Proposed e-commerce norms can affect global investor sentiment: IACC

The proposed e-commerce 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, according to Indo American Chamber of Commerce (IACC). In a letter to the Department of Consumer Affairs Joint Secretary Anupam Mishra, IACC said e-commerce is a sunrise sector with immense growth opportunities. E-commerce has provided choice and convenience to consumers, given unparalleled access to small traders and MSMEs (Ministry of Micro, Small & Medium Enterprises), generated massive employment and has had a multiplier effect on allied ecosystems like logistics and payments.

“However, the proposed amendments to the Consumer Protection (E-Commerce) Rules, 2020, that are envisioned to protect consumer interests, may further compound the impact of a multiplicity of regulations on the e-commerce sector by increasing compliance liabilities that risk severely impairing the growth of the sector,” IACC said in its letter dated July 2. IACC further stated that such a measure will affect investor sentiment globally, especially with respect to ease of doing business in the country. The industry body highlighted some of the provisions under the proposed guidelines that “may impinge on the business operations” of e-commerce companies, while some others are covered in other regulatory formats.

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IACC said the provision of “fallback liabilities” for e-commerce marketplaces is uncalled for and such liability should be for sellers, especially as e-commerce entities hold no control over inventory under the marketplace model. “…such a provision is likely to impact smaller e-commerce companies that will feel the brunt of these liabilities, inhibiting their growth,” it added. In its letter, IACC said certain proposed provisions around flash sales, cross-selling, etc defeat the premise of a level playing field between offline and online retail by creating an additional later of complexities for online retail. The association also emphasised that “having principal-based light-touch regulations in place of stringent definitions as the amendments propose is a better approach to undertake”.

“While protecting the interests of consumers is of paramount importance, at the same time regulatory action should not stifle the growth of the sector, which would ultimately hurt the interest of the consumer, as well as small sellers, retailers, logistics providers, and other stakeholders reliant on the sector for their livelihood,” it said. Ban on fraudulent flash sales, mis-selling and appointment of chief compliance officer/grievance redressal officer are among key amendments proposed to the Consumer Protection (E-Commerce) Rules, 2020, on which the government has sought public comments by July 6. Among other amendments, the government has proposed registration of every e-commerce entity which intends to operate in India with the Department for Promotion of Industry and Internal Trade (DPIIT).

In a recent consultation between industry associations and the Department of Consumer Affairs, industry representatives had sought extension beyond the July 6 deadline. According to sources, some representatives had, during the meeting, stated that the proposed guidelines will not help consumers, and that lack of parity between online and offline sellers will hurt the interest of consumers and micro, small and medium enterprises (MSMEs). However, Atmanirbhar Digital India Foundation (ADIF) – a group of homegrown startups – has welcomed the proposed amendments, terming it “forward-looking”.

“The proposed rules will go a long way in promoting sustainability and growth of indigenous MSMEs and create a level-playing field with the mandatory country of origin and ranking prepositions. ADIF welcomes such steps, as flash sales can be considered as against the spirit of competition with a bias towards a small set of suppliers,” it added. ADIF emphasised that these proposed rules are “progressive, bold steps towards building an Atmanirbhar Bharat and will be a game-changer for the e-commerce industry in India once implemented”. “The proposed amendments to Consumer Protection (E-Commerce) Rules, 2020 is a strong signal of intent from Government of India to make ‘forward looking’ policies, and ‘ensure level playing field for all e-commerce players’ while also prioritising consumer protection,” ADIF Secretary General Ajay Data said.

ADIF includes representation from Murugavel Janakiraman (Founder and Chief Executive Officer (CEO) – Matrimony.com), Snehil Khanor (Co-Founder and CEO of TrulyMadly), Ritesh Mallik (Founder at Innov8 Coworking), Sairee Chahal (Founder and CEO SHEROES), Anand Lunia (Founding Partner – India Quotient), Amit Sinha (Co-Founder – Unnati) and Shailesh Vikram Singh (Managing Partner – Massive Fund).