E-commerce: Don’t let Protectionism Drive Policy

It is hard to imagine how prohibiting high discounts and attractive offers is supposed to protect consumer interests. It is easier, however, to imagine how this move can help the “offline” stores in their competition against the online ones

The new rules also mandate e-commerce companies to provide a domestic alternative for any imported goods or services offered for sale. Consumer protection rules imposed on e-commerce firms should not be used for the atmanirbhar and swadeshi drive.Perhaps the most contentious rule, which highlights a misunderstanding of how marketplaces work, is the “fallback liability” clause. In short, this clause makes the e-commerce entity responsible for the goods and services sold by sellers registered on the platform. This is not dissimilar to holding a mall responsible for the products sold by individual retail shops within it. This is impractical and unfair to the marketplace.Further, there is an array of rules that increase compliance requirements, such as registering with the department for promotion of industry and internal trade, mandatory partnering with the National Consumer Helpline, and the appointment of compliance officers. Every e-commerce platform must appoint a chief compliance officer (who will be liable for third party information on the platform), nodal contact person (to coordinate with law enforcement), and a grievance officer.In the final analysis, though, these rules will fail the test of necessity and proportionality. Most e-commerce firms have fairly robust systems of customer care, which consumers can approach for grievance redressal. Further, e-commerce platforms facilitate refunds and returns in cases where customers are dissatisfied with the products. Beyond that, they have built a network where users rate and review both products and sellers of the products that can provide crucial information to any potential customers.

It would behove the government to withdraw most of these proposed rule changes, as the veneer of consumer protection peels away rather easily to reveal the underlying protectionist motivations.Read the full article here