The Consumer Affairs Department seems to be venturing into areas where other departments such as the Department for Promotion of Industry and Internal Trade (DPIIT) and the Ministry of Electronics & Information Technology (MeitY) are already working
The Department of Consumer Affairs of the Government of India, is learnt to be revisiting some provisions pertaining to definitions such as ‘related party’ and ‘e-commerce entity’ proposed in the draft e-commerce rules announced on June 21, according to multiple sources.
The Consumer Affairs Department seems to be venturing into areas where other departments such as the Department for Promotion of Industry and Internal Trade (DPIIT) and the Ministry of Electronics & Information Technology (MeitY) are already working.
Stakeholder views have been received, and the department is in the final stages of notifying the rules governing the sector.
The “broad definition” of ‘related party’ has been flagged by the industry — as one “that can potentially include all entities such as those involved in logistics, any joint ventures, etc.”.
Hence facing pushback from not only the industry but also some sections involved in the exercise, a Delhi-based retail executive said, “The definition of related party certainly needs some more clarity, otherwise it will be difficult not only for foreign players like Amazon and Flipkart, but even homegrown companies like Tata and Reliance to have their various brands such as 1mg, Netmeds, Urban Ladder, Milkbasket, etc. sell on their super-apps.”
The draft rules say every e-commerce marketplace must ensure that nothing is done by related parties or associated enterprises that the e-commerce entity itself cannot do.
Also, it has been highlighted that in some cases, provisions such as fall-back liability is counter-effective to the DPIIT’s policy for foreign funding of e-commerce companies that disallows these firms from having control over their inventory.
On the one hand the FDI policy prohibits companies such as Amazon and Flipkart from having control over the inventory sold on their platforms, while on the other, the e-commerce rules of the Consumer Affairs Department holds these platforms liable in case a seller fails to deliver goods or services due to negligent conduct, which causes loss to the customer.
The “broad definition” of ‘related party’ has been flagged by the industry — as one “that can potentially include all entities such as those involved in logistics, any joint ventures, etc.”
“Provisions like fall-back liability are antithetical to the way e-commerce business models have evolved and they are even in contravention of the existing rules,” a senior industry official said.
The cross-indexing of rules governing the e-commerce sector among various government departments has also been flagged. Niti Aayog, in an office memorandum, has said that many of the provisions were “beyond the realm” of consumer protection.
Some of the proposed provisions like having a compliance officer, adherence to law enforcement requests, etc., follow in the footsteps of the Information Technology (Intermediary) Rules, 2021 issued by MeitY.
These IT rules are facing legal challenges in several courts, including the Delhi High Court, Bombay High Court, and Karnataka High Court.
The Confederation of All India Traders (CAIT), wrote to Minister of Commerce & Industry and Consumer Affairs, Food and Public Distribution Piyush Goyal : “As expected, [a] few organisations in the country are bent upon creating roadblocks to ensure that reforms are derailed…it is highly painful to observe that Niti Aayog without realising as to why the e-commerce rules are necessary joined the chorus criticising the rules.”
However, a Gurgaon-based retail sector analyst said, “These rules appear to blatantly limit consumer choices further through provisions such as a blanket ban on flash sales, etc., despite the regulations being routed through the Ministry that is mandated to uphold consumer rights.”
