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Big e-commerce players must follow the law of the land

New rules for online marketplaces seek to level the playing field and protect the interest of consumers 

July 06, 2021 / 03:18 PM IST

Consumer is king. That’s the classical view. The reality of the modern world, however, has long pushed the consumer to a mere pawn. In a system that consistently seeks to embrace technology, his predicament is precarious, to say the least.

That’s because relationships in the entire chain from producer to consumer have gone completely impersonal. The net result is that we have created a new disadvantaged class. More often than not, this unsuspecting class has innocently followed the proverbial Pied Piper.

The government has, time and again, stepped in to insulate this class from exploitation. But its latest effort has taken many giants in the e-commerce space totally off-guard. Pushed on the back foot, heavyweights such as Amazon and even home-grown Tata group are complaining that the new rules will hit them hard.

They are particularly upset over a few proposals that could well nigh force them to reconfigure their entire business model. The government has insisted that the new proposals are aimed at protecting hapless consumers and that e-commerce rules in other countries are stricter than in India.

What are these new rules? Among other things, they envisage

  • No e-commerce entity shall organize a flash sale of goods or services offered on its platform.

  • No e-commerce entity shall indulge in mis-selling of goods or services offered on its platform.

  • No e-commerce entity shall allow any display or promotion of misleading advertisement whether in the course of business on its platform or otherwise.

  • Every marketplace e-commerce entity shall (a) ensure that it does not use any information collected through its platform for unfair advantage of its related parties and associated enterprises; (b) ensure that none of its related parties and associated enterprises are enlisted as sellers for sale to consumers directly; (c) ensure that nothing is done by related parties or associated enterprises which the e-commerce entity cannot do itself.

E-commerce entities are marketplaces. In a physical marketplace, buyers and sellers congregate to do transactions. In e-commerce, it happens in a virtual space. Simply put, these e-commerce marketplaces such as Amazon, Flipkart and others are facilitators enabling buying and selling. In reality, however, they go beyond the role of facilitator and stray into the domain of selling. Of course, they do it in a myriad indirect ways.

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The catch lies here. The rules sought to be imposed aim to straighten the playing field to ensure a sense of fairness in the business environment.

In early 2019, the government did ban equity relationships between marketplace e-commerce players or their associates with vendors. Also, restrictions were placed on how much inventory a vendor could source from an e-commerce firm or its associates. All these were intended to ensure that the nexus between the e-commerce firm and vendors was broken.

The e-commerce platforms have also turned topsy-turvy the price models of many manufacturing companies with their deep-discounts for purchase through their portals. On many occasions, such discounts triggered tension with many consumer goods firms when it comes to servicing products purchased through online marketplaces.

The latest proposals are an extension of this consumer protection exercise. Oftentimes, one wonders how an e-commerce platform which gets only a commission for allowing the vendors to use its platform, could elicit attraction from deep-pocketed investors who pump in liberal money into it. They are quite adept in playing the valuation game. The effort of the government appears to be to seal all by-pass routes for these marketplace e-commerce firms.

As it did in the case of social media ( Twitter, Facebook and the like), the government in this instance, too, is trying to make it mandatory for these e-commerce platforms to  appoint a Chief Compliance Officer who shall be responsible for ensuring compliance with rules.

Big is a power, no doubt. And the Amazons and Flipkarts wield the power. The inequity in the playing field definitely needs to be erased.
KT Jagannathan is a senior journalist based in Chennai
first published: Jul 6, 2021 02:29 pm

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