E-Commerce Rules 2021 : A BIG TWIST

  
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E-commerce has been one of the fastest growing sectors for the past decade now. In India - Amazon/Flipkart have cornered the lion’s share of the market - and the need to regulate these players was quite important.

Enter: E-commerce Rules

Unfair trade practices. Consumer grievances. Price manipulations. These rules covered a lot of ground to protect consumer interests & were introduced to keep these e-commerce behemoths in check.

But now - just one year later, new changes are proposed - some of which are quite massive in terms of their impact on the functioning of e-commerce platforms & the sellers on these platforms.


#Rule 1: No Flash Sales

One of the biggest revenue drivers for these e-commerce platforms - are exclusive events like ‘Prime Day’, ‘Great Indian Festival’ etc. - which offer various products at massive discounts & generate insane sales volumes.

What if these platforms couldn’t engage in these events anymore?

As per these proposed amendments - NO FLASH SALES would be allowed on e-commerce platforms.

A ‘Flash Sale’ is when an e-commerce entity fraudulently adopts tactics to increase the sale of a particular seller or a group of sellers - by offering discounts, reduced prices & offers.

So, if Amazon sets up a special offer to sell a particular brand of Mi phones at a discount - is that a flash sale? If Flipkart offers a limited period offer on the sale of ‘Bose’ earphones - is that a flash sale?

That is exactly where the problem lies. Currently the definition of a flash sale is so broad - that is covers all sales drives essentially, which defeats the purpose of e-commerce. We believe that the definition of flash sales needs to be narrowed down & be more precise.

A blanket ban on all kinds of flash sales could have a significant economic impact - as it could reduce consumer spending drastically & might cause ripple effects across segments.


#Rule 2: Fall back liability

Imagine you ordered an original Rolex watch [hypothetically] from Amazon. A couple days later you received the package & you found out that the watch was counterfeit.

You registered a compliant with Amazon - which in turn connected you directly to the seller to rectify this situation. However, your bad luck that the seller turned out to be a fraud. You wanted your money back - but you couldn’t hold Amazon liable [as per current rules].

This might change with the introduction of ‘fall back liability’

Fall back liability means the ‘liability’ of an e-commerce entity [Amazon/Flipkart], where the seller fails to deliver goods/services to the consumer due to negligent conduct - which causes a loss to the seller.

We believe this is one of the better amendments which would force e-commerce entities to enforce stricter controls to ensure that sellers comply with all the rules laid down - leading to better grievance resolution.


Apart from these two rules mentioned above - other rules were also proposed to be introduced such as:

  1. Not allowing E-commerce platforms to manipulative search results to benefit a particular seller.

  2. Not allowing E-commerce platforms to collect information about consumers - without the express consent of consumers.

  3. Associated entities/related parties of the e-commerce entity wouldn’t be allowed to enlist on the e-commerce entities’ platform. For eg. Cloudtail/Appario Retail wouldn’t be allowed to sell on Amazon’s platform if these rules come into effect.

  4. Sellers would be required to appoint a grievance officer - which in our opinion doesn’t make a lot of sense - given this would be detrimental to the growth of smaller sellers increasing admin costs.

Conclusion

E-commerce is expected to be a $200B market in India by 2026. It’s been one of the few sectors untouched by the pandemic, keeping the economy afloat.

These are still proposed amendments - and which rules are actually notified remains to be seen. However, a careful evaluation of its economic impact must be made.

For eg. the definition of flash sales must be narrowed down & be more specific. In the case of ‘fall back liability’ - what would be the liability of the e-commerce entities must be defined.

We’ll keep tabs on how the ball rolls.