In the face of resistance from both industry stakeholders and certain sections of the government, the Department of Consumer Affairs is reportedly reconsidering certain provisions in the draft e-commerce rules it released in June. Notably, concerns have been raised within the government regarding perceived “overreach” by the Consumer Affairs Department, encroaching into domains already addressed by other departments such as the Department for Promotion of Industry and Internal Trade (DPIIT) and the Ministry of Electronics & Information Technology (MeitY).
The draft rules, which invited stakeholder comments until July 6 (later extended to July 21), have sparked confusion due to contradictions and discrepancies with existing DPIIT regulations. Industry concerns center around the “broad definition” of ‘related party,’ which could encompass entities involved in logistics and joint ventures, potentially expanding the scope of the rules significantly. This ambiguity, if not clarified, could pose challenges for both foreign players like Amazon and Flipkart and domestic companies like Tata and Reliance with diverse brands on their super-apps.
An example cited involves the joint venture between the Tata Group and Starbucks, which might be considered a related party under the proposed provisions, preventing it from selling products on a Tata super-app.
The draft rules stipulate that e-commerce marketplaces must ensure that related parties or associated enterprises do not engage in activities prohibited for the e-commerce entity itself. Sources indicate potential changes to include exclusions in the definition to address industry concerns.
Criticism also targets provisions like fall-back liability, seen as contradictory to DPIIT’s policy on foreign funding for e-commerce companies. Industry players argue that these provisions conflict with existing rules and the evolving nature of e-commerce business models.
Niti Aayog has intervened, flagging in a memorandum that many provisions go beyond consumer protection. Some proposed provisions align with the Information Technology (Intermediary) Rules, 2021 issued by MeitY, currently facing legal challenges.
There are concerns that the government’s decision to route new e-commerce rules through the Consumer Affairs Department may be influenced by the noise over DPIIT’s FDI policy, perceived by the U.S. as non-tariff trade barriers.
The Confederation of All India Traders (CAIT) responded to Niti Aayog’s critique, asserting that certain organizations are attempting to derail reforms. Sector experts express worries that some provisions may limit consumer choices, such as the blanket ban on flash sales, seemingly contrary to the mandate of upholding consumer rights by the Ministry.