e-Commerce: The New Boom

e-Commerce: The New Boom

Open Network for Digital Commerce could disrupt India’s e-commerce space

Note4Students

From UPSC perspective, the following things are important :

Prelims level : ONDC

Mains level : Paper 3- Advantages and challenges in the Open Network for Digital Commerce project

Context

The Department for Promotion of Industry and Internal Trade (DPIIT) recently issued orders appointing an advisory committee for its Open Network for Digital Commerce (ONDC) project.

About ONDC project

  • The Open Network for Digital Commerce (ONDC) project aims to make e-commerce processes open-source.
  • In simple terms, it aims at creating a platform that can be utilised by all online retailers.
  • This is another effort by the government to facilitate the creation of shared digital infrastructure, as it has previously done for identity (Aadhaar) and payments (Unified Payments Interface).
  • It will digitise e-commerce value chains, standardise operations, promote inclusion of suppliers, and derive efficiencies in logistics.

What are its advantages?

  • Level playing field: When done well, this approach can level the playing field and create value for users. 
  • Curb monopoly: The market is dominated by a few players who are facing investigations for unfair trade practices in many countries.
  • Prevent market failure: The sector is characterised by many small players who individually do not have the muscle to have an equitable bargain with e-commerce companies.
  • Economists call this a “market failure”, and it presents a legitimate case for intervention.

The three layers of an open digital ecosystem and their conceptual framework for adoption and safeguards

1) Tech layer

  • The “tech layer” should be designed for minimalism and decentralisation.
  • The government should restrict its role to facilitating standards and protocols that provide open access, and in getting them adopted organically.
  • Building an entire tech platform should happen only if a standards-based approach doesn’t suffice.
  • If built, the platform should be built on “privacy by design” principles.
  • It should collect minimal amounts of data (especially personal data) and store it in a decentralised manner.
  • Tools like blockchain could be used to build technical safeguards that cannot be overridden without active consent.

2) Governance layer

  • Avoid excessive government intervention: The “governance layer” around this should allay business fears of excessive state intervention in e-commerce.
  • Legal provision: Any deployment of standards or tech should be accompanied by law or regulation that lays out the scope of the project.
  • Independent regulator for personal data: If collection of any personal data is required, passing the data protection bill and creating an independent regulator should be a precondition.
  • Handling by independent society: To assure the industry of fairness, the government could hand over the stewardship of the standards or platform to an independent society or non-profit.

3) Community layer

  • A community layer can foster a truly inclusive and participatory process.
  • This may be achieved by making civil society and the public active contributors and seeking wide feedback on drafts of the proposal.
  • Once the framework is implemented, ensuring quick and time-bound redressal of grievances will help build trust in the system.

Concerns with government creating shared digital infrastructure

  • This approach also comes with risks and we should tread with caution.
  • In general, governments should intervene in markets only when there is a clearly identifiable market failure or massive societal benefits from creating shared infrastructure.

Way forward

  • The government’s championing of open-source technology for digital commerce is commendable.
  • It should also push the envelope on the other principles of the open-source movement — transparency, collaboration, release early and often, inclusive meritocracy, and community.
  • Even if we do all things right, an infrastructure-led approach may not be sufficient.
  • Therefore, we need to supplement infrastructure with tightly-tailored regulation.
  • We need to explore the concept of interoperability, that is, mandating that private digital platforms like e-commerce firms enable their users and suppliers to solicit business on other platforms.
  • To drive the adoption of an open e-commerce platform in a sector with entrenched incumbents we need to create “reference applications”, and financial or non-financial incentives.
  • Useful learnings can be drawn from the adoption of UPI: The government supported the rollout of BHIM as a reference app, and offered incentives.

Consider the question “How the Open Network for Digital Commerce project can help deal with the issues with the e-commerce sector? Suggest the approach the project should adopt to make it a success.”

Conclusion

It is timely that India is exploring innovative ways to bridge the gaps in e-commerce markets. But the boldness of this vision must be matched by the thoughtfulness of the approach.


Back2Basics: What is ‘Privacy by Design?

  • Privacy by design is a concept that integrates privacy into the creation and operation of new devices, IT systems, networked infrastructure, and even corporate policies.
  • Developing and integrating privacy solutions in the early phases of a project identifies any potential problems at an early stage to prevent them in the long run.

e-Commerce: The New Boom

The proposed e-commerce rules shield vested interests

Note4Students

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

Context

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?”

Conclusion

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.

e-Commerce: The New Boom

A regulatory hurdles could stifle e-commerce

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Regulation of e-commerce sector

The article highlights the risk of stifling the e-commerce sector due to the government’s propensity for its regulation to protect the local traders.

Efforts to shield local retailers

  • India began to open up its economy three decades ago, but efforts to shield local retailers resulted in a retail sector fraught with a thicket of rules.
  • With the web’s reach expanding rapidly, online retail is expected to grab a fast-widening slice of a pie placed at above $880 billion last year and projected at $1.3 trillion in 2024.
  • Such a huge opportunity has set the stage for a grand e-com confrontation, with our two biggest business houses gearing up to take on a duopoly of US-based Amazon and Walmart-owned Flipkart.
  • The more fiercely e-com is contested, the tighter this sector’s straps seem to get.

