A Complete guide on new e-commerce guidelines by GOI
By Kishan Dutt Kalaskar
Overview
In several nations, e-commerce is regulated. India, like other countries, has the authority to control the conduct of corporations operating on its territory. This is why the Indian government has enacted e-commerce-specific legislation.
The Indian e-commerce market, on the other hand, has become a haven for global behemoths. Wal-Mart and Amazon, for example, are currently the most powerful players in the Indian market. Many of these global corporations were found to be breaking local laws. Rather than respecting the rules in letter and spirit, these global corporations have attempted to get around them.
The Indian government was forced to issue new notifications as a result of this situation. These were not new rules in and of themselves. They were merely intended to ensure that multinational corporations did not exploit legal gaps.
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Following are some of the key characteristics of these new e-commerce guidelines.
Exclusive Offers are no longer available: Exclusive partnerships with vendors are now prohibited in India, according to the Indian government. Such transactions, according to the Indian government, are unfair competition since they aid attempts to corner the market.
Until far, e-commerce businesses have used their financial and marketing clout to force vendors to offer exclusive bargains. These transactions have been at the heart of e-tailors’ unethical behavior in India. Because several merchants will now sell the same goods, competition will increase, lowering consumer prices.
The Indian government is preventing exclusive deals from becoming a large player’s game by prohibiting them. Millions of small business owners should be able to sell on these platforms as well.
Lawbreakers with a Disguise: India’s government has decided to open its markets in stages. This is why some sectors of the economy are open to 100 percent foreign direct investment while others are not.
100vernment prohibits foreign corporations from owning more than 49 percent of multi-brand retail outlets. To get around this regulation, e-commerce giants like Flipkart and Amazon used a complicated network of businesses. As a result, e-commerce companies were really cloaking multi-brand retail entry into the Indian market.
Backdoor operations will no longer be possible: Flipkart and Amazon, for example, have separated their inventory holding operations into independent companies. Once again, it was discovered that e-commerce corporations were avoiding the law rather than following it. Marketplaces are simply supposed to be a place where buyers and sellers meet, according to the previous e-commerce regulation. Marketplaces have been explicitly forbidden from retaining inventory in order to prevent them from influencing market pricing, which also hurt smaller sellers.
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In actuality, these markets had developed special purpose vehicles whose primary aim was to purchase directly from brands at a lesser cost. Smaller merchants would buy the product from these SPVs. E-commerce platforms also have sway over the smaller retailers. This is why these ostensibly smaller stores have a lot more exposure than regular smaller retailers. As a result, the reality was that these so-called independent stores were little more than e-commerce companies’ inventory management divisions. In order to get around the legislation, they were falsely represented as independent businesses. Furthermore, many of these SPVs were being utilized to construct private labels and segregate market share for the e-commerce brand.
Given the nefarious nature of e-commerce operations, it’s no surprise that the government has chosen to put a stop to them. E-commerce corporations are now prohibited from purchasing more than 25% of all products sold by a single seller, according to new laws.
Furthermore, the Indian government has implemented a number of restrictions that make it impossible for e-commerce platforms to give particular merchants preferential priority. The new laws make it plain that discriminatory policies of any kind are banned. The government wants to make sure that the millions of small sellers that make up India’s retail market are treated equally.
No more huge discounts by E-Commerce Enterprises: E-commerce enterprises are likewise prohibited from offering substantial discounts under current guidelines. Deep discounting is a predatory pricing strategy that entails taking losses until the opponent runs out of cash. There is no doubt that this policy is unethical and must be ended as soon as possible.
Comparison to new rules: The draught e-commerce policy said, “Actions and things that the platform entities cannot perform can also not be done by any of its associates and associated parties.”
Online marketplaces are not allowed to maintain their own inventory or affect the price of items offered under India’s e-commerce FDI guidelines, which also ban group companies or entities controlled by marketplaces from selling on their platforms.
Compared to the old rules Companies are also prohibited from “manipulating the price” of goods and services offered on their platforms in order to create “unreasonable profit,” discriminate against customers, or make any arbitrary classification of customers that affects their rights under the Act.
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E-tailers must disclose facts concerning return, refund, exchange, warranty and guarantee, delivery and shipment, modes of payment, and grievance resolution mechanism, as well as the “country of origin” under the new Consumer Protection (E-Commerce) Rules, which go into effect in 2020.
Challenges: They are unable to sell their own retail goods: “None of the e-commerce entities related parties and connected enterprises is enlisted as a seller for direct sale to consumers,” according to the new guidelines. This has an influence on a number of platforms that sell products from independent vendors.
An e-commerce platform’s “associated enterprise” is defined as any entity that shares 10% or more of its ultimate beneficial ownership.
Overburdening by legal challenges Judiciary: Many of these principles will undoubtedly result in lengthy judicial battles. The judiciary will be overburdened as a result of this.
The guidelines will allow for government action on a case-by-case basis. For example, back-to-back flash sales that limit buyer choice are disallowed. Whether a sale is in violation of these terms is still up for interpretation by regulators.
In contrast to Commerce and Industry Ministry regulations, the new draught guidelines provide that no related parties or associated businesses should be listed as marketplace sellers. The Commerce Ministry, on the other hand, compelled corporations like Amazon to reduce their stake in preferred vendors to 24 percent. This was done to give sellers a more level playing field. As a result, the regulations are muddled.
Other concerns: It’s unclear how identifying items by their “country of origin” will benefit domestic manufacturers unless it’s assumed that consumers are motivated by patriotism rather than value.
This proposal, unlike the last set of rules produced by the trade ministry, makes no distinction between international and domestic e-commerce.
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Conclusion
Multiple ministries controlling the e-commerce sector have created misunderstandings, which the government must clear up. As a result, the government must establish a single nodal agency and streamline online marketplace regulations. E-commerce enterprises will continue to construct new structures and build convoluted supply chains to avoid the current standard until the government comes up with final legislation to manage the sector.
The new rules will merely exacerbate existing issues while potentially assisting some unproductive rivals. As a result, the new drought rules must be reviewed again.
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