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Consumer Protection Rules: Customers to get negatively impacted, say e-com firms seeking changes in proposed rules

Earlier in their meeting with the Consumer Affairs Ministry, Amazon said that the proposed rules were confusing and had some inconsistency.

July 22, 2021 / 08:45 AM IST

E-commerce industry bodies that represent companies like Amazon and Flipkart among others have sought major changes in the proposed Consumer Protection Rules suggesting that the existing proposal is detrimental to the interests of the consumers. In their submission to the government the industry has stated that the government should not overlap other rules such as Competition Act and FDI norms with Consumer Protection Act besides seeking further clarity on flash sales, private label products and fallback liability clauses.

"The NDI Rules also provide that "in marketplace model, any warranty / guarantee of goods and services sold will be responsibility of the seller." Therefore, any marketplace entity with FDI, accepting fall back liability under the amendments will end up violating the NDI Rules and thereby the Foreign Exchange Management Act, 1999," said the Internet and Mobile Association of India (IAMAI) in its submission to the government, the last date for which was July 22.

"The concept of "Fall Back liability" should be done away with because it dilutes the intermediary safe harbour under the provisions of the IT Act as well as the arm’s length requirements provided under the FDI Policy," it added.

According to the association such a provision will open the floodgates for unscrupulous claims against e-commerce entities. However, it called for a diluted version of this rule for inventory based e-tailers given that they control, own and manage the inventory of the goods being sold.

Earlier in their meeting with the Consumer Affairs Ministry, Amazon said that the proposed rules were confusing and had some inconsistency. Indian conglomerate Tata Group which was also present in the meeting said some of the rules could have huge ramifications on its operations and may restrict the sale of its private-label products.

Moneycontrol reported about the meeting on July 4.

One of the marketplaces requesting anonymity told Moneycontrol that basically these rules do not fit under the jurisdiction, were not implementable adding that there was a distortion of responsibilities being added on to the marketplaces which is neither their scheme of work nor responsibility.
With the new set of drafts, the government is trying to ensure that consumers do not get a raw deal while purchasing products online.

However, according to the companies, the amendments raise several concerns and ambiguities from an e-commerce business standpoint, which are also likely to have the unintended negative consequences for consumers ultimately.

"the amendments, seek to regulate aspects of the e-commerce sector that have no bearing on consumers’ interests at all, and in doing so, could impact consumer interest negatively," said IAMAI in its 20 page recommendation to the government.

The industry has also sought clarification on why there was the need for a filter mechanism for made in India products. "The suggestion of alternatives is usually based on consumer choice and past transactions undertaken on a platform. The proposed amendments to provide suggestions of “domestic alternatives” on a mandatory basis would severely impact consumer choice and may not be ultimately in consumer’s favour," said IAMAI.
On July5, the government had extended the deadline for e-commerce companies to send their response to the proposed Consumer Protection Rules till July 21.

The work on the draft is happening at a time when the government seems to be in a tiff with the e-commerce companies. In a recent remark, Commerce and Industry Minister Piyush Goyal said leading e-tailers were flouting laws of the land adding that many of their practices were against the interest of consumers and these new sets of rules are drafted with an aim to protect consumer interests.

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Priyanka Sahay
first published: Jul 22, 2021 08:45 am