What are the new regulations?

  • The Centre put out proposals to tighten e-com regulations for consumer protection.
  • E-com firms must appoint resident officers to address grievances and monitor rule-compliance, and then be ready to share information sought by authorities within 72 hours.
  • For the sake of “free and fair competition”, they must label all wares on their websites by country-of-origin, offer local alternatives, keep search results unbiased, not sell anything to anyone registered as a ‘seller’ with them, not conduct deep-discount flash sales of cherry-picked products.
  • Restriction on aiding associated enterprises with any helpful data gleaned by their algorithms.
  • As another measure to assure small enterprises an even field, they must also ensure that their logistical systems support all sellers in the same category equally.
  • As it happens, this attempt to straitjacket e-com platforms coincides with an antitrust probe of ‘unfair practices’ ascribed to Amazon and Flipkart.

Issues with regulations

  • Some of these sound too vague and subjective to adopt.
  • Even if clear criteria are specified for their adoption and they actually serve to curtail brand favouritism, they would leave e-com majors with too little autonomy to devise strategies of service differentiation for a competitive edge.
  • The perception of e-com majors being bullies, however, does not seem very widely shared among their customers, few of whom complain of either insufficient rivalry or choice deprivation online. 

Conclusion

What e-com users are now at risk of suffering, though, is a hobbled industry. If all e-com websites are forced into a statist mould meant for generic market platforms, these companies could lose their ability to set themselves apart, outperform rivals and serve the market’s ultimate cause.

e-Commerce: The New Boom

[pib] Amendments to the Consumer Protection (E-commerce) Rules, 2020

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Consumer Protection (E-commerce) Rules, 2020

Mains level : Not Much

For the purposes of preventing unfair trade practices in e-commerce, the Central Government had notified the Consumer Protection (E-Commerce) Rules, 2020 with effect from 23 July 2020.

Consumer Protection (E-commerce) Rules, 2020

The proposed amendments aim to bring transparency in the e-commerce platforms and further strengthen the regulatory regime to curb the prevalent unfair trade practices.

The proposed amendments are as follows:

(a) Chief Compliance Officer

  • To ensure compliance of the rules, the appointment of Chief Compliance Officer, a nodal contact person for 24×7 coordination with law enforcement agencies, officers to ensure compliance to their orders and Resident Grievance Officer for redressing of the grievances of the consumers on the e-commerce platform, has been proposed.
  • This would ensure effective compliance with the provisions of the Act and Rules and also strengthen the grievance redressal mechanism on e-commerce entities.

(b) Registration of e-coms

  • Putting in place a framework for registration of every e-commerce entity with the DPIIT for allotment of a registration number which shall be displayed prominently on the website as well as invoice of every order placed by the e-commerce entity.
  • This would help create a database of genuine e-commerce entities and ensure that the consumers are able to verify the genuineness of an e-commerce entity before transacting through their platform.

(c) Prohibition of miss-selling

  • The goods and services entities selling goods or services by deliberate misrepresentation of information have been prohibited.

(d) Expiry dates

  • This would ensure that consumers are aware of the expiry date of the products they are buying on the e-commerce platform.
  • It compels all sellers on marketplace e-commerce entities and all inventory e-commerce entities to provide the best before or use before the date to enable consumers to make an informed purchase decision.

(e) Fair and equal treatment

  • It has been provided that where an e-commerce entity offers imported goods or services, it shall incorporate a filter mechanism to identify goods based on country of origin and suggest alternatives to ensure fair opportunity to domestic goods.

(f) Fall-back liability

  • This would ensure that consumers are not adversely affected in the event where a seller fails to deliver the goods or services due to negligent conduct by such seller in fulfilling the duties and liabilities.

Why need such an amendment?

It was observed that there was an evident lack of regulatory oversight in e-commerce which required some urgent action.

  • Manipulating search results: Moreover, the rapid growth of e-commerce platforms has also brought into the purview the unfair trade practices of the marketplace e-commerce entities engaging in manipulating search result to promote certain sellers.
  • Preferential treatment: This includes preferential treatment to some sellers, indirectly operating the sellers on their platform, impinging the free choice of consumers, selling goods close to expiration etc.
  • Flash sales: Certain e-commerce entities are engaging in limiting consumer choice by indulging in “back to back” or “flash” sales. This prevents a level playing field and ultimately limits customer choice and increases prices.

Check this PYQ from CSP 2012:

Q. With reference to consumer’s rights / privileges under the provision of law in India which of the following statements correct?

  1. Consumer are empowered to take samples for food testing
  2. When consumer fi les a complaint in any consumer forum, no fee is required to be paid.
  3. In case of death of consumer, his/her legal heir can file a complaint in the consumer forum on his/her behalf.

