From UPSC perspective, the following things are important :
Prelims level : Types of e-commerce model
Mains level : Paper 3- Rules to regulate the e-commerce
The article analyses the various restrictions under The Consumer Protection (E-Commerce) Rules, 2020 to regulate all commercial transactions and issues with such restrictions.
- The recent rules relating to e-commerce, issued by the ministry of consumer affairs, food and public distribution, under the Consumer Protection Act, 2019 needs some changes.
What the recent rules specify
- The Consumer Protection (E-Commerce) Rules, 2020, notified on July 23, regulate all commercial transactions sold over a digital or electronic network.
- The e-com rules currently recognise two e-commerce business models, namely, marketplace model and inventory-based model.
- The rules have separate specified provisions for marketplace- and inventory-based entities.
- The e-com rules require that all information on the return, refund, exchange, warranty and guarantee, delivery and shipment of the goods or services being sold, including their country of origin, be provided on the platform.
- Such details enable consumers to make an informed decision.
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.
Issues with the rules
- It remains unclear as to what would constitute price manipulation.
- It also remain 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.
- The Foreign Exchange Management (Non-debt Instruments) Rules, 2019 currently recognise the marketplace and inventory model.
- It permit 100% FDI under the automatic route to marketplace entities as also to those engaged in single-brand retail.
- Foreign investments, up to 51%, are permitted in multi-brand retail with prior government approval.
- As per the non-debt rules, entities engaged in single-brand retail are permitted to undertake retail trading through e-commerce.
- However, single-brand retail trading through e-commerce has to open a brick-and-mortar store within two years from the date it commences online retail.
- Retail trading, in any form, by means of e-commerce, is not permissible for entities engaged in inventory-based multi-brand retail trading and having foreign investment.
Consider the question “What are the objectives sought to be achieved through The Consumer Protection (E-Commerce) Rules, 2020 to regulate commercial transactions? What are the issues with the rules?”
The commercial sector is anxious for India to consider relaxing some of these requirements, or extending the time period for compliance, given that brick-and-mortar operations may not be possible in the foreseeable future.
Back2Basics: Invenetory model and marketplace model
- Marketplace model of e-commerce means providing of an information technology platform by an e-commerce entity on a digital and electronic network to act as a facilitator between buyer and seller.
- The main feature of the market place model is that the e-commerce firm like flipkart, snapdeal, amazon etc. will be providing a platform for customers to interact with a selected number of sellers.
- Inventory model of ecommerce means an ecommerce activity where inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly.
- The main feature of inventory model is that the customer buys the product from the ecommerce firm.