Need to review draft e-commerce rules for progressive regulation: Experts

They say increase in liability and compliance burden may affect India's position as ideal place for global investments

There is a need to relook at the draft e-commerce rules for progressive regulation, according to various industry experts. The experts agreed that these rules will impact consumers, companies as well as investors. Moreover, the experts brought about the fact that over-regulation might hamper the functioning of the e-commerce ecosystem which has helped consumers and sellers in both the waves of the pandemic.

“There has to be harmony among various acts, otherwise the smaller e-commerce players will be overburdened with compliances,” said Dr Aruna Sharma, IAS, Former Secretary to the Government of India, at a session organised by The Dialogue, a tech policy think tank, to discuss the draft e-commerce rules announced by the government on June 21, 2021.

Physical shops and e-commerce will always co-exist, as certain consumers will always prefer to see the product in person before they buy it. But the preference will be more for e-commerce as consumers find the online shopping experience more convenient. 

“Many will be physical retailers and on e-platform as well,” said Sharma. “It saves time and also increases their choice.”

Jehangir Gai, a prominent consumer activist also stated that while a certain amount of regulation is required, the proposed rules will not only limit consumer options with respect to sales and discounts but also hamper the ultimate online shopping experience. Both online and offline markets should be able to always coexist. “Though the objective of the rules is laudable, there is a need to check the methodology,” said Gai. “So, let’s have meaningful regulation that safeguards the consumers without impacting the industry.”

Similar sentiments were echoed by Deepak Shetty, Director, Zed-Axis Technologies. Speaking on the rules, Shetty said there has to be a fine balance between capitalism and socialism. Regulations should not become myopic to a particular way of doing business. He said MSMEs (micro, small and medium enterprises) have survived the pandemic because of e-commerce. The e-commerce medium has allowed local sellers to expand their business by increasing their geographical footprints and reaching more people. “It’s essential to keep an open field and let a competitive environment flourish,” said Shetty.  “If we suffocate businesses, we’re going to stifle their creativity.”

The draft rules propose every e-commerce entity, which intends to operate in India, to register itself with the Department for Promotion of Industry and Internal Trade (DPIIT). The new rules have emulated the IT Intermediary rules governing social media companies in India which necessitates multiple levels of compliance including appointing officers such as a compliance officer and grievance officer.

The proposed amendments, such as those on mandatory appointment of a grievance officer, a chief compliance officer, and a nodal contact person “for 24×7 coordination with law enforcement agencies” for all e-commerce companies, will increase the compliance burden and may impact innovation. These mandatory compliances might make it difficult for small businesses as they have to hire dedicated people and increase overhead costs. Additionally, restrictions on flash sales, discounts on products, etc. might limit the choices and options for consumers and impact the buying experience.

Kazim Rizvi, Founding Director, The Dialogue, said with the growing demand of the online marketplace and its increased role in the growth of the economy, it is incumbent upon the government to keep online and offline marketplace on the same pedestal. “The rules should be drafted in such a manner that it does not increase the costs of operation and cater to the needs of small businesses and consumers,” said Rizvi.

Experts said that the increase in liability and compliance burden may affect India’s position as an ideal place for global investments. Possibilities of regulatory overlaps with the CCI (Competition Commission of India)  and other regulators could bring uncertainty and should be avoided in the draft rules. Experts said there is a need for enforcing stability and streamlining the policymaking process that can benefit this sector.