Flash sales may face axe! Govt moves new e-commerce rules

E-commerce websites like Flipkart and Amazon occasionally host flash sales. However, this might come to an end as the government is planning to introduce strict rules for these e-commerce platforms. With the new norms, the websites will not be permitted to hold any sort of flash sales.

In a bid to curb widespread cheating and unfair trade practices in the ecosystem, the government has proposed several tweaks to e-commerce rules. Among the changes proposed are a ban on certain kinds of flash sales and punitive action against the platform if sellers don’t deliver, according to a statement issued by the Food and Consumer Affairs Ministry on Monday.

“The prevalence of such unfortunate incidents has negatively impacted the consumer and business sentiment in the market, causing immense distress and anguish to many. It was observed that there was an evident lack of regulatory oversight in e-commerce which required some urgent action. Moreover, the rapid growth of e-commerce platforms has also brought into the purview the unfair trade practices of the marketplace e-commerce entities engaging in manipulating search result to promote certain sellers, preferential treatment to some sellers, indirectly operating the sellers on their platform, impinging the free choice of consumers, selling goods close to expiration etc,” the ministry said.

Additionally, conventional flash sales by third party sellers are not banned on e-commerce platform. But, certain e-commerce entities are engaging in limiting consumer choice by indulging in “back to back” or “flash” sales wherein one seller selling on 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. This prevents a level playing field and ultimately limits customer choice and increases prices.

To protect the interests of consumers, prevent their exploitation and encourage free and fair competition in the market, the Government of India is sharing a draft of the proposed amendments to the Consumer Protection (E-commerce) Rules, 2020.

Flash sales and other proposed changes to e-commerce rules

1) An appointment of a Chief Compliance Officer, a nodal contact person for 24×7 coordination with law enforcement agencies, officers to ensure compliance to their orders and a Resident Grievance Officer for redressing the grievances of the consumers on the e-commerce platform, has been proposed. This would ensure effective compliance with the provisions of the Act and Rules and also strengthen the grievance redressal mechanism on e-commerce entities.

2) Putting in place a framework for registration of every e-commerce entity with the Department for Promotion of Industry and Internal Trade (DPIIT) for allotment of a registration number which shall be displayed prominently on the website as well as invoice of every order placed the e-commerce entity.

3) Registration of e-commerce entities would help create a database of genuine e-commerce entities and ensure that the consumers are able to verify the genuineness of an e-commerce entity before transacting through their platform.

4) Mis-selling has been prohibited i.e selling goods and services entities selling goods or services by deliberate misrepresentation of information by such entities about such goods or services.

4) All sellers on marketplace e-commerce entities and all inventory e-commerce entities to provide best before or use before date to enable consumers to make an informed purchase decision.

5) If an e-commerce entity offers imported goods or services, it shall incorporate a filter mechanism to identify goods based on country of origin and suggest alternatives to ensure fair opportunity to domestic goods.

6) To ensure that consumers are not adversely affected in the event where a seller fails to deliver the goods or services due to negligent conduct by such seller in fulfilling the duties and liabilities in the manner as prescribed by the marketplace e-commerce entity, provisions of Fall-back liability for every marketplace e-commerce entity have been provided.

The government has sought views and suggestions on these amendments to the Consumer Protection (E-commerce) Rules, 2020, within 15 days (by July 6, 2021).