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Friday, July 23, 2021

Explained: The draft rules for e-commerce companies, and how it will impact online shoppers

The government has proposed changes to the e-commerce rules under the Consumer Protection Act. What changes for online shoppers and for companies? How is it similar to the rules for social media companies?

Written by Pranav Mukul , Edited by Explained Desk | New Delhi |
Updated: June 22, 2021 2:38:41 pm
Any online retailer will first have to register itself with the Department of Promotion for Industry and Internal Trade (DPIIT).

The government has proposed changes to the e-commerce rules under the Consumer Protection Act to make the framework under which firms operate more stringent. While a number of new provisions are similar to what the Centre sought of social media companies through the IT intermediary rules announced earlier this year, several proposals in the e-commerce rules are aimed at increasing liabilities for online retailers for goods and services purchased on their platforms.

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Are there any changes that could impact the shopping experience of users?

Firstly, the draft rules issued by the Consumer Affairs Ministry seek to ban “specific flash sales” by e-commerce entities. While as per the draft rules, conventional e-commerce flash sales are not banned, specific flash sales or back-to-back sales “which limit customer choice, increase prices and prevents a level playing field are not allowed”.

The rules have also introduced the concept of “fall-back liability”, which says that e-commerce firms will be held liable in case a seller on their platform fails to deliver goods or services due to negligent conduct, which causes loss to the customer. In several cases, when problems arise with goods purchased from their marketplaces, e-commerce platforms direct the consumers to the respective sellers to solve any grievance. With fall-back liability, consumers will be able to reach out to the platform itself.

The rules also propose to restrict e-commerce companies from “manipulating search results or search indexes”, in what comes as a response to a long-standing demand from sellers and traders to prevent preferential treatment to certain platforms.

What else do these new rules change for consumers?

E-commerce companies will also be restricted from making available to any person information pertaining to the consumer without express and affirmative consent. No entity shall record consent automatically, including in the form of pre-ticked checkboxes.

Further, the companies will have to provide domestic alternatives to imported goods, adding to the government’s push for made-in-India products.

The draft amendment also proposes to ask e-commerce firms to mandatorily become a part of the National Consumer Helpline.

What changes for e-commerce companies?

Any online retailer will first have to register itself with the Department of Promotion for Industry and Internal Trade (DPIIT).

The rules propose mandating that no logistics service provider of a marketplace e-commerce entity shall provide differentiated treatment between sellers of the same category.

Taking on from the DPIIT’s foreign direct investment policy for e-commerce marketplaces, parties and associated enterprises related to e-commerce companies will not be allowed to be enlisted as sellers on the respective platform.

Any entity having 10 per cent or more common ultimate beneficial ownership will be considered an “associated enterprise” of an e-commerce platform.

What are the commonalities with the IT intermediary rules?

On the lines of the IT intermediary rules announced for social media companies, the Consumer Affairs Ministry has proposed to mandate e-commerce companies appoint a grievance officer, a chief compliance officer and a nodal contact person “for 24×7 coordination with law enforcement agencies”.

The provisions also look to ask e-commerce companies to share information with a “government agency which is lawfully authorised for investigative or protective or cyber security activities, for the purposes of verification of identity, or for the prevention, detection, investigation, or prosecution, of offences under any law for the time being in force, or for cyber security incidents”.

The draft rules propose that the information sought by the government agency will have to be produced by the e-commerce company “within 72 hours of the receipt of an order from the said authority”.

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