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Curb on flash sales, new compliance requirements: India’s proposed e-commerce rules explained

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The Ministry of Consumer Affairs, Food and Public Distribution has called for changes in Consumer Protection (E-Commerce) Rules, 2020 after complaints from small businesses alleging misuse of market dominance and heavy discount offers by online retail giants.

Curb on flash sales, new compliance requirements: India’s proposed e-commerce rules explained
The Central government on Monday unveiled its plan to make rules pertaining to e-commerce websites tighter.
This comes after complaints from small businesses alleging misuse of market dominance and offering of heavy discounts by online retail giants like Amazon and Flipkart.
The Ministry of Consumer Affairs, Food and Public Distribution has called for changes in Consumer Protection (E-Commerce) Rules, 2020. Under the proposed changes, certain flash sales will be banned, the registration details of online retailers will be updated and the companies will need to share information with government agencies.
Ban on flash sale
As per a Consumer Affairs Ministry statement, a “flash sale” is a sale organised by an e-commerce entity at significantly reduced prices, high discounts or any other such promotions or attractive offers. This sale is for a predetermined period of time on selective goods and services or otherwise with the intent to draw a large number of consumers.
Under the proposed rules, conventional e-commerce flash sales will not be banned. Only specific flash sales or back-to-back sales which limit customer choices, increase prices and prevent a level playing field won’t be allowed, according to the ministry statement.
The e-commerce giants organise several flash sales throughout the year, especially around the festival season. The government has proposed to impose curbs on such sales.
Appointment of Compliance Officer, Nodal Contact Person and Resident Grievance Officer
Taking a cue from the new IT rules, the Consumer Affairs Ministry too has planned to mandate the appointments of a grievance officer, a chief compliance officer, and a nodal contact person in e-commerce companies “for 24×7 coordination with law enforcement agencies”.
The ministry said that this would ensure effective compliance with the provisions of the rules and also strengthen the grievance redressal mechanism of e-commerce entities.
The new proposal also requires every e-commerce entity to provide government agencies with information within 72 hours “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.”
New rules for associate parties of e-commerce platforms
The new proposal will require asked e-commerce firms to make sure that no party associated with them is listed on their platforms as sellers for selling to customers directly. This may prohibit e-commerce companies from running their in-house or private labels.
Foreign e-commerce firms in India are neither allowed to hold inventory or sell directly to consumers. In order to bypass this, firms have operated through joint ventures with local companies that operate as inventory-holding firms.
The Central government has asked e-commerce platforms to ensure that they do not use any information collected through the platforms for the unfair advantage of related parties and associated enterprises.

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