Niti Aayog, DPIIT raise concerns over draft ecommerce rules

Centre's new draft ecommerce rules have invited criticism from various sections within the government with Niti Aayog warning that the new norms "will severely harm Ease of Doing Business and impact small businesses," according to records obtained by The Indian Express under RTI Act.

The new draft rules, issued by the Ministry of Consumer Affairs in June, have faced backlash from various sections. Department for Promotion of Industry and Internal Trade (DPIIT) under Ministry of Commerce and Industry has flagged anomalies, questioned some provisions and recommended changes.

Besides DPIIT, Corporate Affairs Ministry has also raised voiced issues with new rules.

Incidentally, Union Minister Piyush Goyal is in charge of both Ministry of Consumer Affairs, under which the rules were issued, and the Ministry of Commerce and Industry, under which DPIIT functions.

What are the issues raised?

One of the key objections is fallback liability. Under the Consumer Protection Act, 2019, the seller is held accountable for selling a defective product or causing harm to the consumer through it. However, under the draft ecommerce rules, the platforms, not sellers, such as Amazon or Flipkart will be liable in case of issues related to the product.

Industrial players have pointed out that FDI norms prevent these platforms from having control over the inventory sold on their sites but they could be pulled up in case if a consumer is troubled.

Another proposal is a ban on flash sales. In recent years, flash sales on ecommerce sites have become widely popular but the new draft rules have called for a ban. A retail sector analyst told The Indian Express that a blanket ban on flash sales appears to “blatantly limit consumer choices”.

The new terms introduced in the draft, such as “cross-selling” and “mis-selling”, were also questioned by the DPIIT, saying the need for such terms need to be reevaluated.

Another concern is fear of the new rules overlapping with already existing norms, particularly with the Competition Act under Corporate Affairs. The ministry warned of "divergent rulings" when cases are interpreted under different regulations.

MSMEs and small business

Niti Aayog has warned that the small businesses will be impacted by the new ecommerce rules and that can hamper the economic recovery. However, MSME Ministry has backed the draft rules, while the DPIIT has said that start-ups and MSMEs must be exempted from the norms.

Ministry of Electronics and Information Technology has called for aligning the ecommerce draft rules with the new IT rules. It was reported earlier that Consumer Affairs Ministry is tweaking rules after suggestions from various groups.

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