Industry body IAMAI on Monday termed the proposed amendments to the Consumer Protection (E-Commerce) Rules 2020 as a “deterrent” for the industry’s growth, and pointed out several ambiguities that it claimed are likely to have unintended negative consequences for consumers. The Internet and Mobile Association of India (IAMAI) has suggested excluding the entire value chain from the ambit of e-commerce definition, clarifying the flash sale concept, and confining the rules to protect the rights and interests of the consumers as “in its current form, they fall under the jurisdiction of Competition law, legal metrology law, intermediary law, etc”.
In a statement, the association said although it supports the government’s initiatives and regulatory interventions to protect consumer interests, the proposed amendments to the rules raise several concerns and ambiguities from an e-commerce business standpoint that are also likely to have unintended negative consequences for consumers. The draft e-commerce rules released by the government on June 21 propose a ban on 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. 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. The IAMAI highlighted that the amendments seek to regulate the entire e-commerce supply chain, many elements of Platform to Business (P2B) and Business to Business (B2B) e-commerce, which are beyond the remit of the parent Consumer Protection Act (CPA).
The amendments also fail to provide a level-playing field between online and offline e-commerce/retail, IAMAI said adding that e-commerce platforms will face several restrictions and an increased compliance burden under the amendments. “However, the same will not be applicable on the brick-and-mortar stores. Also, implementation of the amendments in the 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 noted.
In its submission to the Consumer Affairs Ministry on the Consumer Protection (E-Commerce) Rules, 2020, IAMAI mentioned that the amendment to the definition of e-commerce entities goes over and beyond the definition of e-commerce entities provided under other delegated legislations such as the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019 (NDI Rules). The scope is also beyond what is contemplated under the CPA… The IAMAI has recommended that clauses with respect to cross-selling, fall back liability, re-registration with the Department of Promotion of Industry and Internal Trade will only lead to over-regulation of the sector and impede innovation and access of small sellers to marketplace platforms.
The industry body said the concept of “Fall Back liability” 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. “It will open floodgates for unscrupulous claims against e-commerce entities. It can significantly change the landscape of e-commerce in India and impede innovation, the statement said. One of the proposals says that a marketplace e-commerce entity will be subject to a ”fallback liability” when 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.
On flash sales, IAMAI suggested that a normal brick-and-mortar store can offer flash sales and therefore, there is no reason to restrict these flash sales on an e-commerce platform. Flash sales should be very clearly and explicitly defined from a customer/consumer standpoint, to avoid any ambiguity both in letter and spirit, to ensure consumers do not suffer on account of not benefiting from flash sales, IAMAI opined. On the clause of mis-selling, the association pointed out that this is in contradiction with sellers’ liabilities in e-commerce rules and the intermediary role that must be performed by all marketplace e-commerce entities under the FDI laws and the IT Act. This is an issue, which constitutes primary responsibility of the seller under the e-commerce rules (original) and such additional responsibility on marketplace e-commerce should be removed, IAMAI said.
It pointed out that the earlier set of rules that were notified a few months back were sufficient and better served the needs of the consumers. Various industry bodies have raised concerns over various provisions of the proposed regulations. IT body Nasscom had recently said obligations should be rationalised in line with activities of relevant entities, and fallback liability of online retailers should be limited to ensuring timely refund to consumers. The Indo American Chamber of Commerce (IACC) had stated that 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 stated that 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. While 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, it had 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 as mandated by the proposed rules.