Flash sales could soon be a thing of the past with the Union government proposing sweeping changes to India’s Consumer Protection (E-Commerce) Rules, 2020. These rules would impact a large swathe of players, especially companies like Flipkart and Amazon. Proposed changes to the rules include grievance officers and compliance officers being appointed, and more. The Department of Consumer Affairs has sought feedback from the public on the proposed changes by July 6.
The rules require every e-commerce entity that wants to operate in the country to register with with the Department for Promotion of Industry and Internal Trade (DPIIT), and every e-commerce entity “shall ensure that such registration number and invoice of everyday order is displayed prominently to its users in a clear and accessible manner on its platform”.
It further states that e-commerce entities cannot not allow “any display or promotion of misleading advertisement whether in the course of business on its platform or otherwise.”
The proposed changes to the rules also require companies to provide ranking for goods and “ensure that the ranking parameters do not discriminate against domestic goods and sellers”.
The rules call for an addition that no e-commerce entities will indulge in mis-selling of goods or services. In case of cross-selling (sale of goods or services related to the purchase) with an intent to maximise the revenue of the entity, the platform has to provide adequate disclosure, as well as the name and data of the entity.
It states that consumers cannot be misled by manipulating search results or search indexes. “It cannot allow the usage of the name of the brand associated with that of the marketplace e-commerce entity for promotion or offer for sale of goods or services on its platform in a manner so as to suggest that such goods or services are associated with the marketplace e-commerce entity,” it added.
When imported goods are put up for sale, the changes require the e-commerce marketplace to mention the name and details of the importer, identify goods based on their country of origin, provide a filter mechanism on their e-commerce website, and display a notification regarding the origin of goods at the pre-purchase stage. This will be at the time of goods being viewed for purchase, and also requires the companies to offer suggestions of alternatives “to ensure a fair opportunity for domestic goods”.
It adds that sponsored listings must be clearly mentioned, that no-commerce entity shall organise a flash sale of goods or services offered on its platform, that those with dominant position cannot abuse its position.
A flash sale on an e-commerce site refers to promotion of deep discounts, offers and reduced prices for a certain period of time on select goods and services.
Similar to the recently released IT rules, the Consumer Protection Rules require e-commerce entities to establish an “adequate grievance redressal mechanism” with regard to the number of grievances received by such an entity. The changes to the rules propose that companies will have to appoint a grievance officer for consumer redressal, and the details of this person must be made available on the website.
A Chief Compliance Officer will also have to be appointed, who will be responsible for ensuring compliance with the Act and rules. This person, the proposed changes state, “shall be liable in any proceedings relating to any relevant third-party information, data or communication link made available or hosted by that e-commerce entity where he fails to ensure that such entity observes due diligence while discharging its duties under the Act and rules made there under”.
It stated that no liability under the Act or rules will be imposed without the e-commerce entity being given a chance to be heard.
The Chief Compliance Officer will have to be a senior employee who is a resident and citizen of India. Companies will also have to appoint a nodal contact person for 24x7 coordination with law enforcement agencies and officers “to ensure compliance to their orders or requisitions made in accordance with the provisions of law or rules made thereunder.”
In 2020, changes made to the 2019 rules required e-commerce firms to have a grievance redressal mechanism, as well as a person to ensure compliance.
The proposed changes to the Consumer Protection rules stated that the name of the grievance officer, contact details and the mechanism by which a user may make a complaint. It also requires the officer to receive and acknowledge any order, notice or direction issued by the appropriate government, any competent authority or a court of competent jurisdiction.
It requires companies to respond to orders by authorised government agencies within 72 hours “for investigative or protective or cyber security activities, for the purposes of verification of identity, or for the prevention, detection, investigation, or prosecution, of offences under any law for the time being in force, or for cyber security incidents.”
E-commerce entities cannot use information collected for unfair advantage of related parties and associated enterprises. Further, related parties and associated enterprises cannot be enlisted as sellers for sale to consumers directly, and that nothing is done by these related entities which the e-commerce entity cannot do itself.
A related entity here can be defined as an enterprise -- or seller -- that has common directors, managing partners or even common chain or shareholders that have 10% or more stake in the company and in any manner, have the power to influence the other entity’s decisions, or even any relationship of mutual interest.
E-commerce entities cannot sell goods to those registered as a seller on the platform, and cannot “advertise a body of sellers for the purpose of subsidizing a sale on its platform”.
The rules also include a clause called fall-back liability, where the e-commerce entity is liable if a seller fails to deliver the goods or services to a customer “due to negligent conduct or omission”.
This comes as both Amazon and Flipkart have both challenged a single-judge order of the Karnataka High Court which permitted the Competition Commission of India to probe both companies over predatory pricing and deep discounting.
The Confederation of All India Traders (CAIT), which has been raising a hue and cry over the business practices of large e-commerce entities has complimented the Union Commerce and Consumer Affairs Minister over the new rules.
CAIT Secretary General Praveen Khandelwal called it “a guiding stone to purify e-commerce landscape of the Country which has been greatly vitiated by various e-commerce global companies to the extent that not only the domestic trade has been damaged but even the consumers are also feeling the heat of their unethical business practices”.
The All India Online Vendors Association said it supported the proposed amendments. “We hope the government implements the same strictly in full compliance at the earliest after proper stakeholder discussions on addition or deletions,” it added.