Select the correct answer using the codes given below:

(a) Only 1

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 3

e-Commerce: The New Boom

Towards digital Atmanirbharta

Note4Students

From UPSC perspective, the following things are important :

Prelims level : FDI restrictions on e-commerce

Mains level : Paper 3- FDI in e-commerce

We need a comprehensive FDI policy on trade to take care of the needs of all the stakeholders. The article highlights the issues faced by the e-commerce sector in relation to the FDI policy.

E-commerce as an enabler

  • With their efficient, quick and reliable logistics network, e-commerce platforms have nudged consumer behaviour patterns from an offline to an online shopping mode.
  • During the pandemic, e-commerce emerged as an enabler in ensuring the availability of essentials to the masses.
  • E-commerce is going to be increasingly important in the future of retail shopping in India and the world over.
  • It is estimated to become a $100 billion industry by 2024, which was at $38.5 billion until 2017.
  •  The trend will continue to grow with the government’s impetus on digital literacy, also supported by the increasing penetration of internet and smartphone users.
  • However, what the sector lacks is the bandwidth of operation.

Issues with FDI policy for e-commerce

  • In addition to the FDI Policy/FEMA, other laws such as IT Act, Consumer Protection Act, and those pertaining to IP and copyright, regulate the e-commerce sector in India.
  • Of these, the FDI policy plays an important role as massive investments are needed to build and strengthen the entire ecosystem of the e-commerce sector in the country.
  • FDI policies on trade have evolved over time as policy-making was done from time to time mostly responding to the needs of the market coupled with political feasibility.
  • Thus, FDI policy in cash and carry or wholesale B2B operations is different (100 per cent FDI allowed under automatic route) compared to highly restrictive FDI policy on retail B2C trade.
  • Similarly, an artificial distinction was created between single-brand retail and multi-brand retail as opposition to multi-brand retail was strong: 100 per cent FDI is allowed under automatic route in single-brand retail whereas FDI regime in multi-brand retail is quite restricted.
  • E-commerce is not allowed under FDI policy in multi-brand retail.
  • The FDI policy on e-commerce is quite different as e-commerce platforms are allowed to work only as a marketplace with permission to provide certain specified services to sellers and buyers.
  • However, FDI is allowed in the inventory model when these platforms sell fresh farm produce made in India.
  • There is no specific policy on FDI in e-commerce for exports.

Need for comprehensive FDI policy for trade

  • The rapid expansion of the retail, organised retail as well e-commerce sector in India in the coming years will create huge opportunities for all.
  • The policies that have evolved over time need a relook to balance the interests of all in a win-win policy.
  • Today, our small businesses employing an exceptionally large number of workers need to use e-commerce more and more to augment their sales.
  • E-commerce provides them with the means to access a much bigger market without having to overly invest in marketing. This should include more and more foreign markets.
  • Consumers have benefited enormously from e-commerce.
  • Also, the harmonious working of online and offline retailers is essential.
  • With GST and the drive towards digitisation, more small traders need to be enabled to make the transition and take advantage of the expanding opportunities.

Consider the question “Why e-commerce sector is important for the economy of a country? What are the issues the sector faces in India?” 

Conclusion

Public policy on e-commerce needs to place an equal premium on the views and interests of all the stakeholders in the ecosystem to strengthen our domestic businesses and create many more jobs and livelihood opportunities in the country to fulfil the dreams of Atmanirbhar Bharat.

e-Commerce: The New Boom

E-commerce policy is needed for speedy, inclusive growth

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- Significance of e-commerce sector for India

The article highlights the untapped potential of the e-commerce sector in the transformation of the Indian economy and suggests factors to take into account in the new e-commerce policy.

How pandemic contributed to the growth of e-commerce

  • A celebrated McKinsey study has revealed that we have covered a ‘decade in days’ in the adoption of digital during the pandemic.
  • Behavioural changes have been witnessed in most areas like work, learning, health, travel, entertainment, etc.
  • But the biggest surge has been in e-commerce, both in goods and services.

Significance of the sector for India

  • E-commerce is one of India’s fastest-growing sectors, for attracting FDI and creating jobs, and providing a pan-India market for lakhs of SMEs, and facilitating exports.
  • India has a vibrant retail sector, bubbling with energy and a bright future.
  • E-commerce can rope in lakhs of MSMEs in cross-border trade and multiply turnover and revenues enormously.
  • Its role in facilitation of exports with linkages and access to overseas markets can also help inject competitiveness in our products and creating a lot of jobs and market opportunities, adding to inclusive growth.

Issues faced by the sector

  • The digital interface during e-commerce processes with multiple agencies has resulted in a plethora of compliances.
  • These compliances include Income Tax Act 1961, Information Technology Act 2000, Consumer Protection Act 2019, FEMA Act 2000, Competition Act 2002, Companies Act 2013, Anti-Piracy Law, GSTN, DGFT, etc.
  • In addition, handling, generation and protection of humongous data is a major issue under data protection laws.
  • At times, there are requirements of compliances with various local and state laws, and during exports, adherence to foreign laws, many of which could be quite complex and rigorous.

