A Misplaced Assertion: Harmonisation of Regulations is crucial for the growth of E-Commerce in India

The Government in June 2021 released the proposed amendments to Consumer Protection (E-Commerce) Rules, 2020 (hereinafter “proposed amendments”), with a view to regulate the e-commerce space more closely from a consumer protection perspective. The proposed amendments seek a substantial increase in compliances and liabilities, along with a broader scope of the term “e-commerce”. In addition to these, the proposed amendments are not in alignment with existing regulatory frameworks. One such significant overlap is with the competition law framework, and the role of the Competition Commission of India (hereinafter CCI).

 

E-commerce in India has been a beacon of competition, not just from the retailing perspective, but also various other services that have been made possible. It is a visible sign of a thriving platform economy, and has significantly changed the conduct, and content of commerce.

 

The burgeoning nature of the e-commerce market in India can be witnessed from multiple projections all of which point to an upward trajectory, and hover around an expectation of a $200 billion size by 2025[1]. This growth must also be seen in the context of Covid-19 in India, where platforms contributed to a sense of resilience and normalcy during the peak of the pandemic.

 

However, digital markets have brought with them plenty of issues concerning the jurisprudence of competition law, not just in India, but in various other countries. Matters related to non-price aspects of competition, unique selling practices of e-commerce platforms, and the ambiguous understanding of “level playing field”[2] between traditional and online businesses, have significantly challenged the Competition Commission of India’s (CCI) oversight. These new challenges have also been formally acknowledged by CCI[3], in its January 2020 report on e-commerce in India. With most of the issues yet to see completion of detailed investigation, any interim legislation may end up hampering this investigation.

 

Flash sales, as defined in the proposed amendment[4] (along with the proviso), aim to reduce the advantage that e-commerce platforms may give to certain sellers, or groups of sellers. But what must be considered is that flash sales, through discounts, and reduced prices, have the effect of greater benefit for consumers (one of the objectives of competition law), and greater competition (particularly, interbrand competition among products) across platforms. Further, while such flash sales also involve an element of special distribution arrangements, the CCI has not yet pronounced on the legality of such arrangements.  These arrangements may in fact, create an efficient supply chain. These issues are currently being explored by the CCI as part of its investigation into non-horizontal agreements under Section 3(4) of the Competition Act, 2002. This would be complemented with a better understanding of appreciable adverse effects on competition, under Section 19(3) of the Act; in terms of flash sales being perceived as an aggravating or mitigating factor, for competition.

 

While these involve a more traditional understanding of competition in India, contemporary developments around data and privacy, are newer determinants of competition[5]. The proposed amendment recognise this, when it says no e-commerce entity shall engage in abuse of dominant position[6], as per Section 4 of the Competition Act. However, the Consumer Protection Act might be a misplaced legislative framework to talk about dominance of e-commerce platforms, and rather, must be addressed on a case-to-case basis by the CCI. Competition within, and between e-commerce platforms is based on efficiencies in the supply chain, with data about consumer preferences shaping production planning and distribution channels. By reiterating the need to not engage in “abuse of dominance” in a consumer protection framework, it prematurely shapes the jurisdiction of Consumer Protection Authority (CPA) in matters of data collection, sharing, preferential selling, search indexes and rankings, and cross-selling; leading to possible jurisdictional overlaps with CCI and other regulators therefore, giving opportunity for forum shopping. Similarly, under Section 6(6)(a) of the proposed amendment (liabilities of platforms), platforms need to ensure that it does not use any information collected through its platform for unfair advantage of its related parties and associated enterprises. This is an issue under platform neutrality, with CCI now taking cognizance of a gamut of such instances[7].

 

Finally, under Rule 7(1)(b) of the proposed amendment, it has been mandatory for e-commerce platforms to identify, and highlight the “country of origin” of goods, while adding the need for providing filtering options, and suggesting domestic alternatives. This, even though well intentioned in its idea of promoting Make in India and encouraging small Indian manufacturers, may end up distorting the notion of level playing field. It may discriminate against imports, and overlook the complex process of value addition or assembly that may happen in the destination country.

 


Conflicts beyond the Competition Law


The proposed amendment reiterate many provisions listed in the FDI policy for e-commerce, such as mandatory registration, scope of related parties, country of origin, etc. However, while the FDI norms do not make a mention of platform liability[8], the proposed amendment clearly enunciate the need for one.

 

Going further, the proposed amendment have a jurisdictional overlap between the proposed Data Protection Authority (DPA) (under the Personal Data Protection Bill, 2019), and the Consumer Protection Authority. Section 5, clause 14(a) of the proposed amendment venture into aspects of data sharing and processing (based on consent), whose nuances can best be dealt with only a DPA, and an overarching data protection law.

 

Lastly, the overlap with competition law explored above, also brings the CPA in conflict with CCI, possibly contributing to more “forum shopping” and delaying strategies.

 


Conclusion


Post feedback to the draft Rules, the expectations would consist of a softer regulatory touch for e-commerce until more important legislations are passed, and of CCI developing greater expertise in digital markets. Any focus on consumer protection must be exclusive, and consumer-centric. This may draw from the EU’s the New Deal for Consumers[9], a legislation on consumer protection in e-commerce. It focuses on transparency in marketplaces and advertisements, terminability of online contracts, robust grievance redressal and compensation, and uniformity in quality.

 

As for the regulation of e-commerce as a whole, relying on consumer protection alone takes a parochial view of supply side dynamics. Another EU model might serve as a reference for e-commerce regulation in this regard, with the proposed Digital Services Act package[10]. While the Digital Services Act regulates all online intermediaries and places strict obligations for large players, the Digital Markets Act emphasises on limiting the economic power of the major players, or “gatekeepers”. Thus, with 2 distinct laws, the package aims to empower consumers, foster greater transparency and accountability, and create equitable competition.


 

[1] Invest India, Retail and E-Commerce, available HERE .

See also Saritha Rai, P.R. Sanjai, Bhuma Shrivastava, 2020, “Asia’s Richest Man Takes on Amazon in India’s Booming Online Market” HERE (posted on 11-11-2020).

[2] Chawdhry, Mohit, 2021. Levelling the Playing Field between Traditional and Digital Businesses, Report Issue 009, New Delhi: Esya Centre. Available HERE.

[3] Competition Commission of India, 2020, Market Study on E-Commerce in India: Key Findings and Observations, New Delhi: Competition Commission of India. Available HERE .

[4] Cl. 3(1)(e), Consumer Protection (E-Commerce) Rules, 2020.

[5] Competition Commission of India, 2020, Market Study on the Telecom Sector in India: Key Findings and Observations, New Delhi: Competition Commission of India. Available HERE .

[6] Cl. 5(17), Consumer Protection (E-Commerce) Rules, 2020.

[7] The Hindu BusinessLine, 2021, “Anti-Competitive Practices: NRAI Files Plaint against Zomato, Swiggy” HERE .

[8] Consolidated FDI Policy, 2020, Chapter 5.2.15.2 E-Commerce Activities, Department for Promotion of Industry and Internal Trade.

[9] European Commission, 2019. Factsheet: New Deal for Consumers. Available HERE .

[10] Allen and Overy, 2020, “The Digital Services Act Package is Here”. Click HERE.

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