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US lobby group says proposed e-commerce rules are a cause for concern: Report

US-India Business Council (USIBC), a lobby group part of the United States Chamber of Commerce, said that India’s proposed amendments to the e-commerce rules are a cause for concern and will lead to a stringent operating environment for companies, Reuters reported.

India’s Ministry of Consumer Affairs on Monday proposed amendments that give the existing Consumer Protection (E-Commerce) Rules, 2020 more teeth. The proposed changes include new rules to address abuse of FDI regulations, the establishment of a grievance redressal mechanism, new display and labelling criteria for foreign goods, the prohibition of flash sales, and data protection for customers, among other things.

USIBC, of which Amazon and Walmart are members, described the rules as concerning and in line with India’s stance on other big digital companies, Reuters reported based on internal emails it reviewed.

Will preclude platforms from owning vendors: USIBC noted that India’s proposals “preclude (e-commerce) platforms from owning vendors,” the report stated. The Indian government’s Foreign Direct Investment (FDI) policy outlines that e-commerce companies with FDI like Amazon and Walmart-owned Flipkart can only operate as marketplaces for third-party sellers and cannot operate an inventory-based model where they sell directly to customers. But brick-and-mortar retailers have accused Amazon and Flipkart of getting around this by setting up complex ownership structures and giving preference to a select group of sellers that are indirectly owned or controlled by them. Reuters in February reported that thirty-five sellers, Cloudtail one of them, accounted for two-thirds of Amazon’s sales in India.

Significant limits on sales: The email also said the proposed changes “includes several concerning policies, including significant limits on platforms’ ability to organise sales and handle grievances,” the report added. The draft rules prohibit flash sales, which are defined as sales “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 a large number of consumers” provided that such sales are organised “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.” This could potentially disallow Amazon from running its Prime Day sales or lightning deals and Walmart’s Flipkart from running its Big Billion Days.

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Similar to rules for social media platforms: Some of the rules are similar to those that apply “for social and digital media companies … and will result in a more stringent e-commerce regime,” Reuters reported USIBC as saying. Akin to the grievance redressal mechanism established in the Information Technology (IT) Rules, 2021 that apply to social media intermediaries, the proposed changes to E-Commerce Rules will require platforms to appoint employees who are Indian residents to the following roles: chief compliance officer, nodal contact person, and resident grievance officer.

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