The changes to Consumer Protection (E-Commerce) Rules, 2020 rules have sparked serious discussions in India’s e-commerce sector as companies face the prospect of a fundamental transition in their business structure, if the new rules are implemented. The government is proposing changes to consumer protection rules to protect consumer interests and give e-commerce businesses more responsibility.
But, these developments have some e-commerce firms worried due to their impact on companies’ functioning and the changes they might usher in for online shoppers.
Changes to e-commerce rules under the Consumer Protection Act aim to develop a framework that directs businesses to operate in safe environments while ensuring consumer security.
Gist of the proposed amendments to the E-commerce Rules
Introducing Fall-back Liability
The new rules introduce the concept of “Fall-back Liability”. If the supplier on the e-commerce platform is unable to deliver the goods or services due to negligence, resulting in loss to consumers, the e-commerce company will be held liable. With fall-back liability, consumers will be able to contact the platform itself instead of the vendor.
Restricting Search Index Manipulation
The new propositions also prohibit e-commerce companies from manipulating search results or indexes based on long-term needs of sellers and merchants to prevent preferential treatment on certain platforms.
Ban on Specific Flash Sales
The amendment seeks to ban specified flash sales by e-commerce entities. While regular flash sales are not prohibited, flash sales or exclusive returns that restrict customer choice, drive up prices and damage fairness are discouraged.
Consumer Data Protection
Without explicit consent, e-commerce companies will be prohibited from providing consumer information to anyone. No organisation should automatically record consent, in the form of pre-marked signals on their portals.
Impact of E-commerce Rules Changes on Companies
With the new rules, every online retailer, regardless of size, will have to register with the Department of Promotion for Industry and Internal Trade (DPIIT). The rules propose mandating that no logistics service provider of a marketplace e-commerce entity shall provide differentiated treatment between sellers of the same category. Due to DPIIT’s FDI policy in e-commerce markets, parties and companies involved in e-commerce will not be able to register as a supplier on the respective platform.
What should E-commerce Companies and Start-ups Expect Going Forward?
With the changing government laws in the digital sector operating in India, all kinds of internet companies and businesses need to brace themselves for rapid compliance and adoption of new rules. Just like the IT intermediary rules announced for social media companies, e-commerce companies are also required to appoint officials for the posts of a grievance officer, a chief compliance officer and a nodal contact person to coordinate with law enforcement round the clock, if needed.
Going forward, e-commerce companies should pay attention to their policies and follow rules, such as exchanging information with government agencies to verify the identity in cases pertaining to cyber security incidents. Simply put, the purpose behind these new changes is predicated by the government on a safer and accountable online commerce ecosystem for both businesses and customers.