Draft rules could stifle ecommerce

Govt seeking control over the sector is dangerous

Even as the controversy over the enforcement of the IT (Intermediaries) Rules, 2021, which seek to regulate the working of Big Tech companies and social media platforms, continues, the Ministry of Consumer Affairs has come out with a set of amendments to the Consumer Protection (ecommerce) Rules, 2020, that will have a similar regulatory impact on the burgeoning ecommerce sector in the country.

While it is claimed that the IT rules are meant to protect national interests and the interests of social media users, the aim of the draft ecommerce rules is also stated to be the protection of national interests and those of domestic businesses and consumers. Some of the proposals, however, seek control over the ecommerce space in the name of regulation, just as the IT rules seek to exercise control over social media intermediaries, and thus the ability to control freedom of speech.

As in the case of the rules for Big Tech, there is a stipulation for ecommerce platforms to appoint a chief compliance officer, a nodal contact person, and a resident grievance officer for continuous coordination with law enforcement.

These may be necessary but can also be used by authorities to put pressure on companies. The platforms will have to display the ‘country of origin’ on every product and ensure a ‘fair opportunity’ to domestically-made goods. Flash sales, which are very popular with customers, especially during the festival season, are sought to be prohibited if they are run back-to-back and prevent a level playing field for all players and limit customer choice. But expressions like limiting customer choice and level playing field can be interpreted freely. Restrictions are also sought to be imposed on “related parties and associated enterprises” and no related entity can sell goods to an online seller operating on the same platform.

Also read: Govt asks ecommerce companies to appoint nodal officer for compliance with consumer protection rules

Some of the rules, like the one that restricts the sharing of consumer data without consent, are needed. But many of the draft rules are open to different interpretations, and this could not be accidental. Subjective interpretation of rules can lead to bureaucratic arbitrariness and intervention by the government. It is true that Amazon and Walmart’s Flipkart, the two largest ecommerce firms operating in the country, have faced complaints about pricing and other issues.

These two are also fighting a court battle to prevent the Competition Commission of India (CCI) from reopening its probe into their business practices. There is also a view that the government is bringing in these restrictions to help the domestic retail lobby. Whatever the reasons, the proposed rules seem aimed at gaining control over a fast-growing sector, and the result of that can only be to stifle it, and ultimately consumer interest.