The e-commerce industry in India has seen new entrants at an accelerated pace. The high demand during lockdowns has made it conducive for many new small players to grab a piece of the meat. However, the big fish are caught in a tussle with the Government regarding allegations of unfair trade practices.
As a new firm, here are the current rules and regulations governing e-commerce in India and everything you need to know about the increased Government scrutiny.
Draft rules proposed for e-commerce under the Consumer Protection Act.
FDI Policy prohibits product price tweaks
E-commerce marketplaces providing a platform for international sellers to list their products are not allowed to influence sale prices directly or indirectly as per the current Foreign Direct Investment (FDI) policy.
Prohibition on ‘Misleading Ads’
The government is tightening scrutiny on firms posting ads on its platform that may be misleading in nature. E-commerce firms are prohibited from displaying or promoting ‘misleading ads’.
Registration with DPIIT
Online retailers will foremost need to get registered with the Department of Promotion for Industry and Internal Trade (DPIIT).
‘Flash Sales’ are frowned upon
The latest law proposed for the E-commerce industry in India is for a banning on flash sales. The proposal put forward by the Ministry of Consumer Affairs is in favour of physical retailers across India who are listed as ‘sellers’ on popular e-commerce platforms.
E-commerce firms rely on ‘flash sales’ to obtain an overshoot of orders by targeting customers on special events and holidays. There may be a curb on these heavily discounted sales especially if they negatively impact local sellers.
Compliance Guidelines
There are also proposals in the pipeline for e-commerce companies to appoint key representatives for the following positions:
- Chief Compliance Officer
- Nodal Contact person for 24×7 availability to co-ordinate with law enforcement agencies.
- Sub compliance officers
- Resident Grievance Officer
Curbs on selling in-house products
If you are a seller-based e-commerce platform, there may be curbs on launching your in-house/private label. The latest laws governing e-commerce prohibits companies from listing their in-house brands and products. However, popular e-commerce platforms have found ways to bypass or work around these prohibitions.
Show domestic alternatives to foreign products
Companies may also be urged to be transparent on the home countries of goods listed on the platform and to supplement them with domestic sources. This will give consumers a choice to compare the imported product with its domestic counterpart.
Other compliance guidelines
Other compliance guidelines will be for firms to mandatorily join the ‘National Consumer Helpline’ and to adhere to ‘fallback liability’ (to compensate for negligent sellers).
Difference between E-Retail and E-Commerce
E-Retail refers to retail carried out on an online marketplace by a retailer who may also have a physical presence at a brick-and-mortar store. On the other hand, e-commerce refers to transactions that occur purely online in exchange of goods and services. They are both similar and often complement each other to facilitate consumer purchases on the internet.
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Online retailers will foremost need to get registered with the Department of Promotion for Industry and Internal Trade (DPIIT).
What’s in it for me?
If the proposed rules come into force, price comparison and product reviews/recommendations will merge with e-commerce platforms. As such, it’s not recommended for start-ups to venture into these business models since they will be rendered redundant.
With greater focus on the role of BigTech in E-Commerce, be careful on how you handle consumer data. Transparency is key here to avoid being held liable by law enforcement agencies. Small e-commerce firms and SMEs may find it difficult to list on major marketplaces. Don’t rely completely on them and keep your options open.
With trouble brewing for big e-commerce firms, it will make room for smaller players to gain firm footing in India’s massive e-commerce landscape. Source local goods and prioritise them over foreign imports to find favour with the compliance guidelines. Exercise caution around consumer consent and protect consumer information from data breaches and cyber-attacks.
