Draft rules on e-commerce: objects of the industry department, according to the head of Niti Aayog, will improve the ease of doing business

KEY PROVISIONS of the central government’s draft rules on e-commerce have been fiercely opposed by the Department of Industry and the Ministry of Trade Affairs – and Niti Aayog’s vice president who warned that they “will seriously harm ease of doing business and will have an impact on small businesses, ”records obtained by Indian Express under the Right to Information Act (RTI).

The records show that the Ministry for the Promotion of Industry and Internal Trade (DPIIT) reported several anomalies, questioned certain provisions and suggested adjustments in a memo sent to the Ministry of Consumer Affairs, which published the draft rules in June.

These include a review of proposals such as the back-up liability of sellers, the proposal to ban flash sales, and the need for a clear definition of terms, such as “cross-selling” and “abuse”. in the draft rules.

By the way, Union Minister Piyush Goyal is responsible for the Ministry of Consumption, Food and Public Distribution, which released the draft rules, as well as the Ministry of Commerce and Industry. , to which DPIIT reports.

In addition, in a letter to Goyal on July 6, Niti Aayog Vice President Rajiv Kumar stressed that the proposed rules on e-commerce go “far beyond consumer protection” and “will seriously harm ease of doing business and will have an impact on small businesses ”.

The Ministry of Corporate Affairs also opposed specific provisions of the draft rules, while the Ministry of Finance reportedly raised red flags.

Besides “fallback liability”, a key part of the project that has been the subject of criticism within the government are the proposed changes under “obligations of market sellers, inventory of e-commerce entities”.


High stakes

In its memorandum, dated July 18, DPIIT said: “The concept of ‘back-up liability’ can be considered in relation to the product liability provision under section 2 (34) and in Chapter VI of the Consumer Protection Act 2019. It can be assessed whether the introduction of a new concept of “back-up liability” is necessary in view of the existing legal provisions. The definitions of Cross Selling, Miss-selling and Flash Sale can be reconsidered. These concepts are discussed in the context of ethical and responsible e-Commerce. It can be examined whether the introduction of these new concepts is necessary ”.

DPIIT and the Department of Consumer Affairs did not respond to follow-up questions separately emailed by The Indian Express.

According to the Consumer Protection Act, 2019, product liability is defined as “the responsibility of a manufacturer or seller of a product, any product or service, to compensate for any harm caused to a consumer by such defective product manufactured or sold or by a deficiency. in services ”.

This, along with Chapter VI of the Consumer Protection Act, places liability for the defective product on the seller or manufacturer. However, the proposed rules on e-commerce, which are notified under the Consumer Protection Act, make online marketplaces responsible for any shortcomings in the products delivered through their platforms.

Industry players also pointed out that while FDI policy prohibits companies such as Amazon and Flipkart from having control over inventory sold on their platforms, the draft e-commerce rules hold these platforms accountable to the where a seller fails to deliver goods or services due to negligent conduct, which causes loss to the customer.

DPIIT suggested that the obligations of market sellers, inventory e-commerce entities can be aligned with the framework of the draft national e-commerce policy. “The aim is to prevent sellers from engaging in any type of activity that distorts the market,” he noted.

The DPIIT also questioned the outright ban on flash sales. While the department said that concepts such as cross-selling, gouging and flash selling “are addressed as part of ethical and responsible e-commerce,” a Gurugram-based retail industry analyst said that a general ban on flash sales appears to “blatantly limit consumer choice”.

In addition, DPIIT called for start-ups and MSMEs to be exempted from complying with the new e-commerce rules.

Last month, The Indian Express reported that the Consumer Department was reviewing some of the provisions proposed in its draft e-commerce rules following a pullback by industry and sections of government.

The Department of Corporate Affairs, in a memorandum dated July 22, pointed to the overlap between some of the proposed provisions and the Competition Act. He said that as a result of these provisions “consumers may be led… to bring cases of abusive conduct against dominant companies to consumer forums…”.

“This will create fertile ground for forum shopping in addition to regulatory overlaps, thus leading to a potential scenario of divergent decisions,” he added.

The Centre’s think tank, Niti Aayog, also echoed concerns about the overlap with existing laws and regulations. In a July 14 memo, Niti Aayog said: “The proposal restricting the list of related parties on e-commerce platforms appears to be overbroad.”

Meanwhile, Niti Aayog Vice President Rajiv Kumar wrote in his letter to Goyal: “In the period of post-pandemic recovery, it is necessary to give a major boost to MSMEs, small businesses through e-commerce using the strength of digital India. The draft rules would have a negative impact on the recovery rate ”.

However, in its letter, the Ministry of Micro, Small and Medium Enterprises stated that it “supports the proposal contained in the proposed changes to the Consumer Protection (Electronic Commerce) Rules 2020”.

The Ministry of Electronics and Information Technologies (MEITY) called for an alignment between the proposed rules on electronic commerce and the rules on information technology (intermediate directives and code of ethics for digital media ) notified in February.

“The“ electronic commerce entity ”being of an intermediary nature, must observe the required due diligence as prescribed in said IT rules, 2021. Electronic commerce entities are intermediaries within the meaning of the IT law and they are required to follow the IT rules, 2021. Thus, parity must be brought with the IT rules, ”he writes.

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