Govt toughens rules for e-commerce giants
The draft proposes updated definitions of e-commerce entities, outlaws flash sales.
The Union government has sought to bring substantive changes in the way e-commerce platforms, such as Amazon and Flipkart, operate, seeking public views Monday on a draft to amend the Consumer Protection (E-Commerce) Rules 2020. The draft proposes greater scrutiny of flash sales, enhanced liability of e-commerce sites, data protection for consumers and stronger grievance redressal.
The draft rules, framed under the Consumer Protection Act 2020, the flagship consumer-rights law, will apply to “all models of e-commerce, including marketplace and inventory models of e-commerce”.
The new draft proposes an updated definition of what constitutes an e-commerce entity, cross-selling, which refers to sale of additional goods related to a purchase already made, and fall-back liability, which essentially increases the liability of e-commerce platforms.
The draft rules, which will be open to public comments until July 6, defines an e-commerce entity as any person who “owns, operates or manages digital or electronic facility or platform for electronic commerce” and any “related party”, as defined under the Companies Act, 2013, but “does not include a seller offering his goods or services for sale on a marketplace e-commerce entity”. This enhances the liability of e-commerce companies for goods and services delivered on their platforms.
The draft rules outlaws flash sales—instant, unannounced sales that usually accompany discounts—that are manipulated to give advantage or preferential treatment to a particular seller or a group of sellers.
Clause 16 of the draft reads: “No e-commerce entity shall organize a flash sale of goods or services offered on its platform.”
This clause is qualified by the definition of flash sales in the draft, which states: “’Flash sale’ means a sale organized by an e-commerce entity at significantly reduced prices, high discounts or any other such promotions or attractive offers for a predetermined period of time on selective goods and services or otherwise with an intent to draw large number of consumers provided such sales are organised by fraudulently intercepting the ordinary course of business using technological means with an intent to enable only a specified seller or group of sellers managed by such entity to sell goods or services on its platform.”
“Conventional flash sales are not banned. The proposed amendments aim to bring transparency. The government has received widespread complaints of cheating and unfair trade practices on e-commerce platforms,” a senior official said.
Cross-selling, which involves additional offers for other goods once a particular item has been purchased, should have “adequate disclosures” for buyers.
The draft rules also seek to protect consumer data by prohibiting e-commerce firms from making “available any information pertaining to the consumer to any person other than the consumer without the express and affirmative consent of such consumer”.
The draft rules also provide for a chief compliance officer. They also stipulate new obligations on e-commerce sites to share cyber-security incidents promptly with appropriate authorities.
A mail to Amazon India’s corporate communications, seeking its views on the draft rules, went unanswered till the time of going to press.
The government had radically overhauled the Consumer Protection Act 1986 by passing an amendment to it in 2020 to keep pace with a changing marketplace.
According to a March report by financial technology firm FIS, the Covid-19 pandemic has given a major boost for the country’s e-commerce market, which it said, was expected to grow 84% to reach $ 111 billion by 2024.