IT for Change recommended that the new rules differentiate between companies, clarify the ban on flash sales, and introduce new regulations on government access to consumer data.

“The fact that certain platforms have been able to amass disproportionate market power and the lack of a level playing field in e-commerce is a core concern of consumer protection.” IT for change said while making recommendations on the proposed changes to e-commerce rules.

background: The government proposed changes on June 21st that will give the existing consumer protection (e-commerce) regulations more teeth in 2020. The changes include, among other things, new rules against the abuse of FDI regulations, the establishment of a complaint procedure, new display and labeling criteria for foreign goods, the ban on flash sales, advertising restrictions, and liability for recidivism.

Read: Summary of Proposed Changes to Ecommerce Rules, 2020

Why is it important? While many stakeholders have provided feedback on the proposed rules, filing IT for Change has raised some important concerns, such as:

What recommendations does IT for Change give?

Proceed in a differentiated rather than a generalized manner: IT for Change stated that the proposed changes apply horizontally and consistently to all e-commerce companies, without distinguishing between dominant market companies and smaller start-ups that operate inventory-based e-commerce. “Such a blanket approach is likely to prove tedious and cumbersome for smaller e-commerce companies and startups with limited sales and a small workforce,” explained the organization, making the following suggestions:

  • Different obligations for different types of companies: Make a clear distinction between marketplace ecommerce business obligations and inventory based ecommerce businesses.
  • Thresholds by size: Set thresholds for transparency and accountability within each category based on factors like user base, market capitalization, etc.
  • Targeted legislation: “Targeted legislation to address specific transparency and accountability challenges arising from dominant e-commerce companies can be essential,” said IT for Change, citing the example of how the EU’s proposed Digital Markets Act ” Gatekeeper Platforms ”and targets them.

Fix regulatory overlaps: IT for Change argued that some of the provisions of the proposed changes, such as banning the sale of private labels and preventing an e-commerce company from abusing a dominant position, fall under the jurisdiction of the Competition Commission of India (CCI). and there will be confusion as to whether the Chamber of Commerce or the Consumer Protection Agency (CPA) will review disputes related to these provisions. Another example is the provision requiring e-commerce companies to obtain consumer consent to share their personal information with third parties, which falls within the scope of the Information Technology Act of 2000 and the proposed Personal Data Protection Act. To address this overlap, IT for Change suggested the following suggestions:

  • Single authority for the decision of competition and consumer protection disputes: In the short term, a robust cooperation mechanism between CCI and CPA can be put in place to avoid regulatory overlap Finland.
  • Consumer protection law must work together with competition law: IT for Change argued that “not all aspects of consumer protection can be addressed by consumer protection rules” and that these rules “need to work in step with competition law to create a level playing field for e-commerce companies”. The organization called for the parallel implementation of regulations in order to curb monopoly tendencies in the digital market, such as the Digital Markets Act proposed by the European Commission.
  • Change rules related to customer information: Rule 5 (14) (e) should be changed to the effect that the personal data of consumers may only be disclosed with the consent of that consumer, “obtained in accordance with the provisions of the Information Technology Act 2000 and other relevant legal provisions on” protection of personal data, as applicable . “
  • Rules are in addition to other laws: A new rule that states that the provisions of these rules “are in addition to, and do not differ from, other laws”.

Access rights to data: Rule 5 (18) of the proposed rules allows the government to access any data held by an e-commerce company for various purposes. IT for Change argued that this “rule does not meet the standards of legality, necessity and proportionality recognized by the Supreme Court in the Puttaswamy judgment” as it “gives government agencies extensive powers to process data from e-commerce companies without any court order to demand”. Supervision or other controls and offsets. ”However, the organization also noted that the 2019 draft National E-Commerce Directive stated that e-commerce companies de facto have no ownership rights to transactional data and consumer information. Given these views, IT for Change suggested:

  • Deletion of the current provision: Rule 5, paragraph 18 of the proposed amendments is deleted.
  • New rules for data access: Draft rules are amended or supporting legislation is enacted in order to
    • Investigative authorities and supervisory authorities have authorized access to consumer data as long as these requests comply with the principles of legality, legality, necessity and proportionality.
    • individual consumers and third parties have the right to access data in relation to their individual transactions
    • Data cooperatives and other altruistic data organizations that lead data management models have access to raw, non-personal data resources that are aggregated by e-commerce entities.

Clarify the ban on flash sales: The proposed changes define Flash Sales as follows:

“A sale organized by an e-commerce company at significantly reduced prices, high discounts, or other such promotions or attractive offers for a predetermined period of time for selected goods and services or otherwise with the intention of attracting a large number of consumers to attract. Provided that such sales are organized by fraudulently intercepting the normal course of business with technological means in order to allow only one particular seller or a group of sellers managed by such a company to sell goods or services on its platform. “

The Department of Consumers later clarified that third-party conventional flash sales are not prohibited, but IT for Change noted that “without a definition of what ‘conventional flash sales’ are and the distinction between’ traditional ‘and’ fraudulent “Flash sales, the rules and the clarification increase the regulatory uncertainty.” The organization submitted this

  • Clarification on purpose: The regulatory intent of the flash sale ban needs to be explicitly clarified, and if the intent is to ban predatory pricing tactics, another regulation needs to be made referring to paragraph (ix) of the FDI Consolidated Policy Obtains circular from 2020, which states that companies should not directly or indirectly influence the selling price of goods or services.
  • Clarification on the flash sale definition: If the intent is different, the definition of flash sale should be changed to provide more clarity.

Transparency of the ranking algorithms: IT for Change stated that e-commerce companies “are known to employ algorithmic tactics that misrepresent the supply and demand of goods and services, and use nudging practices that manipulate consumer choice”. To address this, the organization proposed that rule 6 (3) (f) be amended as follows:

  • Change to increase transparency: “[Every marketplace e-commerce entity shall] to ensure transparency about the processes that are used to determine the ranking of goods or sellers on its platform, individually and collectively, through a simple and publicly accessible description in clear and understandable language. This includes, among other things, an explanation of the functionality of the product search and ranking algorithm and its various parameters. “

also read (Feedback from other stakeholders)

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