Govt proposes ban on mis-selling, fraudulent flash sales on e-commerce platforms

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New Delhi: The Centre on Monday proposed amendments to the Consumer Protection (E-Commerce) Rules, 2020 and sought public comments on banning mis-selling and fraudulent flash sale of goods and services on e-commerce platforms, and also on making registration of these entities mandatory with DPIIT.

Ban on misleading users by manipulating search results, appointment of chief compliance officer and resident grievance officer are some of the other amendments being proposed.

The Consumer Protection (E-Commerce) Rules, 2020 were first notified in July last year. Their violations attract penal action under the Consumer Protection Act, 2019.

E-commerce entities are also required to provide information not later than 72 hours of the receipt of an order from a government agency for prevention, detection and investigation and prosecution of offences under any law, as per the proposed amendments.

“Views/ comments/ suggestions on the proposed amendments may be sent within 15 days (by July 6, 2021) by email to js-ca@nic.in,” Anupam Mishra, joint secretary in the consumer affairs ministry, said in a public notice.

Among the key amendments, the government has proposed ban on mis-selling of goods and services offered on such platforms. Those engaging in ‘cross-selling’ will have to provide adequate disclosures to users displayed prominently.

The government also seeks to ban ‘flash sales’ on e-commerce platforms if such sales are organised by fraudulently intercepting the ordinary course of business using technological means with an intent to enable only a specified seller or group of sellers managed by such entity to sell goods or services on the platform.

Meanwhile, a senior official said e-commerce companies will still be around, sales would still be around and consumers will get the best sales.

Only impractical, predatory deep-discounted sales meant to benefit only certain pre-fixed businesses through use of back-end IT mechanisms and that prevent other businesses from participating in selling to consumers will be banned, the official added.

The proposed amendment defines ‘flash sale’ as that organised by an e-commerce entity at a significantly reduced prices, high discounts or any other such promotional offers for a predetermined period of time.

Cross-selling means sale of goods/services which are related or complimentary to a purchase made by a consumer at a time from any e-commerce entity with an intent to maximise the revenue of such entity.

‘Mis-selling’ means an e-commerce entity selling goods/services by deliberate misrepresentation of information. The government said it will not allow e-commerce entities that hold a dominant position to abuse its position.

On registration of entities, the government has proposed that every e-commerce entity which intends to operate in India has to register itself with the Department for Promotion of Industry and Internal Trade (DPIIT) within such period as prescribed by DPIIT for allotment of a registration number.

Currently, e-commerce entities are registered under the Companies Act, Indian Partnership Act or Limited Liability Partnership Act and not separately with DPIIT.

The government has proposed that e-commerce entities should ensure that such registration number and invoice of orders are displayed prominently to its users in a clear and accessible manner on its platform.

It has also proposed a ban on display and promotion of misleading advertisements. E-commerce entities offering imported goods/services will also have to mention name and details of the importers and the ‘country of origin’.

Besides, it has proposed ‘ranking’ for goods and services offered on the platforms while ensuring that the ranking parameters do not discriminate against domestic goods and sellers.

Further, the government has proposed amending the Rules to ensure ‘sponsored’ listing of products and services are distinctly identified with clear and prominent disclosures, and entities are banned from using any information collected through their platform for ‘unfair’ advantage of related parties or associated enterprises.