E-tailers fear draft law may lead to price hike

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Widening of the definition of e-commerce to include kirana stores and small-time sellers will increase the compliance burden on them and may ultimately lead to price hikes, e-commerce companies and industry bodies have said. Industry stakeholders in their collective representation to the government, including the PMO, have also suggested many other changes in draft e-commerce rules (Consumer Protection Rules, 2020) that proposes to ban “fraudulent flash sales” and mis-selling of goods and services on e-commerce platforms.

Feedback and the suggested changes

Internet and Mobile Association of India (IAMAI), Confederation of Indian Industry (CII), US-India Strategic Partnership Forum and US-India Business Council in their feedback have unanimously said that the new rules are going to act as a key deterrent for the industry. Amazon India and Flipkart are the two major players in the Indian e-commerce domain.

The stakeholders said the proposed rules will lead to many roadblocks for small and medium enterprises (SMEs) who are taking to online selling.

As the country is trying to recover from the damages caused by the second wave of Covid-19, this could have a negative impact on such enterprises, they said.

E-commerce definition

According to the industry bodies, the definition of e-commerce is broad and inclusive of offline entities like kiranas (a family-owned grocery shop), which have a minuscule role to play in terms of online orders. They feel that by broadening this particular definition, small-time sellers will be forced to comply with the newly proposed rules, which will lead to a surge in their compliance burden and subsequently affect their ease of doing business.

They further noted that it will lead to a situation of uncertainty for both enterprises and e-commerce companies. This could also lead to possible hikes in prices and that will adversely impact the consumer, they added, At a time when the country is already reeling under the pressure of inflation and skyrocketing prices of fuel, more price hikes will lead to further distress from a consumer standpoint.

‘FDI violation’

The industry stakeholders further stated that fall-back liability on e-commerce for sellers violates the principles of foreign direct investment policy under Press Note 2 of 2018 which has already put a ban on the platforms from controlling the sellers.