Diluting proposed e-commerce rules tantamount to 'succumbing to hidden pressure', CAIT tells Piyush Goyal

E-commerce giants, Niti Aayog objected to the draft rules released in June 2021 (Representative image)

Amid reports claiming that the Centre may ease certain provisions of the draft e-commerce rules, the Confederation of All India Traders (CAIT) wrote to Consumer Affairs Minister Piyush Goyal on January 2, demanding the roll-out of the proposed rules without any dilution.

"Any dilution in the proposed e-commerce rules under CPA (Consumer Protection Act) will percolate a strong feeling across the country that the government has succumbed to some hidden pressures," the traders' body said.

Easing the proposed rules will also suggest that the government has offered the e-commerce landscape to the global e-tailers to "twist the e-commerce trade to their advantage even at the cost of flouting the laws", it said.

The CAIT's strongly-worded letter comes three days after Moneycontrol had reported, citing sources, that the consumer affairs ministry may drop contentious clauses on deep discounts and flash sales.

Notably, the Consumer Protection (E-Commerce) Rules, 2020, first came into force in July 2020. The consumer affairs ministry floated a revised draft of the rules in June 2021, intending to tighten the watch on e-commerce companies.

The draft proposed to make e-commerce marketplaces responsible for the quality of goods sold on their platforms, set up robust grievance redressal mechanisms and stop offering market-distorting discounts, among other things.

The prohibition of deep discounts and flash sales on online platforms, which were included in the June draft, had been vehemently opposed by the major e-commerce entities.

The provisions, however, are supported by the traders' association which has accused the global e-commerce giants of attempting to usurp the space of digital trade in India.

"It has been duly established that several foreign funded e-commerce companies are indulging into predatory pricing, deep discounting, loss funding, exclusivity, owning inventory and seller system in their business practices, facilitating sale of prohibited goods like marijuana as per a recent racket busted by Madhya Pradesh Police," the CAIT said in its letter addressed to Goyal.

The association also attempted to rebut the argument that the adoption of strict e-commerce rules may adversely impact the flow of foreign direct investments (FDI).

"Through e-commerce no substantial FDI is entering into India rather the money which comes under the guise of FDI is used for cash burning or to support huge losses incurred by global e-tailers," it said.

The objections to the proposed rules, apart from the major e-commerce players, were also raised by Niti Aayog, the Centre's top-most think-tank.  The agency had pointed out that the norms may be harsher than necessary and could adversely affect the growth of e-commerce in India.

Niti Aayog had conveyed to the government that if online marketplaces cannot control the inventory sold on their platforms, they should also not be held responsible for the quality of such products.

The CAIT, however, said such objections are "more of a technical nature".

The rolling  out of e-commerce rules without any dilution, along with the e-commerce policy and the FDI rules on e-commerce "within a time bound manner" is essential to "ensure an even level e-commerce business in India", the association said.

A senior official, who spoke to Moneycontrol earlier this week, said, "the revised drafts of both the e-commerce consumer rules and the e-commerce policy are currently being drawn up. The draft rules may be released first and it will be based on an already established legislation."

The revised policy and rules are expected to significantly impact India’s e-commerce market, which is poised to rise to $111.4 billion by 2025, up from $46.2 billion in 2020, on the back of wider internet availability and smartphone ownership, according to India Brand Equity Foundation, a trust established by the Department of Commerce.