E-commerce policy to aid Inclusive growth

  • Inclusive growth being an important objective of the proposed e-commerce/FDI policy, it should recognise and support new business models in both product and service segments.
  • The policy should be aimed at improving consumer experience and providing gainful employment to regular and gig workers with improved earnings.
  • India, in fact, is the first country to extend protections to workers including the new-age gig and platform workers, which is being viewed with interest globally.
  • With the passage of the Code on Social Security 2020, policymakers have focused on financial and social security associated with employment to contemporary socio-economic realities.
  • The role of platform workers amidst the pandemic has presented a strong case to attribute a more robust responsibility to platform aggregator companies and the State.
  • This has cemented their role as public infrastructures who also sustain demand-driven aggregators and e-commerce platforms.
  • This role of the platform workers may help in higher productivity and more sustainable employment, when many of them could potentially become mini-entrepreneurs.
  • This, however, would need to be facilitated by concerned public and private institutions as also the multiple regulators in the e-commerce ecosystem.
  • In an online services market place and to provide full support to regular and gig professionals rendering services on the platform, it must be imperative on the service platform to build their capacity through training, technology and access to high-quality consumables and tools.

Consider the question “Examine the role e-commerce can play in India’s pursuit of inclusive growth? What are the issues faced by the sector in India?” 

Conclusion

We are in for exciting times, as we enter this decade, rightly called the ‘Techade’; 2020 has accelerated technology infusion in all segments of life and activity. The world is looking at India with expectations and we owe it to our nation.


Source: https://www.financialexpress.com/opinion/e-commerce-policy-needed-for-speedy-inclusive-growth/2226729/

e-Commerce: The New Boom

How e-commerce marketplaces can drive MSME makeover

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not much

Mains level : Paper 3- E-commerce to aid MSMEs

Facilitating manufacturing through MSMEs

  • A significant major contributor to the India growth story is going to be manufacturing.
  • Manufacturing by small units, cottage units and MSMEs, if effectively facilitated, will be the game changer.
  • For MSMEs to be sustainable and effective, the need of the hour is not just better automation but also more channels for accessing greater markets and opportunities to become a part of the national and global supply chains.
  • E-commerce marketplaces are today the best possible enablers for this transformation at minimal cost, innovation and investment.

Need to invest in digital transformation and technology

  • China captured the world market through the traditional method of having guilds and business centres.
  • Today, digital empowerment is the key differentiator.
  • Without that, our MSMEs will not be future ready.
  • E-commerce allows products even from hinterlands to get to the national market, thus, providing opportunities to artisans and small sellers from Tier-2/3 towns to sell online to customers beyond their local catchment.
  • By investing in supply chains, the e-commerce sector provides opportunities for MSMEs to partner them in supply and delivery networks.
  • Start-ups and young brands are also finding opportunities to build national brands and even going global.
  • This leads to additional income generation through multiple livelihood opportunities.
  • Many offline stores are also adopting e-commerce to leverage these opportunities and the traditional and modern retail models are moving towards more offline and online collaborations.

Challenges in building robust e-commerce sector

1) No GST threshold exemption

  • Sellers on e-commerce marketplaces do not get advantage of GST threshold exemption (of Rs 40 lakh) for intra–state supplies.
  • Online suppliers have to “compulsorily register” even though their turnover is low.
  • Offline sellers enjoy this exemption up to the turnover threshold of Rs. 40 lakh.

2) Principal place of business issue

  • Today, the sellers, as in offline, are required to have a physical PPoB which, given the nature of e-commerce, is not practical.
  • The government would do well to simplify the “Principal Place of Business” (PPoB) requirement especially for online sellers by making it digital.
  • Replace physical PPoB with Place of Communication.
  • Eliminating the need for state specific physical PPoB requirement will facilitate sellers to get state-level GST with a single national place of business.

3) Support MSMEs to understand e-commerce

  • MSMEs should be provided with handholding support to understand how e-commerce functions.
  • The government can collaborate with e-commerce entities to leverage their expertise and scale to create special on-boarding programmes.
  • These can be provided by state governments.
  • There is need to examine the existing schemes and benefits for MSMEs, which were formulated with an offline, physical market in mind.

4) Build infrastructure

  • There is a need to build infrastructure — both physical and digital infrastructure is important for digital transformation.
  • The road and telecom network will facilitate access to the consumer and enable the seller from remote areas to enter the larger national market as well as the export market.
  • A robust logistic network and warehouse chains created by e-commerce platforms enable similar access and reach.
  • The National Logistics Policy should focus on e-commerce sector needs.

5) Skilling policies for e-commerce sector

  • Dovetail the skilling policy and programmes with the requirements of the e-commerce sector to meet future demand of the sector.

