It has been close to two weeks ever since the leaked draft e-commerce policy ignited havoc in the e-commerce sector of India, especially for the leading ones like Amazon, Flipkart and many alike.
One of the major problems that the government E-commerce policy wants to fix in the e-commerce sector is deep discounting practised by the large e-commerce entities that keep small offline and online merchants concerned.
As a part of the policy, the government will also overlook the problem of fake products being sold online. Another key aspect would be data storage as the policy suggests, all data should be stored in India only.
The government has also appointed a group of secretaries to work on the e-commerce policy. These secretaries will be sent to various government departments for accumulating feedback.
As published across multiple media platforms, the Department for Promotion of Industry and Internal Trade (DPIIT) has also been conducting discussions to finalise the policy.
Potential general implications of the E-Commerce Policy:
Based on the coverage by various media houses in India, the draft e-commerce policy leaked to the press outlines many implications including:
- All e-commerce operators will need to register with the government of India. And the measurement of the e-commerce entities will be carried by the concerned agencies.
- E-commerce entities will need to ensure that their algorithms are not biased hence not prioritising any vendors. And should implement transparent policies on discounts.
- For the protection of the consumers, the government will lay strong directives for e-commerce players – ensuring sellers’ products are genuine, and e-commerce players will co-own in the liability for counterfeits in case of end-to-end fulfilment.
- The new policy also plans to empower the government to periodically notify which sellers fall under the definition of associates and related parties, and stipulates that actions and things that cannot be done by the platform entities can neither be done by any of its associates and related parties.
- E-commerce players cannot directly or indirectly influence the price of the goods or services and must maintain a level playing field. They also cannot falsely represent themselves as consumers or post reviews on their behalf.
- India’s e-commerce foreign-direct-investment (FDI) rules don’t allow online marketplaces to hold an inventory of their own or influence the price of products sold. They also prohibit group companies or entities in which marketplaces have control of inventory to sell on their platforms, among other things.
- The government will also build a strong ground to promote e-commerce by providing offline sellers with an opportunity to sell online as well – countering monopolies.
- The government will also offer express-delivery service from India Post and integrate government interfaces for ease of e-commerce exports.
- The Standing Group of Secretaries on e-commerce (SGoS) will recommend e-commerce policy changes.
- The FDI policy will supersede the E-Commerce policy in case of inconsistencies.
What triggered the need for E-Commerce Policy?
- Regular complaints from brick-and-mortar retailers alleging online giants like Amazon and Walmart’s Flipkart for scorning federal regulations.
- Various investigations by India’s competition watchdog and the Enforcement Directorate – keeping check of business practices of Amazon and Flipkart.
- Allegations from various e-commerce merchants of Amazon that say that the e-commerce giant favours its large sellers like ‘Cloudtail’ and ‘Appario’ on its platform.
- Numerous Indian offline traders also complain about steep discounts offered by online companies, which smaller retailers have not been able to match.
It is important to note that the homegrown e-commerce giant Flipkart, has been restructuring its B2B business by suggesting its large seller to source products directly from the brands and manufacturers in order to reduce compliance risk ahead of its IPO.
In November 2019, the government released a draft E-Commerce policy that says, FDI in e-commerce will only be allowed for the marketplace model and not for inventory-based selling. This simply signifies that the large e-commerce players including Amazon and Flipkart will be barred from maintaining their own inventory and sell thereof.
What the industry says?
According to various reports, homegrown e-commerce players including Snapdeal, and Paytm Mall have found the leaked e-commerce terms agreeable, unlike the case with foreign-funded players like Amazon and Flipkart.
Salman Waris, Managing Partner at technology law firm TechLegis Advocates and Solicitors, in a statement to Asia Times Financial, opined,
“This will likely spell trouble for players like Amazon and Flipkart that are often accused by brick-and-mortar players of resorting to predatory pricing by offering discounts clandestinely via the sellers on their platforms, in violation of the FDI rules,”
“The e-commerce players, however, have denied the charges,” Waris added
Atul Pandey, partner at Khaitan and Co, in a statement to Business Standard, said,
“The policy aims to bring transparency in operations of online retailers. It will prevent sales of counterfeit products, which is a step in the right direction. According to the draft, the government could appoint an agency that would identify e-commerce entities indulging in hosting sales of pirated products through their portal.”
Ankur Bisen, the senior vice president of the retail consultancy firm Technopak, told Asia Times Financial,
“A lot of things are lying open-ended, and significant consensus needs to happen between the Government and the players. In broader terms the policy is not forward-looking. [Besides] whether an algorithm could be used to favour some vendors or not is a business decision that should be left to players. Being a business organisation, a business can always favour one or more vendors. The entire dimension of the algorithm issue is contentious and it is not the job of the government,”
Shiv Joshi, spokesperson for Retailers Association of India, said,
“We appreciate the government’s position on FDI rules governing retail Industry in India. We recommend that the government should ensure better implementation of the policy in letter and spirit. We strongly believe that the FDI rules applicable to retail should be the same across channels to facilitate a uniform consumer experience and ensure market balance,”
Praveen Khandelwal, Secretary General, CAIT (Confederation Of All India Traders), in a statement said,
“They (Amazon and Flipkart) are openly flouting norms and have treated India as a banana republic. I’m pleased to see that things are moving in the right direction now, and final discussions are going to be held with stakeholders and others. It shows the government’s intention that it will come out with a new Press Note and a robust e-commerce policy.”
A statement from an anonymous analyst, as published on Mint, said,
“The draft is a chat commentary on creating a level playing field. But even domestic players are getting international capital, and the lines are blurring. So, by tightening ownership norms, the government is killing the spirit of ‘free capital’ needed for the growth of the industry,”