The government is keen to support the growth of online trade, but its draft e-commerce rules could have the opposite effect. Freny Patel reports

India’s draft e-commerce rules have come under fire from industry experts who warn that, if passed in its current form, could hinder international business relations and impact investment in the country. Furthermore, the rules would not only have serious implications for India’s foreign direct investment (FDI) goals, but could also put unnecessary pressure on trade discussions. Industry representatives have asked for further modifications, with some suggesting the need to delete a few provisions. The draft Consumer Protection (E-commerce) Rules was announced in 2020 and amended on 28 June 2021.

In early September, Consumer Affairs Secretary Leena Nandan had told the media that the government would take a “balanced” approach when it came to finalising the amendments to the rules, aimed at protecting the interest of consumers. The government intended to come out with the best formulations from a consumer perspective, taking into account the wide and varied views received on the draft rules, Nandan had said.

The rules were meant to protect consumers interests, encourage free and fair competition in the market, bring transparency in e-commerce platforms, and further strengthen the regulatory regime. However, in the current form, the draft rules have instead had a tendency to hurt trade relations as they place numerous restrictions and impose compliance obligations on e-commerce players.

While it is difficult to predict the impact on trade between India and other countries, the federal government has received numerous representations and suggestions from governments and trade associations around the world, voicing their concerns that India has gone too far.

Australia was one of the countries that provided input on the proposed draft amendments to the Consumer Protection (E-commerce) Rules, 2020. In its submission on 6 July 2021, its government welcomed India’s efforts to strengthen online consumer protection, which an Australian Department of Foreign Affairs and Trade spokesperson said was “critical for building trust in digital trade”.

However, an Australian government spokesperson tells India Business Law Journal that “it has encouraged India to pursue policy measures that would achieve this outcome without imposing burdensome compliance costs on foreign companies, particularly small and medium enterprises”.

The Australian government had reportedly highlighted in its submission that the draft rules would “impose extensive extraterritorial obligations on foreign e-commerce entities operating in India”. It found the proposed amendments to be “overly prescriptive” and likely to “increase trade barriers”.

Since the rules are currently at the draft stage, “it is too early to say whether they would have any impact on trade or trade relations,” says Stuti Galiya, a Mumbai-based partner in Khaitan & Co’s corporate and commercial practice group.

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