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Explained: What draft Consumer Protection Rules for Amazon, Flipkart, others mean for MSME sellers

Ease of Doing Business for MSMEs: Indian e-commerce sector, which is seeing increased participation from India Inc’s heavyweights including Reliance, Tata, etc., apart from existing large players such as Amazon, Walmart-owned Flipkart, others, has micro, small, and medium enterprise (MSME) sellers central to its growth.

Every marketplace will have to ensure that none of its related parties and associated businesses are enlisted as sellers for sale to consumers directly.

Ease of Doing Business for MSMEs: The amendments proposed on Monday to Consumer Protection (E-commerce) Rules, which were notified July last year, signalled stricter compliance for e-commerce companies such as Amazon, Walmart-owned Flipkart, and others that have been under the constant regulatory radar over alleged business malpractices by trade bodies. In fact, the Ministry of Consumer Affairs, Food & Public Distribution, announcing the proposed changes, in a statement on Monday categorically noted that that there was an “evident lack of regulatory oversight in e-commerce which required some urgent action”.

The draft rules were in response to complaints from traders, associations, and consumers against “widespread cheating and unfair trade practices being observed in the e-commerce ecosystem.” Indian e-commerce sector, which is seeing increased participation from India Inc’s heavyweights including Reliance, Tata, etc., has micro, small, and medium enterprise (MSME) sellers central to its growth. The changes proposed to the Rules by the government also catered to such sellers who have been voicing alleged unfair treatment to them by e-commerce companies. Here’s a low-down on the proposed additions to the Rules by the government with respect to the seller community.

E-commerce companies enabling the sale of imported goods or services on the marketplace will have to provide a ranking for goods and ensure that the ranking parameters do not discriminate against domestic goods and sellers. The government had last year also stated that e-commerce entities will have to provide an explanation of the main parameters which, individually or collectively, are most significant in determining the ranking of goods or sellers and the relative importance of such parameters through an “easily and publicly available description drafted in plain and intelligible language.”

“While the intent of this law is clear, its implementation might be a challenge, given that products are served up in search queries that are quite different from each other. Ranking them in a consistent way might be difficult, and may not essentially give the signals to the consumer that it intends to provide,” Utkarsh Sinha, Managing Director, Bexley Advisors told Financial Express Online.

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The government also noted that the marketplace will be subject to a fallback liability in case its seller fails to deliver the order due to “negligent conduct, omission or commission of any act by such seller in fulfilling the duties and liabilities” that causes loss to the consumer. “In any business, there has to be some liability to make sure you do the best. If the govt doesn’t penalize the company, the company will do what it wants. Future is e-commerce and once you have committed to selling goods online, e-commerce players should have liability for it. We particularly don’t penalize sellers if the problem is genuine such as the product has gone bad or they don’t have stock. It is part of service industry to deal with such concerns,” Prateek Ruhail, Founder at organic beauty marketplace Vanity Wagon told Financial Express Online.

The draft maintained that sellers of a common category should not be treated differently by the logistics partners of e-commerce marketplaces. The logistics company will have to provide a disclaimer including terms and conditions governing its relationship with sellers on the marketplace and, a description of any differentiated treatment which it gives or might give between sellers of the same category.

“Parity with larger sellers, including those owned or co-owned by the e-commerce platform has long been a demand held by small traders. However, its implementation would be key as there are legitimate algorithmic cues – ranging from the price offered, the seller’s reputation, and their customer satisfaction ratings – that determine the positioning of a particular item on a search query,” added Sinha. Nonetheless, it is arguable that true undifferentiated parity may actually be detrimental for the consumer, who has come to rely on the e-commerce platform to filter up the most appropriate results, accounting for these factors.

Every marketplace will have to ensure that none of its related parties and associated businesses are enlisted as sellers for sale to consumers directly, the government proposed adding that marketplace should not sell goods or services to any person who is registered as seller on its platform. “Prohibition of sale of goods at any marketplace by its related entities will be a game-changer as we have seen that so far the global e-commerce companies were controlling the sale through their preferred sellers. With this provision, the chances of having preferred sellers will be very bleak,” said B.C.Bhartia, National President and Praveen Khandelwal, Secretary General, CAIT. The traders’ body represents 8 crore traders in India including those selling on e-marketplaces.

The government also suggested that every e-commerce marketplace will have to prominently display the name of the seller in the same font size in its invoice as that of the e-commerce entity’s name. Separately, the government proposed that the invoice of everyday order and the entity’s registration number with the Department for Promotion of Industry and Internal Trade (DPIIT) should be displayed prominently to users in a clear and accessible manner on its platform.