Regulation of online sales and services

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The proposed changes provide a framework to protect buyers from unfair practices and prevent the exploitation of indigenous or small sellers.

The Union government had notified the 2020 Consumer Protection (Electronic Commerce) Rules on July 24, 2020, under the Consumer Protection Act, 2019. The Ministry of Consumer Affairs invited comments by July 6 on the significant changes proposed to be made to them. .

Since the adoption of the CPA in 1986, consumer markets for goods and services have undergone a radical transformation. The most important are the changes in e-commerce. Online sales generally provide convenience to consumers and also better prices, but there are often issues with delivery of substandard products and refusal of return, replacement or refund.

The consumer should theoretically be king at a time when consumer demand is affected by the pandemic. Governments and banks are pressured to stimulate consumer demand through liberal incentives, grants and loans. Of course, the extent of competition varies from industry to industry.

There is a continuing need to educate consumers to pay the right price for the right product and to uphold consumer rights. This applies to both online and offline sellers.

Governments around the world are struggling to save physical stores from the fierce and often unfair competition from sellers operating through digital platforms. The issues lie more between online and offline sellers than between online sellers and consumers. Online sales offer convenience, lower prices with the occasional problem of defective products.

The latest rules address three types of tension and friction. Between online sellers and consumers; between online and offline sellers and between mainstream online sellers competing with “preferred” online sellers preferred by e-commerce platforms because of their own financial interests.

The rules don’t just target marketplaces like Amazon, Flipkart, Snapdeal, etc. which are supposed to simply provide an IT platform to connect buyers and sellers (without being unduly biased towards any particular buyer or seller) as well. as direct sellers or retailers who own the products they sell online. Since services are also covered, aggregators such as Ola, Uber, Zomato, AirBNB, etc., would also fall within the scope of the rules.

Thus, the current rules cover “e-commerce entities” which are pure marketplaces as well as inventory-based e-commerce models where the operator of the IT platform holds the inventory of goods and services. sold. The changes are intended to cover even logistics companies involved in the storage, transportation and delivery of online sales. “Related parties” are also meant to be governed by the rules. These rules do not apply to a natural person, such as a farmer or a craftsman, selling directly online.

E-commerce entities are required to ensure that advertisements of goods and services conform to their actual characteristics and conditions of use. They should only sell what they post. They must not be falsified or counterfeit items.

Every ecommerce entity in the marketplace should disclose all details of sellers offering goods and services, such as their company name, address, customer service number or rating.

The changes are also intended to create “fallback liability” for the e-commerce entity itself in the event of vendor default. The Marketplace e-commerce entity will be liable if a seller registered on the Platform fails to deliver the ordered goods or services causing loss to the consumer due to negligent conduct, omission or commission from an act of this seller.

Posting bogus product reviews on the e-commerce site is common professional misconduct and has been prohibited. The rules also provide that sellers in the marketplace must not refuse to take back the goods, nor withdraw or interrupt the services purchased or accepted to be purchased, or refuse to reimburse the consideration, if such goods or services are defective, deficient or false, or if the goods or services do not have the characteristics or characteristics advertised or agreed upon, or if these goods or services are delivered late in relation to the stated delivery schedule. A major concern has been that some major ecommerce platforms are giving preferential treatment to certain sellers (in which they have a financial interest). It is alleged that some major e-coms use their wholesale units to indirectly list products on their websites through selected sellers, bypassing foreign investment restrictions which prohibit direct sales to individual Indian consumers. by a stranger.

The rules currently prevent predatory pricing practices through preferred suppliers by prohibiting discrimination between buyers and sellers on the platform. Of course, wholesale buyers will get bigger discounts, but similarly placed sellers and buyers cannot be discriminated against.

The changes state that e-commerce businesses should not list any related businesses as a seller on their shopping websites, and no affiliated entity should sell merchandise to an online seller operating on their platform.

Flash sales offering huge discounts over a short period of time benefit ordinary consumers. The changes aim to ban such flash sales when only privileged sellers controlled by e-commerce platforms have the ability to sell. This ban can perhaps be made ineffective by including some non-preferred sellers in flash sales as well. Presumably, objectionable flash sales will only prompt punitive actions against e-commerce platforms and consumers purchasing products in such sales will not be affected.

Under the rules, e-merchants – digital sellers or service providers – are required to display details such as the “country of origin” of goods, their return, refund, exchange, warranty and warranty policies. warranty, delivery and shipping, breaking-up detailed price, and payment methods.

One of the goals of the new e-commerce rules is to educate consumers to promote Indian products over imported products. The changes provide that if a retailer presents imported goods for sale, the customer must be informed of the identity of the importer and receive “alternative suggestions to ensure a fair opportunity for domestic goods”.

Each seller is responsible for providing the contact details of a grievance manager who can be contacted in the event of a problem and to take prompt action to remedy the grievances. These rules aim to ensure transparency, accountability and give consumers the right to make an informed choice before deciding to buy something online. E-commerce entities that do not follow the rules will be subject to criminal penalties.

There is a growing feud between big tech companies and governments around the world because of the enormous power these companies have begun to wield and because they thwart government policies regarding the public interest. The changes provide a framework to protect the buyer and prevent the exploitation of aboriginal or small-level online sellers in unfair practices. How exactly bad practices in electronic markets would be identified, monitored and effectively sanctioned would be a real implementation challenge. This is particularly the case when consumer courts have a substantial backlog of pending cases.

The rules do not distinguish between large entities like Amazon, Flipkart, Snapdeal, BigBasket, JioMart, etc., and small ecommerce businesses. As with regulations on social media, it would be better if the regulatory burden is also different for large and small e-coms, such as, for example, based on turnover processed.

(The author is a former Special Secretary, Ministry of Trade and Industry, Government of India. The views expressed are personal.)


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