Editorial: Pushback to e-commerce rules

Several provisions reek of protectionism that could hurt businesses and investment climate

No draft policy in the recent past had encountered as much pushback as the e-commerce rules proposed by the Centre. The objections to the draft regulations have come not just from various government departments — Finance, Corporate Affairs, Electronics and IT, Department for Promotion of Industry and Internal Trade and NITI Aayog — but also from other countries and foreign corporations. Australia is the latest to join the chorus, saying the new rules would impose unreasonable compliance costs and be particularly onerous for small and medium enterprises (SMEs), which would likely have implications on competition and consumer choice. The NITI Aayog has rightly observed that the new rules send the message of unpredictability in policy-making. Finance and Corporate Affairs ministries have dubbed the rules as excessive and unwarranted with a potential to hamper ‘ease of doing business’. The concerns being raised by both industry and sections of the government over the restrictive regulatory architecture must be addressed with an open mind. The e-commerce companies have raised concerns over a clause that says they will have to ensure none of their associated enterprises is listed as a seller. As per the new regulations, these entities are required to recommend local alternatives each time a consumer looks at an imported good or service. This clause is simply impractical to implement. To expect an e-commerce company to provide ‘country of origin’ labels to millions of products listed on its website is a near impossible task.

Under the fallback liability clause, e-commerce firms will be held liable in case a seller on their platform fails to deliver goods or services due to any negligent conduct that causes loss to the customer. It must be pointed out that foreign direct investment is currently permitted only in marketplace models where the e-commerce platforms do not hold inventory and merely connect buyers and sellers. If firms have no control over the inventory on their platform, how they can be held liable for the sellers? Small businesses fear there might be an increase in compliance burden. Also, the rules ban flash sales but there is no clarity on what constitutes flash sales. The regulations are seen as imposing extensive extraterritorial obligations on foreign e-commerce entities operating in India. Several provisions in the amended rules reek of protectionism that could potentially hurt the businesses and investment climate. One wonders how prohibiting high discounts and attractive offers can protect consumer interests. The new rules are likely to impact both e-commerce entities and sellers on online platforms and create entry barriers for small businesses that are already suffering from the debilitating impact of the pandemic.

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