6) Steps to increase export via e-commerce

  • We need to take specific steps to increase exports via e-commerce.
  • There is a need to identify products that have potential for the export market, connect e-commerce with export-oriented manufacturing clusters, encourage tie-ups with sector-specific export promotion councils, leverage existing SEZs to create e-commerce export zones.
  • India Posts can play a significant role by creating e-commerce specific small parcel solutions at competitive rates, building a parcel tracking system, and partnering with foreign post offices to enable customs clearances.

Way forward

  • There is an urgent need to create a consolidated policy framework for e-commerce exports.
  • Policies like the upcoming Foreign Trade Policy needs to be fully leveraged.
  • The Foreign Trade Policy should identify areas and include e-commerce export specific provisions in the revised policy that comes into effect in April this year.

Consider the question “E-commerce marketplaces can help MSMEs in accessing greater markets and provide opportunities to become a part of the national and global supply chains. In light of this, examine the opportunities provided by e-commerce also mention the challenge the sector faces in India.” 

Conclusion

By facilitating and supporting e-commerce, we can leverage the potential of MSMEs in manufacturing which could help in the economic growth of the country by creating job opportunities.

e-Commerce: The New Boom

Draft E-Commerce Policy

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not Much

Mains level : E-commerce regulation in India

The Department for Promotion of Industry and Internal Trade (DPIIT) will soon come out with a common acceptable draft e-commerce policy.

Earlier policy

  • The previous draft in July last year had proposed a regulator, an e-commerce law, periodic audit of companies that store or mirror Indian users’ data overseas.
  • The latest draft calls for streamlining of regulatory processes to ease the burden of compliance for activities related to e-commerce and regulations for data that will provide for sharing mechanism.

What are the provisions of the new law?

Data Usage

  • According to a revised draft, the government would lay down principles for the usage of data for industrial development, where such norms do not already exist.
  • They aim to put in place safeguards to prevent misuse and access of data by unauthorized persons.
  • Such safeguards may include regulating the cross-border flow of data pertaining to Indians and transactions taking place in India and the requirement of adequacy audits to be carried out by Indian firms.
  • As per the recent draft policy, violation of safeguards shall be viewed seriously and attract heavy penalties.

Regulation, exports

  • Conformity assessment procedures will be put in place to verify that goods and services sold on e-commerce platforms meet required standards and technical regulations.
  • The government shall collect information from e-commerce platforms to aid it in making necessary decisions.
  • In order to ensure that e-commerce is not used to defraud customers, registration with an authority identified by the Government shall be mandatory.
  • The policy shall bring e-commerce exports on par with non-e-commerce exports by enabling online grant of drawbacks, advance authorization and GST refund.

Consumer protection

  • As per the draft, e-commerce operators must ensure to bring out clear and transparent policies on discounts, including the basis of discount rates funded by platforms.
  • Such a move aims to ensure fair and equal treatment.
  • It said consumers have a right to be made aware of all relevant details about the goods and services offered for sale including country of origin, value addition in India etc.
  • In case the seller fails to establish the genuineness of his products within a reasonable time frame, the e-commerce platform shall delist the seller.

e-Commerce: The New Boom

E-commerce rules 2020

Note4Students

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.

Context

  • 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.

Investment restrictions

  • 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?”

Conclusion

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.


Source-

https://www.financialexpress.com/opinion/e-commerce-rules-a-one-size-fits-all-approach-some-need-to-be-relaxed/2071953/


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.

e-Commerce: The New Boom

Disintermediation from E-commerce

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Disintermediation

Mains level : Paper 3- Duopoly in e-commerce in India

 E-commerce was expected to provide the level playing field. However, Indian e-commerce has been experiencing the duopoly and new entrant faces several difficulties.

What is disintermediation

  • The emergence of the internet was seen as a tool for marketers to reach consumers directly.
  • The term disintermediation meant taking intermediaries out of the loop.
  •  The aim was efficiency.
  • It was hoped that without local stockists and distributors in between, retail demand could be fulfilled at lower cost.
  • After all, anyone could put up a website and woo traffic.

What is the issue?

  • Today, the gains of online market addressal have converged into the hands of a few big winners in a winner-takes-all scenario.
  • Getting an app onto handsets often involves a toll paid to e-gatekeepers.
  • These apps created an entry barrier for the new entrants.
  • So far, single-brand apps have mostly failed, regardless of price baits.
  • After all, it is hard to beat the convenience of a single-touch window that lets shoppers load e-carts with all their needs.

Conclusion

E-com was once about snipping out distribution networks. With market access cornered by pioneers, now others want to get past these intermediaries. Only blockbuster apps can do it.

e-Commerce: The New Boom

‘BharatMarket’: An e-commerce platform for retail traders

Note4Students

From UPSC perspective, the following things are important :

Prelims level : BharatMarket

Mains level : Not Much

Traders’ body Confederation of All India Traders (CAIT) said that it will soon launch a national e-commerce marketplace ‘BharatMarket’ for all retail traders in collaboration with several technology partners.

