Proposed amendments to consumer protection rules will harm consumer interest, hurt the growth e-commerce sector – The Economic Times

Clipped from: https://economictimes.indiatimes.com/small-biz/policy-trends/proposed-amendments-to-consumer-protection-rules-will-harm-consumer-interest-hurt-the-growth-e-commerce-sector/articleshow/83865642.cmsSynopsis

E-commerce, in recent years, has already significantly empowered both consumers and small businesses in the country. Millions of first-generation entrepreneurs and SMEs in the country have been able to grow their business and enhance their reach through various e-commerce platforms that currently exist.

It is very difficult to fathom the purpose behind any policy, particularly one that is framed under consumer protection guidelines, that reduces competition in the market and attempts to limit choice (and lower prices) that a truly competitive business environment offers to the end consumers.

Earlier this week, the government proposed a set of amendments to the Consumer Protection (E-Commerce) Rules, 2020, which among other elements, proposed the banning of flash sales, making additional disclosures in terms of product description, and limiting the sale of in-house brands. The proposed amendments also make the e-commerce platform operators potentially liable for delays in transactions by merchants operating on the platform even though as per the existing definition of an e-commerce marketplace, the e-commerce platform owner or operator cannot influence any transaction undertaken by the merchants using such a platform.

To top it all, the proposed rules also make it mandatory for the platform operator to offer a recommendation of a “Made-in-India” product should a consumer wish to buy an “imported” product, based on no tangible product attributes, which seems not only to skirt the issue of enabling and growing globally competitive domestic businesses, but fundamentally undercuts free consumer choice that underpin market forces. The country-of-origin concept is also difficult to classify when one considers the current reality of globally interlinked supply chains.

While the Consumer Affairs Ministry has clarified that these are only proposals and feedback can be given until July 6, 2021, the very fact that such ambiguous proposals have even made it to the draft stage sadly reconfirms that the conceptual grasp of basic matters pertaining to economics, commerce, and industry seems to be lost in the process of policymaking. The rules aim to cast too wide a net and sadly, do not provide any clarity at all to a sector already mired in regulatory uncertainty.

E-commerce, in recent years, has already significantly empowered both consumers and small businesses in the country. Millions of first-generation entrepreneurs and SMEs in the country have been able to grow their business and enhance their reach through various e-commerce platforms that currently exist. In the next few years, with the tens of thousands of crores of investment in the e-commerce ecosystem by many Indian and international players, and with the rapidly increasing penetration of 4G (and in near future, 5G) smart-phone / internet access, a healthy (and unencumbered by senseless bureaucratic policy impediments) e-commerce ecosystem will bring about many positive transformations for India that might benefit hundreds of millions of Indians by way of more choice and lower prices, and millions of MSMEs that can more easily find local, regional, national, and even international markets for their goods & services using one or many e-commerce platforms. A healthy e-commerce ecosystem will also provide further impetus to many associated industries such as logistics and last mile delivery, IT & ITES, financial services, training & skilling services, while creating millions of jobs spread across almost every district and almost every block in the country.

One wonders what these draft regulations are intended to achieve. These seem to perpetuate a tendency towards ham-handed regulations on digital businesses without understanding the nuanced implications of such moves on stakeholders across the value chain.

It also asks the question, much more fundamentally, that shouldn’t the single consideration be towards the most important stakeholders of all, that incentivize an efficient, transparent, and competitive e-commerce ecosystem – the hundreds of millions of Indian consumers, and then millions of MSMEs and entrepreneurs who can benefit the most from the disintermediation that e-commerce platforms potentially offer to them.

Prima facie, while the draft norms are aimed at strengthening the consumer grievance redress mechanism, sadly, the proposed norms will only create more confusion and compliance hurdles as they overlap with many existing regulations governing internal trade. An over-regulation of the sector overlooking its specific needs will hinder this growth at a critical time and benefits just about no stakeholder group.

While there is no arguing that consumers’ interest have to be protected at all times, the proposed policy unfortunately is likely to do just the opposite while also stymieing the growth of this very vibrant and positive-transformational sector for India.

The writer is Chairman and MD, Technopak Advisors)

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