E-commerce-If it Ain’t Broke, Don’t Fix it
The article has been authored by Dhanendra Kumar, Formerly Chairman CCI and India’s Executive Director on the World Bank Board.
Government is in the process of adopting the amendments to Consumer Protection (E-commerce) Rules, 2020 with an intent to prevent unfair trade practices in e-commerce and protect consumer’s interests.
It is critical to bring clarity on the distinct roles of the platform(s) and the participants in an E-Commerce eco-system. Obligations and liabilities of each of these marketplace entities, should be based on a simple consideration – “Which entity is best placed to bear the underlying risk?”, the answer is simple-It is the entity that has the ability to control / mitigate the risk.
While micromanaging an evolving business sector is always a temptation for the state and its regulatory arms, it must be remembered that regulation itself is a surrogate for competition.
In a fast-evolving sector like E-Commerce any over-regulation will lead to micromanagement; thereby discouraging the real enterprise that is called for a building a robust eco-system serving all its constituents. For growth of this industry, regulation should pass the test of being enabling in nature. It would do well to provide just the guardrails at the extreme edges. Over-regulations will stifle the market and would be to the detriment of both the seller and the consumers. If the number of such participants reduce, it means lesser choice for the consumers, and lesser activity on the platforms. In the long-run, platform(s) may even be forced to exit; taking away the element of consumer choice entirely.
At the same time, transparent and symmetrical availability of information underpins consumer choice. Consumer choice is the best manifest form of consumer protection.
The crux of an ecosystem business is that every entity in the marketplace is equally important. Fundamentally, at the entity level, there are two distinct roles – that of a `platform’ and a `participant’. Beyond this distinction, there really are no separate, neat segments in this business’s foundations.
The platform’s role is that of a neutral entity - provide a place for participants to have an online presence. The two broad types of participants - sellers and buyers -come to this space with their respective expectations. Sellers need to provide product information in a symmetrical manner, and buyers need to be able to view the sellers’ offerings in a non-discriminatory / non-preferential manner. The buyer should be able to make her buying decision based on full information of available choices. Finally, the buy-sell matching should lead to reliable conditions of exchange i.e. timely payment and timely delivery respectively.
Consumer’s is best served if one gets the correct price-value-quality combination for that one must have a choice of available alternatives, adequate information about each of the alternatives and if possible, feedback from other users / consumers who have already tried the product.
The expectation from the platform, therefore, is to provide consumer with all three in a transparent and symmetrical form. Therefore, the platform has to provide a technology based / virtual space where one finds the product of his/her interest (and available alternatives) in a reliable manner. And when one makes the decision to purchase, the product is indeed delivered in the timeline promised.
Sellers too must be required to meet the same set of information standards.
The content / representation and quality of the product, however, remains the participants’ responsibility. And in a situation of multiple buyer – seller possibilities (and indeed, multiple platforms), the chances of monopolistic behaviour, cartelisation or any other unfair trade practices become minimal, if not negligible.
Therefore, if a platform is asked to bear the liability of poor workmanship / quality, negligence or omissions in the product sold, it would not only be unnecessarily onerous, but also beyond its capacity to bear the underlying risks. Clearly, the liabilities / obligations on these aspects have to lie with the seller. That said, the platform is liable to see that the seller is caused to provide adequate product information in a consistent format, so that the chances of mis-selling are minimised. Similarly, the platform carries obligations to comply with various provisions of the IT Act, which a seller cannot be expected to meet.
It is important to remind ourselves that, apart from the distinct roles, the e-commerce marketplace is an ecosystem that does not operate in isolation. Any arrangements entered into between a platform and a participant that are in the nature of an unfair trade practice and / or abuse of dominant position(s) would attract the provisions of existing legislation that governance commercial transactions. More importantly, we have a well-defined Competition Law. So, do we need to reinvent yet another wheel?
In conclusion, a well working online marketplace that is competitive and enables consumer choice is the best assurance of consumer interest. Any regulation envisaged in the garb of consumer interest would not only be second best, but also could do more harm than good.
The article has been authored by Dhanendra Kumar, Formerly Chairman CCI and India’s Executive Director on the World Bank Board.
