and its related proposed amendments,” USISPF said in its note to the department of consumer affairs.

In a statement to ET, Susan Ritchie, VP -trade and technology policy, USISPF, said the forum supports consumer protections for brick-and-mortar and digital sales channels alike and that such protections should apply regardless of where or how purchases are made. “The proposed rules, however, create an artificial distinction between physical sales and digital sales channels that are only designed to inhibit the growth of digital sales rather than to protect consumers,” she said.

IAMAI, which has attended government meetings held earlier this month, also highlighted its concerns over policy changes that do not provide a level-playing field between online and offline retailers.

The amendments also “fail to recognise the different ecommerce models such as inventory/marketplace”, it noted. Clubbing the two would “impact businesses as well as consumers and will create a high level of uncertainty in an industry that is still in its growth stages and can benefit from light-handed regulation,” the industry lobby stated.

Etailers have also strongly objected to the
attempt to ban online flash sales, arguing that such a move would be anti-consumer and, if at all mandated, should be applicable to both online and offline retailers.

Meanwhile, the Rashtriya Swayamsevak Sangh (RSS) affiliate Swadeshi Jagran Manch (SJM), which also counts offline traders among its members, has suggested the government should not put a blanket ban on flash sales. Instead, it should clearly define what would count as ‘price manipulation’ and discourage marketplaces to favour sellers related to ecommerce platforms, SJM said.

Soon after the draft laws were first published, the government came out with a clarification saying it
won’t ban all flash sales but only ‘conventional flash sales’. Etailers, sellers and brands are still unclear about what is being defined as ‘conventional’.

The SJM note to the government, however, proposes tighter monitoring and regulation of ecommerce platforms and further protection for merchants selling on ecommerce platforms.

Ambiguities Persist

On July 5, ET
reported that firms like Amazon India, Flipkart and the Tata Group had raised concerns with the government in a meeting over issues like “related-party clause”, the proposal to not allow an ecommerce platform from using its name in its private brand, among others.

A common theme in the submissions made on Wednesday were aspects pertaining to antitrust and data-related clauses with the industry groupings requesting that such clauses be left out of the purview of the ecommerce policy while other concerned departments or ministries address it.

“The amendments raise several concerns and ambiguities from an ecommerce business standpoint, which are also likely to have the unintended negative consequences for consumers ultimately,” IAMAI stated.

“We humbly submit that in their current form, the amendments seek to regulate aspects of the ecommerce sector that have no bearing on consumers’ interests at all, and in doing so, could impact consumer interest negatively.”

IndiaTech, which also represents Indian online platforms that offer services, has sought more clarity on applicability of these proposed rules. It has asked for exemption of services, such as cab-hailing, travel, gaming and insurance from the ambit of these proposed amendments as many of these are governed in detail by their respective regulations and may have separate regulators.

“The rules transgress from consumer welfare into various domains such as FDI, trade, competition, personal data protection, data sharing, related party, aggregator guidelines, Insurance etc. which technically do not fall under the ambit of Consumer Protection and have been adequately addressed by other laws, regulators and ministries, said Rameesh Kailasam, CEO, IndiaTech.

“Ideally a reference to those existing provisions and their validity should now be prescribed by the ministry for those respective sectors to ensure avoidance of such conflicts with existing regulations and regulators,” he said.

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