Proposed e-commerce norms can hit consumer interest, increase compliance burden for firms: IAMAI

The proposed e-commerce regulations could negatively impact consumer interest, while creating a high level of uncertainty and increase compliance burden for not just e-commerce companies but MSMEs providing services to online retailers, according to industry body IAMAI. The draft e-commerce rules released by the government on June 21 proposes to ban fraudulent flash sales and mis-selling of goods and services on e-commerce platforms. Appointment of chief compliance officer/grievance redressal officer are among the key amendments proposed under the Consumer Protection (E-Commerce) Rules, 2020.

In its submission on the draft rules, the Internet and Mobile Association of India (IAMAI) said the proposed amendments raise several concerns and ambiguities from an e-commerce business standpoint, which are also likely to have unintended negative consequences for consumers.

“A uniform application of these Amendments/Rules across all e-commerce models would not be feasible, is far from ideal, 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 would benefit from light handed regulation,” it added.

The association noted that the amendments fail to provide a level-playing field between online and offline e-commerce/retail.

Under the amendments, e-commerce platforms will face several restrictions and increased compliance burden. However, same will not be applicable on the brick-and-mortar stores, it said.

The industry body pointed out that implementation of the amendments in its current form will “significantly increase the compliance burden on MSMEs as well as for start-ups who are not even in the e-commerce business, but provide services to e-commerce”.

IAMAI has also urged that the concept of “fall-back liability” be done away with as it dilutes the intermediary safe harbour under the provisions of the IT Act as well as the arm’s length requirements provided under the FDI policy.

One of the proposals states that a marketplace e-commerce entity will be subject to a ‘fall-back liability’ where a seller registered on its platform fails to deliver the goods or services ordered by a consumer due to negligent conduct, omission or commission of any act by such seller.

“It will open the floodgates for unscrupulous claims against e-commerce entities. It can significantly change the landscape of e-commerce in India and impede innovation and access of small sellers to marketplace platforms (whom e-commerce marketplace entities may not onboard due to the apprehension from fall-back liability),” it said.

However, a diluted version of this rule may be applicable on inventory based e-commerce entities, as they control, own and manage the inventory of the goods/services being sold, it added.

Previously, the Indo American Chamber of Commerce (IACC) had said the proposed regulations could increase compliance liabilities, affect global investor sentiment with respect to ease of doing business in the country, and severely impair growth of the online commerce sector.

Supreme Court senior advocate Gopal Jain had said holding e-commerce companies responsible for goods sold by some other sellers and proposed restrictions on sale of goods by related parties on the platform will hurt the MSMEs.

The government on Monday extended till August 5 the deadline for public comments on proposed amendments to the Consumer Protection (E-Commerce) Rules, 2020. Earlier, the last date for public comments on the draft e-commerce rules was July 6.

Alliance of Digital India Foundation (ADIF) — a group of homegrown startups — had welcomed the proposals saying these will protect consumer interests in the long run.

There is a strong emphasis on eliminating discrimination against Indian sellers and manipulation of customers and the market by larger e-commerce players, it added.

The organisation stated that discounts are mostly offered on slow-moving and perishable inventory holdings, but deep discounting could kill good and/or competing products.

“While larger players can resort to such tactics and survive to create market dominance, smaller players will not be able to afford these discounts for longer periods and will bleed out of existence,” it said.

ADIF said it supports the government’s intent towards protecting the small and medium sellers.

“However, the rules tend to miss the mark on ensuring friendliness for small and medium players. Solopreneurs and women entrepreneurs, especially, merit special consideration and attention.

“ADIF advocates zero paperwork for them up to GST threshold (Rs 20 lakh) and minimal compliance requirement for all sellers at least till Rs 1 crore of revenue,” it said.

ADIF also highlighted that smaller e-commerce entities will find it difficult to appoint three separate people as chief compliance officer, nodal contact person and resident grievance officer.

It suggested that until the DPIIT registrations are completed, the founders should be given permission to act as the above officers of the company. Up to a certain turnover, e-commerce entities should have the flexibility to nominate one person who can act as nodal contact person as well as chief compliance officer and resident grievance officer.

On cancellation charges imposed by e-commerce entities, ADIF said that these charges should be imposed by e-commerce entities (when a customer cancels an order) only if it will provide similar cancellation charges when cancellation is done by the seller or the e-commerce firm.

“However, e-commerce entities may be exempt from this rule in cases where the cancellation charges are levied by sellers and e-commerce entities are only passing on the charges to the customer,” ADIF Executive Director Sijo Kuruvilla George said.

In its suggestions, the ADIF also urged the ministry to re-examine the provision of fall-back liability on marketplace e-commerce entities.

“This liability provision defeats the very principle of safe harbour rule which acts as a protection to intermediaries under Section 79 of the IT Act,” it said.

It stated that more deliberation is needed to create provisions to protect the interests of Indian marketplace entities which have invested in associated parties or private labels.

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