Under the new rules proposed by the government, e-commerce companies cannot sell goods on their platform in the marketplace, flash sales are prohibited, and foreign products must indicate the country of origin.
YouTube is ready to acquire the Indian video shopping app Simsim, Google said in a blog entry published July 20.
“As online shopping increases, videos play an important role in helping viewers discover new products and find expert advice they can trust. Every day, users visit YouTube to compare products, view reviews, and find recommendations from their favorite YouTubers. Today we’re taking another step to help viewers discover and buy products from local businesses. ”- Google Blog Post
Why is that important? While it makes sense for YouTube to acquire Simsim from a business perspective, YouTube should take note of the proposed changes to the ecommerce rules that will apply to YouTube if it allows shopping on its platform.
What plans does YouTube have with Simsim?
What is Simsim? Simsim is a platform where YouTubers can post video reviews of local businesses’ products and customers can purchase those products directly from the app.
YouTube’s immediate plan: “There will be no immediate changes to Simsim, the app will continue to operate independently while we work on bringing Simsim offers to YouTube viewers,” the blog post said.
What could YouTube do in the future? In the future, we might expect Simsim to play a key role in enabling video shopping directly on YouTube, much like shopping on Instagram through posts.
Applicability of the e-commerce rules to Simsim
Will YouTube fall under the rules? YouTube does not fall under the e-commerce rules when Simsim offers are only shown to viewers as advertisements and viewers are directed to the Simsim app to make the purchase, but when YouTube allows customers to buy directly on its platform and sellers to sell directly through its platform, like Amazon and Flipkart, it is considered an e-commerce company and e-commerce rules apply. In particular, YouTube must comply with both the IT rules 2021 (since it is a social media platform) and the e-commerce rules 2020 in the latter case.
What kind of ecommerce company will YouTube be? There are two types of e-commerce entity under Indian law: marketplace-based and inventory-based. Inventory-based ecommerce companies can own inventory and sell it directly to customers, but marketplace ecommerce companies are only allowed to provide a third party platform. The Government of India’s Foreign Direct Investment (FDI) policy states that ecommerce businesses with FDI such as Amazon and Flipkart owned by Walmart can only act as marketplaces. Since YouTube receives FDI, it can only act as an e-commerce company on the marketplace.
Proposed Changes to Ecommerce Rules and Impact on YouTube: The Indian government proposed changes on June 21st that will give the existing consumer protection (e-commerce) rules more teeth in 2020. When YouTube becomes an e-commerce company, it falls within the scope of these rules. Some notable changes proposed and their impact on YouTube are:
- Related parties and affiliated companies cannot be sellers or receive an unfair advantage
- Since Simsim does not have its own inventory and only allows other companies to sell through its platform, Simsim is not a seller and therefore does not have to adhere to this rule. However, this also means that YouTube or companies close to Google cannot be sellers on the platform.
- Marketplace ecommerce platforms cannot sell to sellers on platforms
- This rule prevents YouTube from selling goods to sellers on its platform or to sellers on Simsim.
- Ecommerce platforms in the marketplace cannot advertise a group of sellers
- In its blog post, YouTube says it will “work on ways to bring Simsim offerings to YouTube viewers”. This becomes problematic when the sale is directly on the YouTube platform as this is advertising a group of sellers to subsidize a sale.
- The platform brand name may not be used to promote products
- Sellers on YouTube / Simsim cannot use the YouTube name to promote products.
- Cannot use sales information to improve sales of their own products
- YouTube / Simsim cannot use the sales information received to improve sales of their own products.
- New labeling and display criteria for imported goods
- YouTube / Simsim must display the country of origin, provide a filtering mechanism and suggest alternatives to foreign products.
- No manipulation of search results
- YouTube must not mislead users by manipulating search results or search indexes to give preference to Simsim sellers
- Flash sales are not allowed
- YouTube is not allowed to conduct flash sales on its website
- Appointment of Chief Compliance Officer, Nodal Contact Person, Resident Grievance Officer
- As a social media broker, YouTube must already name these roles in accordance with the IT rules 2021. This will likely also satisfy the e-commerce rules.