From UPSC perspective, the following things are important :
Prelims level : Inventory model vs marketplace model
Mains level : Paper 3- Issues with regulation of e-commerce
The proposed Consumer Protection (E-Commerce) Rules, 2020, have been drafted ostensibly in the name of the consumer. The rules are driven more by the desire to shield the traditional brick-and-mortar stores, and handicap e-commerce firms, especially the foreign ones.
Issues with the provisions of draft Consumer Protection (E-Commerce) Rules, 2020
1) Fall-back liability clause is unfair for those operating through marketplace model
- Under this provision, e-commerce entities will be liable in case suppliers on the platform fail to deliver the goods to consumers, causing them a loss.
- E-commerce firms in India operate through either the inventory model or the marketplace model.
- As FDI is permitted only in the marketplace model.
- Under the marketplace model, e-commerce platforms don’t hold inventory, but simply connect buyers and sellers.
- Foreign players typically operate through this model.
- Considering that these platforms exercise little or no control over the inventory under this model, how can they be held liable for the sellers’ actions.
2) Identifying goods based on country of origin and providing fair opportunity to domestic sellers
- The draft rules also require e-commerce platforms to identify goods based on their country of origin.
- And when goods are being viewed for purchase by consumers, the rules also mandate platforms to provide suggestions to ensure “fair opportunity” for domestic sellers.
- This raises the question as to why the Make in India campaign is being pushed through the Consumer Protection Act.
- Surely, if domestic manufacturers are competitive, consumers will automatically gravitate towards them.
- Interests of consumers, not domestic manufacturers, should be at the core of the consumer protection framework.
3) Overlapping/competing jurisdictions
- Data protection: The draft rules have sought to safeguard consumer data by restraining e-commerce firms from sharing consumer data without consent.
- But the data protection should be governed by the provisions under the Personal Data Protection Bill and not the Consumer Protection Act.
- Considering the graded approach that is likely to be adopted under the Data Protection Bill, an e-commerce user’s data could be classified as per its vulnerability and be left under the jurisdiction of the data protection authority.
- Dominant position: The rules also state that e-commerce entities are prohibited from abusing their dominant positions in the market.
- The “abuse of dominant position” has been given the same meaning as that prescribed under Section 4 of the Competition Act, 2002.
- This will open the scope for new consumer protection authority to enter into issues of abuse of dominant position — the domain of the Competition Commission of India.
Consider the question “Over-regulation tends to curb competition and create monopolies instead of ensuring its holistic growth dovetailed with fair competition. In light of this, examine the issues with the draft Consumer Protection (E-Commerce) Rules, 2020?”
The lines of demarcation that have been drawn up in the retail landscape — single brand vs multi-brand, online vs offline, domestic vs foreign — serve only to protect powerful vested interests, not benefit the consumer as is often proclaimed.