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Proposal to Ban ‘Flash sales’ on E-commerce Sites

Proposal to Ban ‘Flash sales’ on E-commerce Sites

Why in news?

  • The government proposed changes to the Consumer Protection (e-commerce) Rules 2020, banning all “flash sales” in order to monitor the deep discounts offered on e-commerce websites.

Key changes

  • Registration mandatory: E-commerce companies would need to register with the Department of Promotion for Industry and Internal Trade (DPIIT).
  • Selling goods & services to sellers not allowed: No marketplace e-commerce entity shall sell goods or services to any person who is registered as a seller on its platform.
  • Sharing of information:  E-commerce companies would also have to share information with the “Government agency, which is lawfully authorized for investigative or protective or cyber security activities, for the purposes of verification of identity, or for the prevention, detection, investigation, or prosecution, of offences under any law for the time being in force, or for cyber security incidents”. The information sought by the Government agency will have to be produced by the e-commerce company “within 72 hours of the receipt of an order from the said authority”.
  • Appointment of officers for coordination with law enforcement agencies: On the lines of IT intermediary rules, e-commerce companies will need to appoint a grievance officer, a chief compliance officer, and a nodal contact person “for 24×7 coordination with law enforcement agencies”.
  • Push for domestic goods: E-commerce firms should mention the name and details of any importer from whom it has purchased such goods or services.
  • Resident grievance officer must be a company employee and a citizen of India and serve as the nodal point of contact for law enforcement agencies.
  • Data not to be misused: E-tailers cannot mislead consumers by manipulating search results on their platforms.
  • Final liability on the marketplace: In the event a seller fails to deliver a good or service, the final liability will fall on the e-commerce marketplace.
  • Cross-selling details to be revealed: E-tailers engaged in cross-selling of goods or services will have to disclose to its users, by providing the name of the entity providing data for cross-selling, as well as the data used for cross-selling on the platform.
  • No differentiated treatment by logistics providers: No logistics service provider of a marketplace e-commerce entity shall provide differentiated treatment between sellers of the same category.

What are flash sales?

  • A “flash sale” is defined as a sale organized by an e-commerce entity at significantly reduced prices, high discounts or any other such promotions or attractive offers for a predetermined period of time                Proposal to Ban ‘Flash sales’ on E-commerce Sites
  • This has been proposed to make the existing e-commerce norms more stringent, by ensuring that these firms do not use data collected through their business for “unfair advantage” and prevent any possible links they may have with traders selling goods and services on their platforms.

Reasons for the change

  • Conventional flash sales by third party sellers are not banned on e-commerce platforms but only the predatory ones.
  • Small businesses complain of misuse of market dominance and deep discounting by e-commerce marketplaces such as Amazon and Flipkart.
  • The Ministry of Consumer Affairs has been receiving complaints against widespread cheating and unfair trade practices being observed in the e-commerce ecosystem.
  • Certain e-commerce entities are engaging in limiting consumer choice by indulging in ‘back to back’ or ‘flash’ sales wherein one seller on a platform does not carry any inventory or order fulfilment capability but merely places a ‘flash or back to back’ order with another seller controlled by platform.

About Consumer Protection (E-Commerce) Rules, 2020

  • The Consumer Protection (E-commerce) Rules, 2020 are mandatory and are not advisories.
  • The rules Apply to all e-commerce retailers, whether registered in India or abroad, offering goods and services to Indian consumers.
  • E-commerce entities need to appoint a nodal person, resident in India to ensure compliance with the provisions of the act or rules.
  • The sellers through the e-commerce entities will have to display the total price of goods and services offered for sale along with the break-up of other charges.
  • Expiry date of the good needs to be separately displayed.            Proposal to Ban ‘Flash sales’ on E-commerce Sites
  • All relevant details about the goods and services offered for sale by the Seller including country of origin and in case of imported goods the name and details of the importer, and guarantees related to the authenticity or genuineness of the imported products need to be provided to enable the consumer to make an informed decision at the pre-purchase stage.

Significance

  • This would ensure effective compliance with the provisions of the Consumer Protection Rules, 2020 and also strengthen the grievance redressal mechanism.
  • The proposal comes at a time when large e-commerce marketplaces are being investigated by the Competition Commission of India (CCI) for alleged abuse of market dominance and giving preferential treatment to sellers in which they hold indirect stakes.

 

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