A prelims question with tricky options to throw you off track-

The BharatMarket initiative recently seen in news is-

A. Trade of Bharat-22 Exchange Traded Fund (ETF)

B. Platform for farmer to sell their produce

C. Initiative in power sector

D. e-commerce platform

Here you have to play safe…..

BharatMarket

  • The marketplace will integrate the capabilities of various technology companies to provide end-to-end services in the logistics and supply chains from manufacturers to end consumers, including deliveries at home.
  • It will include nationwide participation by retailers and aims to bring 95 per cent of retail traders onboard the platform, who would exclusively run the portal.
  • It has been already started as a pilot project, initially with a limited number of essential commodities, in six cities — Prayagraj, Gorakhpur, Varanasi, Lucknow, Kanpur and Bengaluru.
  • This will be an effective way to get essential commodities to consumers during the lockdown period and within containment zones.

e-Commerce: The New Boom

Project Zero

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Project Zero

Mains level : Regulating e-commerce in India

E-com giant Amazon has announced to bring “Project Zero” to India.

Project Zero

  • “Project Zero” introduces additional proactive mechanisms and powerful tools to identify, block and remove counterfeits goods on Amazon website.
  • It aims to ensure that customers receive authentic goods when shopping on Amazon.
  • Over 7,000 brands have already enrolled in Project Zero across US, Europe and Japan.
  • A number of Indian brands participated in a pilot to help the company test the experience in India.

Functioning

  • It combines Amazon’s advanced technology and innovation with the sophisticated knowledge that brands have of their own intellectual property and how best to detect counterfeits of their products.
  • It does so through three powerful tools: Automated protections, self-service counterfeit removal tool and product serialization.
  • Product serialization is enabled by a unique code that brands apply within their manufacturing and packaging process.
  • It allows Amazon to individually scan and confirm the authenticity of every single purchase of a brand’s enrolled products through Amazon’s marketplace.

e-Commerce: The New Boom

[op-ed snap] The competition law and data advantage conundrum

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Nothing much

Mains level : Web platforms and role of competition

CONTEXT

Competition law is struggling to come to grips with the internet-based platforms who pursue growth over profits. 

How web platforms work

  1. They operate on the basis that long-term customer lock-in is more important than the short-term benefits of quarterly profits. Thus they keep the prices very low so as to maximize customer growth.
  2. The price of a product or service is “predatory” or not depends on whether it is being sold below cost.
  3. Internet businesses offer unprecedented economies of scale and savings on overheads. So it is difficult to establish whether their price is predatory.
  4. Some internet platforms are fast becoming part of the critical infrastructure of the internet.
  5. Due to this, platform businesses have access to unprecedented volumes of data in excess of what their competitors will ever possess and can understand consumer behavior.
  6. Thus they can tailor their services more accurately than before and offer an unprecedented quality of user experience.
  7. They understand what sells and can take advantage of the feedback loops based on rankings, user reviews, and shopping carts. This data gives them an advantage over traditional advertisers as to who they should aim their advertisements. 
  8. It is this data advantage that internet platforms use to establish authority over their competition.
  9. As data platforms acquire more and more customers, their understanding of user behavior improves exponentially, making it possible for them to deliver services more directly relevant to the needs of their individual customers. 

Competition regulation

  1. If the purpose of competition regulation is to ensure diversity of market access and prevent the concentration of market power in the hands of a few, regulators should do something to address the distortion brought by internet platforms. 
  2. Restricting the manner in which digital platforms function will end up denying consumers these advantages.
  3. Many smaller businesses have rolled themselves into larger platforms to leverage the scale and data advantage of the combined business. 
  4. This consolidation also progressively robs customers of choice and users will eventually have no option but to use one single dominant platform for all their needs.

If we want to regulate competition on the internet, we will need to come up with something new. The remedies that have served us so well for all these years are just not useful in the same way when it comes to internet platforms.

e-Commerce: The New Boom

Government unveils draft e-com norms

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Not Much

Mains level : Regulating e-commerce in India

  • To protect the interest of online shoppers, the Department of Consumer Affairs has released draft guidelines on e-commerce that state that an e-commerce entity cannot directly or indirectly influence the price of the goods or services.

E-commerce guidelines for consumer protection 2019

  • These are issued as guiding principles for e-commerce business for preventing fraud, unfair trade practices and protecting the legitimate rights and interests of consumers.
  • These guidelines apply to business-to-consumer e-commerce, including goods and services.
  • It added that every e-commerce entity needs to publish the name and contact details of the grievance officer on their website along with the mechanism by which users can lodge their complaints.
  • As per the draft, an e-commerce firm cannot falsely represent themselves as consumers or post reviews about goods and services in their name.
  • The draft guidelines adds that e-commerce firms need to ensure that personally identifiable information of customers is protected, is open for stakeholder comments for 45 days or till September 16, 2019.

