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'Flash Sales' may end soon, Govt. proposes changes in E-Commerce Rules

The Ministry of Consumer Affairs, Food and Public Distribution on Monday released a notification with proposed regulations for the E-Commerce industry. They are revised provisions for the Consumer Protection (E-Commerce) Rules, 2020 to make it more stringent. The rules are aimed to reduce fraudulent practices and increase consumer benefit. These rules have been drafted after many complaints received from small businesses against market domination by a few after the 2020 rules. 


The proposed revisions, released for stakeholders, will define terms like 'cross selling', 'fall-back liability', 'flash sale', 'mis-selling', and others to avoid misinterpretation. The ministry has proposed the ban on predatory ‘flash-sales’ or ‘back-to-back’ sales which limit customer choices, increase prices and prevent a level playing field. Conventional sales will still be allowed and the allowance of the big festival sales by the E-Commerce sites is not clear yet. 


“Flash sale” as defined by the notification, means "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 on selective goods and services or otherwise with an intent to draw large number of consumers.”


The Ministry also plans to ban ‘cross-selling’ practices which means sale of goods & services which are related or complimentary to a product purchased by a consumer at a time from any e-commerce entity with an intent to maximise the revenue of such an e-commerce entity. It prohibits ‘mis-selling’ and manipulated information to avoid customer discontent. ‘Mis-selling means ‘deliberate misrepresentation of information’ by e-commerce entities. 


The Rules also have a ‘fall-back liability’ provision. 


[This, according to the notification means that the liability of an e-commerce entity where a seller fails to deliver the goods or services ordered by a consumer due to negligent conduct, omission, or commission of any act which causes loss to the consumer.]


These will be prohibited, provided 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 its platform.


The draft rules incorporate the provision to appoint Chief Compliance Officer and a 24x7 nodal contact person in every e-commerce entity. The industry player would be needed to prepare a proper grievance redressal mechanism. Every entity also will have to get registered with the Department of Promotion of Industry and Internal Trade (DPIIT) for allotment of a registration number which would be displayed clearly on the website. This number will help in the verification and authentication of any website for the consumers before they make their purchase. 


The proposed changes direct for distinct identification of sponsored products with clear and prominent disclosures. The draft also has provisions related to imported goods. The e-commerce entities need to mention the name of the importer and country of origin. It also says that the entities should provide a filter mechanism for the country of origin at the pre-purchase stage. They should also provide a ranking for goods and services in a way that does not discriminate against domestic goods and sellers. 


The Confederation of All India Traders appreciated the proposed changes and said that they have been released after various rounds of deliberate discussions with the stakeholders. CAIT Secretary General Praveen Khandelwal in a statement said- "The new draft is a guiding stone to purify e-commerce landscape of the country which has been greatly vitiated by various e-commerce global companies to the extent that not only the domestic trade has been damaged but even the consumers are also feeling the heat of their unethical business practices.”


The proposed rules have been posted on the website of the Department of Consumer affairs in order to get feedbacks and suggestions from the stakeholders (within 15 days) till June 6.


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