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PARLIAMENTARY PANEL: DEFINE UNFAIR TRADE PRACTICE FOR E-COM

Context:

A parliamentary panel, in its report on ‘The Consumer Protection (E-Commerce) Rules, 2020, has recommended that the government should offer a more clear-cut definition of what constitutes ‘unfair’ trade practice, along with practical legal remedy to tackle the issue.

Relevance:

GS-II: Polity and Governance (Government Policies & I Interventions for better Transparency & Accountability in Governance)

Dimensions of the Article:

  1. What is Electronic Commerce (e-commerce)?
  2. About the Consumer Protection (E-Commerce) Rules, 2020
  3. Provisions of the new E-Commerce Rules
  4. What the new rules seek to achieve?
  5. Issues with the Consumer Protection (E-Commerce) Rules, 2020
  6. Lack of clarity in the rules:

What is Electronic Commerce (e-commerce)?

  • Electronic commerce or e-commerce (sometimes written as eCommerce) is a business model that lets firms and individuals buy and sell things over the internet.
  • E-commerce, which can be conducted over computers, tablets, or smartphones may be thought of like a digital version of mail-order catalog shopping.
  • Nearly every imaginable product and service is available through e-commerce transactions, including books, music, plane tickets, and financial services such as stock investing and online banking.

About the Consumer Protection (E-Commerce) Rules, 2020

The E-Commerce Rules issued by the Ministry of Consumer Affairs, Food and Public Distribution, under the Consumer Protection Act, 2019, apply to:

  1. all goods/services bought or sold over digital or electronic network, including digital products,
  2. marketplace e-commerce entities (Marketplace Entities) and inventory e-commerce entities (Inventory Entities),
  3. all e-commerce retail, including multi-channel single brand retailers and single brand retailers in single and multiple formats such as single brand retailers who use multiple distribution channels such as offline retails stores in addition to e-commerce, and
  4. all forms of unfair trade practices (as defined under the CPA 2019) across all models of e-commerce.

The E-Commerce Rules also apply to entities which are not established in India but systematically offer goods or services to consumers in India.

  • The E-Commerce Rules specifically recognize and govern entities that are not established in India but systematically offer goods or services to consumers in India such as offshore online marketplaces.
  • In simple words, the Consumer Protection (E-Commerce) Rules, 2020 regulates all commercial transactions sold over a digital or electronic network.

Provisions of the new E-Commerce Rules

  • The Consumer Protection (E-commerce) Rules, 2020 are mandatory and are not advisories.
  • E-commerce entities are required to provide information to consumers, relating to return, refund, exchange, warranty and guarantee, delivery and shipment, modes of payment, grievance redressal mechanism, payment methods, security of payment methods, charge-back options and country of origin.
  • A manufacturer or product service provider or product seller will be held responsible to compensate for injury or damage caused by defective product or deficiency in services

What the new rules seek to achieve?

  • The country-of-origin requirement is significant as India and several other countries are currently re-negotiating their free trade agreements.
  • E-com rules prohibit unfair trade practices by entities and sellers on marketplaces and manipulation of price.
  • The entities are prohibited from manipulating the price of the goods or services to gain unreasonable profit by imposing unjustified price or charges on consumers.
  • The new rules also appear to be a move to ensure regulatory and enforcement control over foreign entities who offer goods and services in India and is in line with a similar classification under the Personal Data Protection Bill, 2019, which extends its applicability to foreign entities who carry on business in India.

Issues with the Consumer Protection (E-Commerce) Rules, 2020

  • It remains unclear as to what would constitute price manipulation.
  • It also remains unclear how the e-commerce entities and sellers are expected to navigate these roadblocks without falling foul of such provisions.
  • Both the marketplace entity and sellers are now required to set up a grievance redressal mechanism, small businesses may not be in a position to comply.
  • The rules also prohibit an e-commerce entity from levying a charge for cancellation post confirmation.
  • While the provisions may be intended as safeguards that ensure a level-playing field, some of these conditions are impractical.

Applying identical rules does not convey a business-friendly approach.

Lack of clarity in the rules:

  • There is a lack of clarity regarding what activities may be classified as resulting in ‘unreasonable’ or ‘unjustified’ profits or ‘unfair’ practices.
  • This lack of clarity may result in consumer protection authorities scrutinizing pricing mechanisms used by e-commerce entities.
  • Data-driven pricing may also become an issue when it is used to provide offers or discounts to specific classes of consumers.
  • There is no clarity on what a ‘reasonable basis’ for such a classification may be, and this may lead to uncertainty with respect to the use of algorithms to customize offers or target specific consumers.

-Source: The Hindu

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October 2022
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