The rising issues surrounding the regulation of e-commerce giants have been a supply of debate amongst Indian policymakers for a number of years. Regardless of efforts to draft a concrete e-commerce coverage, a consensus stays elusive each throughout the nation and globally (in WTO). A draft e-commerce coverage was first proposed in 2018 after which in 2019, however the sector has modified manifold since then. A brand new draft should even be in concord with the continued parallel dialogue of proposed amendments/revisions within the Shopper Safety (e-commerce) Guidelines 2020.
As India grapples with shaping e-commerce rules, a number of challenges demand cautious consideration to steadiness selling truthful competitors, defending shopper pursuits and welcoming long-term capital. Proposed amendments of June 2021 by the Division of Shopper Affairs aimed to handle issues raised by home brick-and-mortar retailers about anti-competitive practices, deep reductions, and predatory pricing by e-commerce entities. Small sellers on these platforms even have voiced complaints, alleging preferential remedy given to associate-sellers of the platforms. Many e-commerce entities have opposed the proposed amendments.
Analysing deep reductions
Within the proposed Shopper Safety (E-Commerce) Guidelines, the contentious provision that might prohibit market-distorting deep reductions has garnered vital consideration. Whereas the intention could also be to guard conventional brick-and-mortar retailers, it’s essential to reassess its affect on customers and small companies.
Guarding towards anti-dumping practices is necessary (through the use of anti-dumping duties to safeguard home manufacturing), however curbing “truthful” reductions will stifle the aggressive spirit of the market. Wholesome competitors ensures high quality items at reasonably priced costs, notably in retail, which finally advantages customers.
Furthermore, many e-commerce sellers are SMEs and small-scale companies that depend on these platforms to achieve a wider viewers and improve their market scope. Emphasising aggressive benefit for e-commerce gamers advantages these small gamers, enabling higher income prospects and bettering export competitiveness. Limiting reductions might impede the federal government’s efforts to advertise native sellers and MSMEs, hampering their digital accessibility and development.
Opposite to the misperception that e-commerce reductions are killing retail in India, solely about 15 per cent of the inhabitants devour/purchase items by digital markets, based on a Deloitte India report this yr. As an alternative of restrictive insurance policies, selling adherence to truthful pricing mechanisms and high quality requirements would assist. Moreover, competition-related points ought to contain an intensive consultative course of with market regulators just like the CCI to make sure well-balanced insurance policies. Worldwide examples of deep discounting legal guidelines like within the EU and Australia can be checked out, that are market-agnostic and never particularly focused in direction of e-commerce or digital markets.
The associated events conundrum
The continuing discussions additionally converse of a clause directing an outright ban on the associated events, which had seen solely a “appreciable” restriction within the 2021 draft. “Associated Events” beneath the Firms Act 2013 consists of any firm which is— (A) a holding, subsidiary, or an affiliate firm of such firm; or (B) a subsidiary of a holding firm to which it is usually a subsidiary.
If logistics tie-ups or logistics operations performing as a subsidiary of the dad or mum e-commerce firm is perceived as a associated get together beneath the parameter of a potential ban that may probably dry out the environment friendly logistics and provide chain operations of the e-commerce entities. Essentially the most essential side of any e-commerce operation is the immediate supply of products with dependable monitoring options and fast and simple returns. Such in-house logistics operations have additionally helped additional last-mile supply of products and merchandise. These constructive points can turn into restricted if e-commerce platforms withdraw management of the provision chain logistics operations. This won’t simply disrupt the continued cycle of well timed deliveries however hurt shopper pursuits as nicely.
Strategy to rules
In accordance with the Centre for Monitoring Indian Financial system (CMIE), the full worth of recent personal sector funding proposals in 2022 noticed an increase. That stated, the variety of proposals has been comparatively small. This might imply companies have assets to speculate however are actually extra centered and selective about investments. Furthermore, personal investments as a share of GDP have declined in the previous few years. The underlying problem could be how the businesses have been monitored amid the tightened regulatory surroundings.
Making certain shopper safety is undeniably an important accountability of the federal government, and any measures geared toward safeguarding customers would undoubtedly garner business help. Nevertheless, there’s a rising concern that among the proposed modifications in e-commerce rules could also be overly restrictive and lengthen past shopper safety. If these rules purpose to “test the affect” of worldwide gamers, a extra clear method could be to think about relooking at International Direct Funding (FDI) within the sector.
Lastly, the federal government should train warning to keep away from extreme interference out there. Whereas establishing regulatory frameworks is essential for making certain truthful competitors and shopper safety, it needs to be primarily reserved for occasions of disaster. As the federal government pushes its may out there by initiatives just like the Open Community for Digital Commerce (ONDC), potential conflicts of curiosity should even be addressed to make sure a degree enjoying discipline and foster wholesome private-sector competitors.
Embracing truthful competitors and equity for all traders whereas defending shopper pursuits by efficient dispute decision and awareness-building measures can pave the way in which for a thriving digital financial system in India.
Dr Srinath Sridharan is an creator, coverage researcher and company adviser
The opinions expressed on this article are these of the creator’s and don’t purport to replicate the opinions or views of THE WEEK.