Mandatory terms

  • Besides, it proposed to make it mandatory for firms to display terms of contract with the seller relating to return, refund, exchange, warranty/guarantee, delivery/shipment, mode of payments and grievance redressal mechanism to enable consumers to make informed decisions.
  • The draft also proposes that once an e-commerce firm comes to know about any counterfeit product, and if the seller is unable to provide any evidence that the product is genuine, the firm needs to take down the listing and notify the consumers of the same.

e-Commerce: The New Boom

[op-ed snap]On the learning curve: transforming education outcomes in India

Note4students

Mains Paper 2: Governance | Issues relating to development & management of Social Sector/Services relating to Health, Education, Human Resources

From the UPSC perspective, the following things are important:

Prelims level: Saksham

Mains level: Initiatives taken in field of education reforms and their effectiveness.


NEWS

CONTEXT

The systemic approach to transforming education outcomes in India is leading to success.

Background

  • Among the lakhs of employees on the payrolls of State governments in India, the education department, unarguably, has the largest share of employees.
  • Besides frontline service providers (teachers), there are a number of other officials and administrators who form an important part of the educational set-up.

The Haryana case study

  • Given the size of the education department, any effort to introduce education reforms must ensure that the incentives of all stakeholders are aligned throughout the system to ensure their participation.
  • Education transformation programmes by States run the risk of falling flat, as they are often unaccompanied by a single transformation change road map that all key actors agree upon and work towards.
  • A successful example of implementing such a road map can be seen in Haryana, which has created a race among its administrative blocks to be declared as ‘Saksham’ (Hindi for abled/skilled), i.e. have 80% or more students who are grade level competent.
  • Under this campaign, State officials nominate their block for the ‘Saksham Ghoshna’ once they are reasonably confident that their block has achieved the 80% target — as a result of remedial programmes, teacher training and internal assessments.
  • This self-nomination is then followed by rigorous rounds of third party assessments to vet their claims.
  • If a block is found to be ‘Saksham’, the block officials are recognised by no less than the Chief Minister, and a large-scale ‘show and tell’ event is organised to honour them.
  • Further, when all blocks in a district are declared as ‘Saksham’, the entire district is also accorded ‘Saksham’ status.
  • According to the latest third party assessment in February 2019, 94 blocks out of a total of 119 in Haryana have been declared ‘Saksham’ and overall grade competence has been assessed at 80%, which is a giant leap in learning outcomes when compared to the overall grade competence of 40% in 2014.
  • Given these early successes, many other States are also embarking on such programmes.
  • The valuable lesson from all this is that inducing competition among administrative units helps invigorate key stakeholders to work in tandem in order to achieve intended outcomes.

Benefits of Ranking of states

  • Since its inception, the NITI Aayog (National Institution for Transforming India), has also been a believer in competitive federalism that puts pressure on policymakers across States to perform better on pre-defined goals and metrics.
  • To translate this to education, we have now developed the State-level ‘School Education Quality Index’ (SEQI), which seeks to make improvements in learning outcomes a focal point of governance.
  • It gives scores to States based on their educational performance and puts this data out in the public domain.
  • The SEQI uses three data sources, including the National Achievement Survey, to come out with 33 indicators to measure education outcomes, of which the largest weightage (48%) is given to learning outcomes.
  • By having a two-fold ranking system — one which recognises well-performing States via an overall performance score, and a delta ranking that measures the level of improvement made by States from their base year — the NITI’s Aayog’s State ranking not only encourages competition among States but also rewards and motivates other States to consistently improve.

District Programme

  • The NITI Aayog’s Aspirational Districts programme, launched in early 2018, also draws from this template.
  • Here, 112 under-served districts across the country compete with each other in order to achieve targets in five crucial sectors; these includeeducation, which has among a weightage of 30%.
  • These districts are monitored real-time and ranked on the basis of their progress.
  • The follow-up for each indicator is handled by the respective Ministry in charge of the same, while NITI Aayog handles the data compilation and dissemination.
  • Most importantly, there is a constant focus on recognising and disseminating best practices of select districts to other States, which act as a reward for well-performing local administrations while providing impetus to other districts to adopt similar measures.
  • This strategy has already shown success; districts that were ranked low in baseline surveys, such as Virudhunagar (Tamil Nadu), Nuapada (Odisha), Gumla (Jharkhand), Siddharthnagar (Uttar Pradesh), and Vizianagaram (Andhra Pradesh), have shown remarkable progress in subsequent rounds of assessment.
  • The fact that this programme has huge support and buy-in from the Prime Minister personally ensures that all stakeholders are spurred into action and energised to achieve the stated goals.
  • Given the success of these initiatives, it is abundantly clear that the right incentive structures for stakeholders lead to administrative efficiency, which then improves the quality of service delivery.
  • States therefore need to induce competition and give a boost to put all key actors in education in the driver’s seat to improve their learning levels.

Way Forward

  • The successes that we are already witnessing in India with the systemic approach to transforming education are inspiring.
  • Improvement in learning outcomes is an immediate goal for India to fulfil its aspirations of playing a greater role in the global economy and a systemic transformation is the best solution that we have so far.

