Teji Mandi Explains: Will new e-commerce draft be able to curb illicit trade practices?
Teji Mandi Explains: Will new e-commerce draft be able to curb illicit trade practices?

The Indian government has released a draft bill for e-commerce to improve operating compliance across the industry. New rules for e-commerce are proposed under the consumer protection act, which would increase the accountability of these platforms towards the goods and services traded on their platforms.

Curbing the Unfair Trade Practices

As per the ministry of consumer affairs, new rules are introduced to curb the alleged unfair trade practices prevailing in the industry.

Several retail associations have lodged complaints against e-commerce companies to promote selected brands and their private labels. Thereby creating an uneven playing field in the e-commerce space.

The ministry in its statement has condemned certain e-commerce platforms and proposed a ban on flash sales in India. These sales festivals are very popular during the festive season as brands offer heavy discounts on their products.

The ministry has alleged e-commerce companies give preferential treatment to selected merchants and private labels wherein orders are routed to these sellers. It also limits the options available to the consumers. Under the new draft, the ministry has proposed to prohibit e-commerce players from running their in-house/private labels.

Under the new proposal, the government could also ask e-commerce firms to delist their related and associated parties from using platforms to reach customers directly.

Breaking the Inventory Nexus

Many e-commerce companies are found operating through a web of joint ventures. These JVs act as inventory-holding firms which are listed as sellers on platforms. This is in blatant violation of India's policy which does not allow e-commerce firms to hold inventory or sell items directly to consumers.

Other Important Provisions

The proposed policy has also asked e-commerce platforms to list domestic offerings as alternatives to imported goods, thereby promoting ‘Made in India’ products.

Apart from that, it has also introduced the concept of fall-back liability. It will hold e-commerce firms liable if a seller on their platform fails to deliver goods or services, causing a loss to the customer.

Under current practices, e-commerce platforms direct the consumers to the respective sellers to solve any grievance. Under the fall-back liability, consumers will be able to reach out to the platform itself.

Closing Comments

In a way, the proposed draft is the second attempt from the Indian government to curb unfair trade practices from e-commerce platforms and create a level playing field.

Earlier, new rules were introduced in 2019 that prevented e-commerce companies from giving preferential treatment to a small group of sellers. However, it proved inefficient as e-commerce companies found a way to circumvent the rules. They adopted more indirect routes to create affiliate companies to control the supply and continued promoting select merchants and their private labels.

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