ONDC floats consultation paper on how e-commerce transactions will be governed

Representative Image.

Open Network for Digital Commerce (ONDC) has come out with a consultation paper on how the trust in e-commerce transactions will be managed between users and different network participants – in terms of search and discovery of products, order fulfillment, payments, returns and refunds, among other things.

It is an open consultation and stakeholders can share responses by October 31. Meanwhile, the network has begun a beta- testing phase at 16 pin codes of Bengaluru.

In the consultation paper, ONDC has laid out the framework for e-commerce orders being processed by an interoperable network where different network participants like buyer apps, seller apps, sellers, gateways and logistics players through ‘transaction-level’ contracts.

For instance, going into a transaction, the buyer app and seller app have no pre-existing legal relationship. A legal relationship is created between them, on-the-fly, through the transaction-level contract, to facilitate a transaction between a buyer and seller.

In this case, the transaction-level contract is a digital contract executed through the ONDC protocol between the buyer app and seller app. Similarly, there would be TLCs between participants in other parts of an e-commerce purchase made on the network.

To establish trust in the network, ONDC has also come up with a scoring and badging system for different network participants. This kind of rating will also be interoperable – for example, the rating for a particular merchant will remain even if he shifts to a different seller app.

As Moneycontrol reported earlier, returns and refunds in the ONDC universe will not be through a cookie cutter mechanism. A seller can choose to list products without any option of returns – and a customer will know this before making a purchase.

“For instance, if the seller had declared upfront that the product is not returnable, the return will not be processed, unless the product is defective or damaged. Even when a product is returnable, the seller may choose to issue a refund rather than initiating a return. Similarly, cancellations will only be processed if the seller had indicated upfront the order is cancellable,” said ONDC in its consultation paper.

There will also be a strong mechanism for audits. Policy compliance will be assessed through regular compliance audits, performed by empaneled auditing agencies, and social audits performed by research organisations. Audits may also be required if ONDC gets reports regarding a Network Participant being non-compliant.

The consequences of non-compliance may range from a simple warning to termination of the Network Participant Agreement, which means a complete ban from the network. For breaches that are serious but do not warrant a termination, the network participant may be suspended for a limited period.

The structure of separate buying and selling platforms is one of the key differences between the closed-loop model of e-commerce and the open network model. As all e-commerce platforms – from Amazon and Flipkart to Swiggy and Zomato – today are cast in the former style, they can control which sellers are given prominence in the listings and have gated communities of users.

ONDC seeks to break down this structure into a modular form of e-commerce where, potentially, any user on any platform can buy from any seller on any other platform.

It aims to raise e-commerce penetration in the next two years to 25 percent of India's consumer purchases, from nearly 8 percent now. It also hopes to sign up 900 million buyers and 1.2 million sellers on the shared network within the next five years, while achieving gross merchandise value of $48 billion.