New e-commerce rules may hinder business growth of companies, say experts

The brand new draft e-commerce guidelines issued by the patron affairs ministry earlier this week is prone to improve the compliance necessities of e-commerce firms and have the potential to stunt the enterprise development of the companies because the proposed amendments try to curb broad reductions, limit the growth of personal labels, methods firms usually financial institution on to get extra customers, specialists mentioned.

Nikhil Narendran, associate at Trilegal, mentioned that the time period flash sale has been very loosely worded within the draft laws and it seems that the definition implies a test on occasions that sometimes run for a sure length like grand Diwali gross sales or one thing akin to heavy low cost occasions like a Black Friday or Cyber Monday sale that’s prevalent within the West. “This to my thoughts is anti-consumer in nature. It’s not one thing a shopper safety legislation ought to say. Malls run grand buying festivals however barring e-commerce entities from doing the identical doesn’t make sense,” Narendran informed FE. Flash gross sales occur when an organization affords instant reductions to patrons to dispose of a big inventory of merchandise; that’s the basic understanding, Narendran defined.

Though the federal government issued a clarification stating that standard flash gross sales should not banned however solely sure flash gross sales or back-to-back gross sales that restrict shopper selection and improve costs won’t be allowed, uncertainty stays. “What do you imply by giant variety of customers, predetermined time frame? (as per the definition of flash sale within the guidelines) I might have a sale working all year long. There is no such thing as a steerage supplied on this to interpret. That’s the place I really feel that companies have no idea tips on how to create (low cost) methods whereas it offers unreasonable discretion to regulators,” mentioned Gowree Gokhale, associate at Nishth Desai Associates.

Trade observers mentioned the studying of the norms recommend that development of sure non-public label manufacturers like Amazon Fundamentals could take a success. As per the draft guidelines, “no e-commerce entity shall allow utilization of the title or model related to that of {the marketplace} entity for promotion or provide on the market of products and providers on its platform in a fashion in order to recommend that such items or providers are related to {the marketplace} e-commerce entity”. (Within the case of Amazon Fundamentals, the phrase Amazon is there).

Atul Pandey, associate at Khaitan & Co., mentioned the proposed amendments require all e-commerce entities to register with DPIIT which was not the case earlier, thereby rising the compliance burden. Additionally, it seems that the scope of e-commerce has been broadened to incorporate third-party entities engaged in offering operational assist to platforms in fulfilling the orders (like logistics service suppliers). If the principles take form, market platforms must take accountability if a buyer incurs losses because of the actions of a vendor. “Thus far, firms used to take the good thing about being an middleman,” mentioned Khaitan.

Authorized analysts mentioned the transfer to incorporate the appointment of chief compliance officer, nodal contact particular person and resident grievance officer is a blatant replication of the lately launched new IT guidelines and utterly unwarranted. “A lot of the e-commerce platforms can be intermediaries to a bigger sense and they are going to be compliant with due diligence beneath the middleman legal responsibility guidelines. So, there isn’t a want for such clauses in e-commerce guidelines,” mentioned Trilegal’s Narendran.

Pandey mentioned many of the proposed laws are already in place in a single type or the opposite. “The amendments look like within the nature of regulating commerce and commerce and never simply defending the pursuits of the customers. It seems like there may be an overreach and the federal government ought to draw a wonderful steadiness,” mentioned Khaitan. As an illustration, the principles state that not one of the associated events of e-commerce entities needs to be enlisted as sellers. The DPIIT has already mandated e-commerce companies having overseas direct funding (FDI) to scale back their shareholding in most popular sellers to no more than 25%. “It appears that evidently the federal government desires to put off this utterly. Nevertheless, this time round, it is going to apply to all firms,” mentioned an analyst.