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E-commerce: Don't Over-regulate But Let It Expand Consumers' Choice

India emerging as the world's largest market, logging the highest growth and galloping to a five trillion-dollar economy soon, can hardly afford to dampen the pace

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The government is working on amendments to the Consumer Protection (E-commerce) Rules, 2020 to prevent unfair trade practices in e-commerce and protect consumers consumer's interests. While the underlying purpose is understandable, it should be noted that any overregulation in a sunrise sector can dampen growth.

One example is in a potted plant, roots encircling the growing seeded plant like a dense, tangled spiralling mass, allowing little or no space for further growth, making it dry or stunted. 

Competition is meant to expand consumers' choices, with information and freedom to choose. Information asymmetry and unfair trade practices can distort informed decisions, which must be curbed. 

Various platforms participating in the e-commerce ecosystem work to increase and facilitate choices for participating enterprises and consumers. ONDC being promoted by the government is another step in the same direction.  

It is critical to clarify the distinct roles of the platform(s) and the participants in an e-commerce ecosystem. Obligations and liabilities of each of these marketplace entities should be based on a simple consideration– "which entity is best placed to bear the underlying risk?" the answer is obvious- "the entity that can control/mitigate the risk". 

In a fast-evolving sector like e-commerce, any over-regulation may lead to micro-management, discouraging the actual enterprise needed for building a robust ecosystem and logistics serving all its constituents.  

For the growth of this industry, regulation should pass the test of enabling in nature. It would do well to provide just the guardrails at the extreme edges. Over-regulation can stifle the market to the detriment of both the seller and the consumers. 

If the number of such participants reduces, it may result in lesser choices for the consumers and lesser activity on the platforms. In the long run, platform(s) may even be forced to exit, entirely removing the element of broader consumer choice. At the same time, transparent and symmetrical availability of information underpins consumer choice. Consumer choice is the best manifest form of consumer protection.  

The platform's role is a neutral entity - providing a place for participants to have an online presence. The two broad types of participants - sellers and buyers - come to this space with their respective expectations. 

Sellers need to provide product information symmetrically and buyers need to be able to view the sellers' offerings in a non-discriminatory/non-preferential manner. The buyers should be able to decide based on complete information of available choices.  

The consumer is best served if one gets the correct price-value-quality combination, for which one must have a choice of available alternatives, adequate information about each of the options and, to the extent possible, feedback from other users/consumers who have already tried the product.

Finally, the buy-sell matching should lead to reliable exchange conditions for equitable growth, i.e., timely payment and delivery.  

Therefore, the platform expects to provide consumers with all three in a transparent and symmetrical form. Thus, the platform must offer a technology-based/virtual space where one reliably finds the product of their interest (and available alternatives). And when one decides to purchase, the product is delivered in the promised timeline. 

Sellers, too, must be required to meet the same set of information standards. In all fairness, the product's content/representation and quality must remain the participants' responsibility. And in a situation of multiple buyers-seller possibilities (and indeed, multiple platforms), the chances of monopolistic behaviour, cartelisation or any other unfair trade practices would become minimal, if not negligible.    

Therefore, if a platform is asked to bear the liability of poor workmanship, quality, negligence or omissions in the product sold, it would be unnecessarily onerous and beyond its capacity. That said, the platform must be liable to see that the seller is caused to provide adequate product information in a consistent format so that the chances of mis-selling are minimised. 

Similarly, the platform carries obligations to comply with various provisions of the IT Act, which a seller cannot be expected to meet. It is essential to remind ourselves that, apart from the distinct roles, the e-commerce marketplace is an ecosystem that does not operate in isolation.  

Any arrangements entered between a platform and a participant in the nature of unfair trade practice and/or abuse of dominant position(s) would attract the provisions of existing legislation that govern commercial transactions. 

More importantly, we have a well-defined and evolved Competition Law, which has always taken a nuanced approach in its verdicts and intensive advocacy based on scientific market studies. 

In conclusion, a well-working, competitive, vibrant online marketplace that enables consumer choice is the best assurance of consumer interest. Overregulation or constant policy changes may lead to uncertainties and dampen FDI and growth. 

India emerging as the world's largest market, logging the highest growth and galloping to a five trillion-dollar economy soon, can hardly afford to dampen the pace.    

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Dhanendra Kumar

The author is the former Chairman of the Competition Commission Of India (CCI) and India's Executive Director on the World Bank Board.

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