E-commerce has grown exponentially in India, in the past few years. It received further impetus due to the lockdowns imposed on account of the Covid-19 pandemic. The sector has attracted Foreign Direct Investment, and believed to have contributed to India’s economic growth, as well as various government initiatives, such as: Make in India, Atmanirbhar Bharat, Startup India, and Digital India, among others.
While e-commerce has also brought forth various benefits for consumers and businesses alike, there were various alleged anti-competitive and unfair trade practices being adopted by e-commerce entities, to the detriment of consumers and Medium Small and Micro Enterprises (MSMEs).
E-commerce is regulated through multiple issue and stakeholder-based policies, laws and rules. These have remained in a state of flux since the past few years, with more amendments and additions being proposed, or being deliberated upon.
The Consumer Protection Act, 2019 (COPRA) came into force on 20th July 2020. The act empowered the government to enact Consumer Protection (e-commerce) Rules. The same were notified on 23rd July, 2020. Despite notification of the rules, it was alleged that large e-commerce entities continued to adopt unfair trade practices such as: product search results manipulation, selling goods close to expiration date etc.
Accordingly, within a year of its notification, the government looked to amend the rules, and sought public comments on the Proposed Amendments to the Consumer Protection (E-commerce) Rules, 2020. Some of the proposed amendments are also in line with the recommendations of the Rajya Sabha Committee on Subordinate Legislation, vide Two Hundred Forty Fifth Report on the rules (RS Committee Report), dated 24th March, 2021.
It has been alleged that large e-commerce companies have been engaging in anti-competitive practices like predatory pricing, preferential treatment to select sellers, deep discounting, and inventory control, among other manipulative and arbitrary practices. Such alleged practices are argued to be hurting the interests of Indian MSMEs and small retailers.
This has attracted enhanced regulatory scrutiny faced by the e-commerce sector in India, and there are ongoing investigations by the Competition Commission of India (CCI). Notably, CCI had published a Market Study on E-commerce in India, on 8th January, 2020. Furthermore, this has also prompted the government to deliberate upon tightening the Foreign Direct Investment (FDI) regulations for e-commerce in India.
Foreign Direct Investment
In 2016, the Department of Industrial Policy and Promotion (DIPP), now the Department for Promotion of Industry and Internal Trade (DPIIT), had released guidelines for FDI on e-commerce, vide Press Note 3 (2016). While it permitted 100% FDI in marketplace e-commerce models, it prohibited FDI in inventory e-commerce models.
This stance was re-emphasized by DPIIT in 2018, video Press Note 2 (2018). As per media reports of March, 2021, speculations were ripe for another possible clarification note to be issued by DPIIT. However, the same did not see the light of the day.
National E-Commerce Policy
The multi-faceted regulatory developments pertaining to e-commerce in India, have taken place without a holistic and clear vision for the sector. Realising the criticality of having a domestic policy on e-commerce, the Department of Commerce (DoC) had established a Think Tank on ‘Framework for National Policy on E-commerce’, which submitted a report on 30th July, 2018, entailing recommendations for a draft national policy framework on e-commerce.
However, owing to criticism of the recommendations, the government announced formulating a revised draft policy on 11th August, 2018, pursuant to which, on 23rd February 2019, the DPIIT released the Draft National E-commerce Policy (NEP). The same also met with criticism, and the draft was subsequently discarded.
In July, 2020, media reports claimed to have got access to a leaked draft version of the updated NEP. Similarly, in March, 2021, another leaked version of the draft NEP was being circulated. However, there has been no official development on the same.
Areas Requiring Research
Basis the regulatory scenario of e-commerce in India, Narayan Chamber of Policy (NCP) has identified areas requiring research. These have been listed below.
- Desk research on multi-stakeholder perspectives on the current regulatory scenario;
- Consumer Impact Assessment of the proposed amendments to the COPRA Rules;
- Competition Impact Assessment of select provisions of the FDI rules;
- Survey on consumer trust on e-commerce; and
- Survey of MSMEs on their perspective on e-commerce; and
- Advocacy campaign on the need for a National E-commerce Policy in India.
Submission of Comments on the Proposed Amendments to Consumer Protection (E-Commerce) Rules, 2020 to the Department of Consumer Affairs
Despite notification of the Consumer Protection (E-Commerce) Rules, 2020, various stakeholders alleged that large e-commerce entities are adopting unfair trade practices, which may have an adverse impact on consumer welfare. These include: product search results manipulation, preferential treatment to some sellers, marketplace e-commerce entities having indirect stake in some sellers on their platform, selling goods close to expiration, predatory pricing, among others.
Various amendments have now been proposed in the Rules to curb such malpractices. While the proposed amendments do well in in promoting transparent information disclosure for consumers, and protecting consumers against manipulative search indexes, there exists various lacunas in them. These have been captured in our submission. (Read More)