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E-commerce policy remains in limbo as ministries differ

Three-and-a-half years after it was announced, the proposed e-commerce policy continues to remain beyond the reach of the government amid never-ending discussions and with no deadline in sight.

Officials say that work on the policy has crawled as many other issues are now part of other legislation and differences between ministries persist.

The e-commerce policy is expected to significantly impact India’s e-commerce market, which is poised to rise to $111.4 billion by 2025 from $46.2 billion in 2020, on the back of wider internet availability and smartphone ownership, according to India Brand Equity Foundation, a trust established by the Department of Commerce.

Yet, despite periodic announcements, no timeline for releasing the policy currently exists, a senior Department for Promotion of Industry and Internal Trade (DPIIT) official said.

“Large parts of what the initial policy was supposed to be now lies within the jurisdiction of other legislation. But work is continuing,” he said.

The DPIIT’s own rules on Foreign Direct Investment in e-commerce were carved out when it was felt the policy would take too long to formulate.

The last time a draft of the policy went public was in February 2019, when it faced heat from companies and civil society alike. While Indian businesses argued that the interests of domestic businesses had not been protected sufficiently, consumer groups said it was heavily tilted in favour of players such as Ola, MakeMytrip, and Paytm, all funded by marquee foreign investors, rather than consumers and small businesses.

Finally, the draft was junked and never released for public consultation. A second draft, leaked in 2019, had termed data a strategic national asset, argued in favour of governments being given the source codes and algorithms of e-commerce websites, mandated local registration, and suggested a system of e-consumer courts.

While some of these issues remain under discussion, many have now been absorbed under the Consumer Protection (E-Commerce) Rules, 2020 under the Consumer Affairs Ministry. Even those rules are currently in the process of being upgraded, multiple sources said.

Rules vs Policy

The rules have met with opposition from a range of government agencies, including Niti Aayog, the government’s public policy think-tank, and the Finance and Corporate Affairs Ministries, which have pointed out that the norms may be harsher than necessary and could adversely affect the growth of e-commerce.

The rules, brought out in June 2021, state that e-commerce marketplaces are responsible for the quality of goods sold on their platforms, need to have in place robust grievance redressal mechanisms and must refrain from offering market-distorting deep discounts, among other things.

Despite being flagged multiple times over the past two years by the government, the rule on deep discounts had led to significant opposition by companies. The rules state that an e-commerce entity cannot “manipulate the price of the goods or services offered on its platform in such a manner as to gain unreasonable profit by imposing on consumers any unjustified price having regard to the prevailing market conditions.”

However, other officials say the complicated nature of the industry and the nascent stages of the regulatory mechanism ensure that there is still space for the DPIIT to step in.

“E-commerce companies have argued that in the absence of clear guidelines on what constitutes manipulative practices, they could be vulnerable to prosecution even for offering mild discounts. This will also restrict the way the business operates now. The final e-commerce policy is expected to take all these concerns into account,” an official said.

The other contentious point is holding e-commerce companies liable for discrepancies in goods sold on their platforms. Niti Aayog pointed out that if online marketplaces can’t control the inventory sold on their platforms, they should also not be held responsible for the quality of such products.

Regulation has begun
Meanwhile, the sector has already begun to be regulated, at least with regard to complaints made by consumers, officials said. The government has swung into action against unfair trade practices prevalent on e-commerce platforms after the pandemic as there had been a noticeable shift in consumer patterns exponentially favouring e-commerce.

Case in point, e-commerce companies have been fined over Rs 78 lakh for making false declarations by the Legal Metrology Division of the Department of Consumer Affairs. The same Division has sent 448 notices to e-commerce companies since October 2020 for violating rules about the display of the country of origin of a product and other details on their websites.

On 26 July, Central Consumer Protection Agency (CCPA) Chairperson Nidhi Khare said complaints related to e-commerce have increased 30-40 percent over the last 4-5 years.

Amazon, Flipkart, ShopClues, Paytm Mall, and Snapdeal have been issued notices by CCPA for selling non-ISI Mark pressure cookers.
Issues galore

Among the issues that a new e-commerce policy is expected to tackle is that of the need for a national regulator for the sector. Sources said the DPIIT wants to ensure the field remains competitive and new entrants are not restricted.

A draft of the policy, discussed at an inter-ministerial meeting in September last year, had pointed to the wide range of laws and regulations that currently govern the sector due to the cross-cutting nature of e-commerce.

This includes the Income Tax Act 1961, Foreign Exchange Management Act, 2000, Consumer Protection Act, 2019 and Information Technology Act, 2000, among others. The draft also stresses that the government is concerned about monopolies forming in the sector and loss of business for small retail traders.

Back in 2018, an earlier draft of the proposed e-commerce policy had suggested the establishment of the CCPA to act as the nodal agency for intra-government coordination on e-commerce policies.

Last year, the CCPA was set up under the Ministry of Consumer Affairs to conduct investigations into violations of consumer rights, order the recall of unsafe goods and services and stop unfair trade practices and misleading advertisements.

It also has the power to prosecute and impose penalties on manufacturers, endorsers and publishers of misleading advertisements. Moneycontrol

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