 

 

 

 

 

e-Commerce: The New Boom

Draft e-commerce policy: Keeping our data safe and secure

Note4students

Mains Paper 3: Economy | Changes in industrial policy & their effects on industrial growth

From UPSC perspective, the following things are important:

Prelims level: Analysis of Draft e-commerce policy

Mains level: The newscard provides various prospects of the draft policy in short and lucid manner


News

  • The DPIIT has released the draft National e-commerce Policy that sends a clear message that India and its citizens have a sovereign right to their data.

Key Issues addressed

  • Data
  • Infrastructure development
  • E-commerce marketplaces
  • Regulatory issues
  • Stimulating domestic digital economy
  • Export promotion

Indian control over own data

  • Govt to be given access to source code, algorithms of AI systems Impose custom duties on electronic transmissions to reduce revenue loss.
  • Bar sharing of sensitive data of Indian users with third party entities, even with consent.
  • A ‘data authority to look at community data.

Local Presence of Apps and Websites

  • All e-commerce websites, apps available for downloading in India to have a registered business entity here.
  • Non-compliant e-commerce app/website to be denied access here.

Incentives for data localization

  • Location of the computing facilities like data centres, server farms within India.
  • Firms to get 3 years to comply with local data storage requirements.
  • Data storage facilities to get ‘infrastructure status’.

FDI in E-Commerce

  • FDI only in marketplace model (where multiple vendors come together under an IT based platform).
  • No FDI in inventory model (where inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly).

Certain E-Com Trade Rules

  • Curbs on Chinese ecommerce exports.
  • Gifting route, often used by Chinese apps, websites, banned for all parcels except life-saving drugs.
  • Integrating Customs, RBI and India Post to improve tacking of imports through ecommerce.
  • Incentives & e-commerce export promotions.
  • Ecommerce startups may get ‘infant industry’ status raising limit for courier shipments from Rs 25,000 to boost ecommerce export.

Regulation for E-coms

  • No separate regulator for ecommerce sector.
  • E-consumer courts to be developed.

The recent changes in e-commerce sector


 

DIPP recently notified a new FDI policy for e-commerce and certain other rules <What exactly e-commerce is? Answer in comments>

What are the rules?

  1. 100% foreign direct investment is permitted in the marketplace model of e-commerce
  2. FDI is not permitted in inventory based model of e-commerce

Additional to these rules for FDI, the other rules are:

  1. An e-commerce entity may provide logistic, warehousing , order fulfilment, call centre, payment collection and other services
  2. An e-commerce entity will not permit more than 25% of the total sales should not be done by one vendor or its group companies
  3. The seller shall be responsible for post sales, warranty and guarantee of goods sold by it
  4. The e-commerce entity will not directly or indirectly affect the sale price of goods or services while maintaining a level playing field

What does it mean?

Now let’s analyse its impacts on various stakeholders, one-by-one

#1. E-Commerce Players


 

  • Price determination- This is a grey area with unclear rules. One interpretation could be that Govt will determine the price and not the market. This could upset the markets
  • Clearly defining the models- This is a positive development. The marketplace and inventory based models are now concretely and clearly defined by law
  • Group companies- Group companies (Flipkart- WS Retail, Amazon- Cloudtail) are created to work around the e-retail rule which doesn’t allow FDI in B2C multi-brand retail

The companies will now have to figure out a new way to scale down sales through their group companies

  • Discounts- The rule in itself is notvery clear as it doesn’t explictly spell out the terms ‘deep discounting’ or ‘discount’

Example- Amazon uses the term ‘promotional funding’ to describe its discounting model, and as is clear, technically doesn’t affect the actual price of the product

Even though the note says the rules are effective immediately, discounting has continued as is. It shows that that this is still a grey area

  • Inventory based models- This model, which is effectively under multi brand retail, remains out of the FDI route

#2. The Consumer

  • E-commerce companies have brought in deep competition in the retail sector by way of offering discounts
  • How are the discounts funded? Part of this is funded through a cash burn, and part through operating efficiencies over the brick and mortar setup <What is cash burn? Answer in comments>
  • Restraints on discounts, if workout in real, consumers will lose a lot of power in terms of price and choice

#3. Brick and Mortar Players


 

  • Effects on brick and mortar retailers will depend on how the restraints on discount work out
  • Footfalls in Brick & Mortar retail had dropped dramatically, and the pricing change may now draw consumers back
  • However, e-commerce companies and strong retailer lobbies will obviously work to keep their dominance

 

Conclusion:

  • Overall, the move is in the right direction, but it lacks strength and complete clarity on various issues (such as pricing, discounting)
  • The grey area in pricing is very open to interpretation, especially on the point of determining the right price, and could be an anti-market move
  • Retail sectr still remains affected by a lot of interest groups and a solid policy change to actually reform retail remains

After this, you can read this story for more insights- Disrupting the disruptors (The Hindu)

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