After Social Media, Centre Tightens ECommerce Market Place

Published : Jun 22, 2021 02:36 pm | By: M D Sridharan

After Social Media, Centre Tightens ECommerce Market Place


After making social media giants adhere to new rules and guidelines, the centre has planned to tighten Ecommerce market and make e-commerce an even-playing field.

After making social media giants adhere to new rules and guidelines, the centre has planned to tighten Ecommerce market and make e-commerce an even-playing field. In order to curb widespread cheating and unfair trade practices in the Ecommerce ecosystem, the centre has proposed to make the Consumer Protection (E-Commerce) Rules, 2020 more stringent.

Following complaints from small businesses of misuse of market dominance and deep discounting by the online retailers such as Amazon and Flipkart, the government has proposed to limit so-called ‘flash sales’ of goods and services by e-commerce companies, according to amendments to the Consumer Protection (E-commerce) Rules, 2020 suggested by the consumer affairs ministry. Conventional e-commerce flash sales are not banned. Only specific flash sales or back-to-back sales that limit customer choice, increase prices and prevent a level playing field are not allowed.

Accordingly E-commerce firms must now also register with the Department for Promotion of Industry and Internal Trade (DPIIT), within a prescribed period and also display the registration numbers. The government has issued a notification seeking suggestions from stakeholders on amending the rules and has given stakeholders time till 6th July, to convey their views.

Besides registering with DPIT and display the registration numbers, the centre has asked the E Commerce firms to appoint a Chief Compliance Officer and a Resident Grievance Officer, in line with Social Media firms. Also on the table are compliance with government requests on information sharing and prohibition of ‘flash sales’ offering deep discounts, and banning misleading ads. In case of any imported goods, the country of origin will have to be displayed along with name of the seller to ensure the ranking mechanisms don’t discriminate against domestic sellers. 

The chief compliance officer shall ensure implementation of the rules, while the resident grievance officer will redress user complaints. Besides, e-tailers shall provide information sought by government agencies for investigations, verification of identities or cyber security activities within 72 hours.

The large e-commerce marketplaces such as Flipkart and Amazon India are being investigated by the Competition Commission of India (CCI) for alleged abuse of market dominance and giving preferential treatment to sellers in which they hold indirect stakes. The CCI probe also focuses on deep-discounting practices undertaken by e-commerce marketplaces, which has led to complaints from offline retailers. Certain practices such as deep discounting,  by the foreign funded e-commerce firms has forced thousands of small brick-n-mortar shops to close.

The announcement comes at a time when the Confederation of All India Traders (CAIT) has dragged the e-commerce giants to the Karnataka High Court seeking a probe into their business models.  Earlier this month, the Karnataka high court dismissed Flipkart and Amazon India’s plea challenging CCI’s probe, prompting the firms to appeal the order at a division bench of the court for relief.

Among the changes proposed are bans on certain kinds of flash sales and punitive action against the platform if sellers don't deliver. To tackle growing concerns of preferential treatment, the new e-commerce rules propose to ensure none of the related parties to a marketplace are listed as sellers or are allowed to use any consumer information  for ‘unfair advantage’. Further, even logistics service providers to these marketplaces will not be allowed to give preferential treatment to any sellers. The proposed amendments to the rules aim to bring transparency, strengthen the regulatory regime, protect consumers' interests, and encourage free and fair competition.