E-commerce now is similar to the Internet in the early 2000s. Earlier this year, the Consumer Protection Act was amended to include new e-commerce laws.
India has a population of 600 million or 50% of its people on the internet. This has transformed the way businesses operate. Online business prospects are being explored by people of all sizes, from the tiniest to the largest retailers.
Why do we have to bring new E-Commerce Laws?
Since the turn of the century, e-commerce has been one of the fastest expanding industries. Because Amazon/Flipkart dominate India’s online retail sector, it was crucial to regulate these firms. They have approximately 65% of the Market Share.
These Marketplaces are known for their duopoly on the market and for their huge Flash Sales and Discounts offered by these Marketplaces. Huge discounts often hurt Small Businesses and MSMEs.
As part of the new e-commerce laws, participants are prohibited from selling the products of firms in which they own a stake and the amount of inventory that may be sold through a marketplace entity or its group companies is limited.
New E-Commerce Laws
1. No Private Labels:
- E-commerce marketplace businesses are specifically prohibited from selling private labels, which are brands they directly or indirectly control.
- E-commerce businesses would be prohibited from selling items obtained from firms in which they have an interest or influence. Bad for the Cloudtail/Appario Retail.
2. No Flash Sales:
- Exclusive events such as “Prime Day” and “Great Indian Festival” produce enormous sales volumes for these e-commerce platforms and are a major income generator.
- As a result of these proposed modifications, e-commerce platforms would be prohibited from allowing Flash Sales.
- By giving discounts, lower pricing, and other incentives, an e-commerce company can promote the sales of a single vendor or group of merchants.
3. No Exclusive Deals:
- E-commerce firms would be required to maintain a fair playing field and guarantee that they do not directly or indirectly impact the pricing of products and services, according to the government.
- To comply with the rules, no vendor can offer any goods and services exclusively on any marketplace platform. That means no sale of your favorite iPhone-13 on Amazon before it got released on its website.
4. No Manipulative Search Results:
- As a consequence, marketplaces may no longer influence search results to favor their own traders and sellers. This guarantees that new vendors will also be noticed and exposed on the marketplace, allowing them to succeed.
- It means there will be no Cloudtail products will be on the first place when you first see the products on the marketplace.
Concerns regarding these Laws
1. Escalating Government Intervention:
- The e-commerce sector has been subjected to a slew of proposed restrictions (e-commerce policy, FDI requirements, Personal Data Protection Bill) during the past few years.
- An industry-wide licensing regime (before the LPG era) might be created by the new E-commerce regulations if regulators are granted more power, which could again constrain competition and harm consumers’ interests.
2. Discourage Investments:
- India is a growing economy, we should welcome investments more and should do everything so that corporates can see the profits in their investments, this will also help MSMEs.
- These revisions would discourage e-commerce firms and sellers from investing.
How will these laws help small sellers?
Having tried E-Commerce myself, it’s true that some seller like Cloudtail has advantages on the Amazon Marketplace, same goes to Flipkart and other large Marketplaces, they usually gave products in huge discounts, which woo the small sellers from getting seen.
It’s good news for smaller merchants on online marketplaces, who have been complaining about the preferential treatment they’ve received from Flipkart and Amazon.
Services like shipping, warehouses, and simple financing options will now have to be available to all vendors on an e-commerce platform and not just those that are favored.
For these services, e-commerce businesses are prohibited from charging extra fees to third-party merchants.
Conclusion
The nature of marketplaces is that many of the sellers are Micro, Small and Medium Businesses (MSMEs). Each seller can now compete on an even playing field, enabling them to take advantage of the reach of online commerce.
Government should also create a regulatory agency to monitor the flouting of e-commerce regulations, but not too many regulations, or it will be just like the licensing era.
These complicated restrictions may have unexpected impacts on a sector that has grown and developed to empower both consumers and sellers over the past few years, despite the noble goal of protecting consumer interests.
Let’s see how it all rolls out.
