Editorial: Shun protectionist approach

The new rules are likely to impact both the e-commerce entities and sellers on online platforms and create entry barriers for small businesses

The draft e-commerce regulations, formulated by the NDA government, may end up hampering the growth of the sector instead of meeting the avowed objective of protecting the interests of the consumers. Several provisions in the amended rules reek of protectionism that could potentially hurt the businesses and adversely affect the investment climate and ease of doing business. One wonders how prohibiting high discounts and attractive offers, which is one of the proposed rules, is supposed to protect consumer interests. The new rules are likely to impact both the e-commerce entities and sellers on online platforms and create entry barriers for small businesses who are already suffering from the debilitating impact of the Covid-19 crisis. Through a series of amendments, the Centre aims to limit how e-commerce companies promote products and sellers on their platforms, prohibit flash sales, make it mandatory for e-commerce entities to register with the Department for Promotion of Industry and Internal Trade, and mandate appointment of a grievance officer and a chief compliance officer. As per the new regulations, the e-commerce 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. Another contentious clause is of the ‘fall-back liability’ making e-commerce companies liable for fraud committed by a seller when the platform merely acts as a marketplace. It is much like making the social media players responsible for the crowdsourced content displayed on their platforms. This is impractical and unfair to the marketplace.

There are also concerns over the clause mandating that none of the “related parties and associated enterprises” of e-commerce players should be listed as sellers on their shopping websites, and no related entity should sell goods to an online seller operating on the same platform. This will hugely impact players like Amazon, Flipkart and the Tata Group. Experts have pointed out that the draft rules are in contravention to equality provisions laid down in Article 14 as they discriminate between online and offline sellers, especially regarding flash sales and inventory ownership. Further, the draft rules also impose an unreasonable restraint in trade. This does not augur well for the future of India’s e-commerce market which is projected to grow 30% annually to touch $200 billion by 2026. It is rightly seen as a game-changer for the country’s economy and the future of ‘Digital India’. There are also concerns over the sweeping powers of the Centre to access data of consumers that could lead to expanded surveillance intruding into the right to privacy.

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