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Govt considering SEBI-like independent regulatory authority for e-commerce

This move comes after many allegations and subsequent investigations involving e-commerce giants like Amazon and Flipkart, although the government itself appears to lack consensus here. 

We missed this earlier: The Indian government is considering establishing an independent regulatory authority for e-commerce, the Ministry of Commerce and Industry said in a statement. The authority will be similar to the Securities and Exchange Board of India (SEBI), the government said.

What functions and powers will the proposed e-commerce regulator have?

The government has not shared many details on the proposed regulator apart from suggesting that it will be like SEBI. SEBI is a statutory regulatory body established in 1992 to regulate India’s capital and securities market and protect the interests of investors. Likewise, the proposed e-commerce regulator will likely be a statutory regulatory body established in accordance with an appropriate Act with the role of regulating India’s e-commerce space and protecting the interest of consumers. Using SEBI as a framework, we can expect the following:

The proposed e-commerce regulator can have powers in three areas:

  • Quasi-Judicial: This will allow the regulator to conduct hearings and deliver judgments related to illegal and unfair trade practices or violation of rules as far as e-commerce is concerned.
  • Quasi-Executive: This allows the regulator to enforce the regulations and judgments made and to take legal action against violators such as issue penalties or punishments. It also allows the regulator to carry out inspections and seek information needed for its investigations.
  • Quasi-Legislative: This gives the regulator the power to help frame new rules and regulations to protect the interests of consumers. It could be entirely new rules or amendments to existing regulations like the Consumer Protection (E-Commerce) Rules, 2020.

However, just like how the orders and directions issued by the SEBI can be challenged in the Securities Appellate Tribunal (SAT) and the Supreme Court of India, orders issued by the proposed e-commerce regulator will also have the scope for appeal.

Functions of the proposed e-commerce regulator: The government claims that the proposed regulator will protect the interests of the consumers. To do this, it will have the powers to regulate the operations of e-commerce platforms, online sellers, delivery and logistics services, and payment gateways.

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Structure of the proposed e-commerce regulator: Like SEBI, the proposed e-commerce regulator will probably have a chairman nominated by the government, officers from the Ministry of Commerce and Industry, and other members nominated by the government as well.

Don’t we already have CCPA?

The government in July 2020 established the Central Consumer Protection Authority (CCPA) to regulate and impose order or punishments on matters relating to violation of rights of consumers, unfair trade practices, and false or misleading advertisements. The CCPA does have sweeping powers to govern both brick-and-mortar and online retail, but the government is now considering establishing a regulatory body specifically for e-commerce.

Why is the government contemplating such a regulator for e-commerce?

The e-commerce space is rife with complaints and allegations from brick-and-mortar retailers and sellers on online platforms. Some of the main complaints are that large e-commerce platforms like Amazon and Flipkart are:

  • Indirectly running inventory-based models in violation of foreign investment rules
  • Engaging in predatory pricing and deep discounting
  • Giving preference to certain sellers in terms of lower fees and better search rankings
  • Starting competing brands using non-public sales data pertaining to sellers
  • Not addressing consumer grievances properly

In cognisance of these complaints, the government passed the Consumer Protection (E-Commerce) Rules, 2020 last year, and in June this year, proposed amendments to further strengthen these rules. Multiple stakeholders have submitted feedback on these proposed amendments, which are currently being reviewed by the government.

Separately, the Competition Commission of India (CCI) is also investigating Amazon and Flipkart for some of the complaints mentioned above.

Commerce minister Piyush Goyal has been vocal about his government’s stance towards large e-commerce companies. “Big companies wield a lot of power owing to large amounts of money with them, they are trying their best to maintain their free will in the e-commerce market. To hurt our small business and traders. And after a while, it causes harm to our consumers in the long term,” the minister recently said in the parliament, according to The Print.

In light of these circumstances, it only makes sense that the government is at least considering an independent regulatory authority to govern the e-commerce space.

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What’s the hold-up?

There appears to be a lack of consensus within the government. While the Department for Promotion of Industry and Internal Trade (DPIIT) is advocating for this new regulatory authority, some other departments within the government have suggested that CCPA take on the added responsibility rather than establishing a new authority, MoneyControl reported on March 18.

“A new regulator to administer the sector would effectively monitor whether e-commerce entities are complying with rules related to taxation, consumer rights, and foreign direct investment, all of which already have separate overseeing authorities. To avoid duplication of work, it has been suggested that existing government bodies such as the CCPA can do the job,” a senior official told MoneyControl.

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