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Ecommerce at Sixes and Sevens

Updated: Feb 20

A flashback of recent regulatory proposals:

26 Dec'18:-

  • Govt. releases press note 2, drastically changing FDI policy, restricting FDI in inventory model of e-commerce, and other strict measures.

  • Amazon & Flipkart pulled down thousands of products from their online stores.

23 Feb'19:-

  • Govt. releases a draft e-commerce policy which proposes the need to protect data and also provides protection to online sellers and consumers against discrimination and unfair business practices.

  • Policy widely criticized as one which does not provide any concrete solution.

24 Jun'19:-

  • Piyush Goyal (commerce and industry minister) met representative of about 25 internet and e-commerce companies to instruct them about the report to be submitted under the new FDI policy.

02 Aug'19

  • Draft guidelines on e-Commerce for consumer protection issued by the Department of Consumer Affairs inviting comments and suggestions from stakeholders by 16th Sept’19.

11 Nov'19

  • Govt. issues draft Consumer Protection (e-Commerce) Rules, 2019 inviting suggestions by 2nd Dec’19. The Rules, which is exactly the same as the guidelines issued in August, make it clear that an e-commerce entity cannot influence the price of goods and services, cannot adopt unfair trade practices, nor leave fake reviews as consumers.

11 Dec '19

  • Govt. introduced The Data Protection Bill in Lok Sabha, which was referred to the Standing Committee, which will furnish its report by the last week of the Budget Session, 2020.

Since the dawn of e-commerce in India, the ecomm companies have enjoyed a 12-year long journey without much regulatory hurdles. However, the year 2019 has been turbulent for the ecomm giants as new regulations seek to bring more discipline and responsibility in their activities.

The new FDI norms, which came into force on 1st Feb’19, forced the e-tailers to go back to the drawing board and rethink their business models. It also drew large-scale criticism from the United States, straining the two country’s trade ties.

Fun Fact: Cloudtail, one of the biggest sellers in Amazon, which at one point used to contribute 70-80% of overall sales, underwent a major do-over in terms of ownership, to meet the FDI norms. Amazon now owns only 24% (earlier 49%) and Infosys co-founder Narayan Murthy owns the rest 76% in Prione Business Services which owns Cloudtail.

Other key provisions proposed by the government are:

  • Protection of sensitive personal information, covered through the data protection bill (discussed in our December’19 issue);

  • Prohibition on influencing the price of offerings to maintain a level playing field for all.

  • Prohibition on posting false customer reviews and exaggerating the quality or features of their offerings.

  • Execution of explicit contracts with every seller, and also displaying terms relating to return, refund, exchange, warranty, etc to consumers to enable them in making informed decisions.

  • To implement an adequate grievance redressal mechanism to satisfactorily solve consumer complaints.

One of the leading stakeholders from the side proposition – CWAI (The Confederation of All India Traders), lauded the steps taken by the government to curb the cheeky and irresponsible behavior of ecomm companies. Backed by roughly 70 million small businesses, CWAI has for long been protesting against the giants accusing them of deep discounts and flouting India’s FDI norms, which has unfairly hurt small businesses. Complaints by CWAI are currently under review by the Ministry.

While we’re here: CWAI invoked about half a million traders to carry out silent protests across the nation on 15th Jan’20, the day Amazon CEO Jeff Bezos visited India. In his deliberation at New Delhi, Bezos said that Amazon will invest $1 Billion to bring small and medium Indian enterprises online. Either the protests worked, or it was already on his cue cards. We will never know.

The Big Picture: The GOI has hit the right chord by initiating discussions along the lines of regulating the Ecommerce space, which has for long been outside the watchdog’s radar. But the industry is nervous, especially because of a poor track record of implementation of new policies and some extremely stringent rules.


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