New Policy for E-commerce to prevent unfair trade practices

The Government proposed the changes to Consumer Protection Act to make e-commerce companies work under stringent laws.

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. Several proposals in the e-commerce rules are aimed at increasing liabilities for online retailers for goods and services purchased on their platforms. 

E-commerce companies must ensure, none of their "related parties and associated enterprises" are listed as sellers on their shopping websites, and no related entity should sell goods to an online seller operating on the same platform. Companies should not hold flash sales – which see deep discounts on offer – if these are organized "fraudulently" using "technological means" with intent to benefit select sellers. Brands affiliated with the e-commerce company will not be allowed to promote or sell on its platform sale on its platform.

Websites selling imported products should identify them based on their so-called "country of origin." Further, they should add a filter mechanism and a display notification to suggest "alternatives to ensure a fair opportunity for domestic goods." No e-commerce entity shall allow any display or promotion of "misleading advertisement" on its platform. They also must within 72 hours of receiving an order assist government agencies for investigative or cybersecurity-related activities.

Online websites should not mislead users by manipulating search results and provide a ranking for goods while ensuring its parameters do not discriminate against domestic goods and sellers. E-commerce companies will put in place a grievance redressal mechanism, including appointing a chief compliance officer. The government's mandate for such appointments, already in place for social media companies, is seen raising compliance requirements of e-commerce firms.

The new rules are expected to have an impact across the board in an e-retail market India forecasts will be worth $200 billion by 2026, with players including from Tata's Big basket, Reliance Industries's JioMart, and SoftBank-backed Snapdeal to market leaders Amazon and Flipkart. The companies have until July 6 to respond to the proposals, after which time they may be reviewed further or implemented. The draft amendment also proposes to ask e-commerce firms to mandatorily become a part of the National Consumer Helpline.

The new proposal asks e-commerce firms to introduce a mechanism to identify goods on their platforms based on their country of origin and suggest alternatives to “ensure a fair opportunity to domestic goods”. E-commerce businesses would also be prohibited from disclosing any personal information about the customers without their express and affirmative consent. No entity shall record consent automatically, including as 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.

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

The government’s proposed changes for the e-commerce sector will affect a wide range of online companies selling goods and services. It will hit online travel companies such as MakeMyTrip, food delivery firms such as Zomato and Swiggy, ride-hailing service providers such as Ola and Uber, besides home services companies such as Urban Company. 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 ministry said it is proposing, for which it plans to seek industry feedback over the next 15 days, after receiving “several complaints against widespread cheating and unfair trade practices being observed in the e-commerce ecosystem.”