Dipping a cautious toe in the e-commerce swamp

By Manisha Singh and Simrat Kaur, LexOrbis
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The Open Network for Digital Commerce (ONDC) aims to democratise e-commerce and improve sellers’ visibility and portability of trust. A non-profit company, ONDC plans to help the vast number of kirana or small, neighbourhood, retail stores to sell digitally and unlock the immense potential of e-commerce. ONDC targets the e-commerce duopoly of Amazon and Walmart by decentralising and diluting the concentration of power.

Manisha Singh, LexOrbis
Manisha Singh
Partner
LexOrbis

Every seller on the network is visible. Any seller on a marketplace platform that is a network participant has full access to any other participating platform. Sellers keep customer trust from all previous dealings, whichever platform they use for a particular transaction. ONDC will enrol buyers, sellers – whether marketplaces or e-commerce inventory entities – and search and payment gateways. Delivery providers may also join. Kirana stores without digital and delivery infrastructure can join the network and sell their products online. ONDC will help catalogue their products. Buyers choose their deliverer from the network; the deliverer collects from the kirana store and delivers to the buyer. Any participating online business, whether it has its own e-commerce presence and whichever marketplace platform it uses, will be visible to all other network participants, no matter which platform they are on.

This is a model for which there is no global precedent, but may mirror India’s own Unified Payments Interface (UPI). ONDC will encourage a presently untapped source of e-commerce, but the question is whether ONDC will be as successful in e-commerce as UPI has been with payments. Digital trading sells and delivers real goods with attendant problems of quality and counterfeit. Which platform should offer redress to a buyer in one marketplace when they receive goods that are not of the proper standard or fake from a seller in another marketplace? ONDC’s 2022 consultation paper envisages there being a transaction level contract between the seller side app and the buyer side app governing each sale.

Simtrat Kaur, LexOrbis
Simrat Kaur
Associate Partner
LexOrbis

A major issue is ONDC’s own responsibility and compliance. It is unclear whether it is a marketplace e-commerce entity, falling under the Consumer Protection Act, 2019, and an intermediary under the Information Technology Act, 2000. The paper emphasises the importance of trust, particularly in ONDC’s core principles. These seem to rely greatly on a public good approach.

ONDC sees itself as an enabler, not operating platforms or interfaces with end users. It only helps participants join the network and facilitates the creation of an open governance framework. Building and running such a framework is left to the participants through their own issue and grievance management (IGM) systems. This hands-off approach not only relieves ONDC from registering under the acts above, but also from complying with the Consumer Protection (E-Commerce) Rules, 2020. It will not have to implement a grievance redress system as required of intermediaries, nor a notice and take down mechanism to combat counterfeiting and infringing. These requirements make marketplace e-commerce entities and intermediaries more accountable. They protect consumers in the digital world as in the real world. The paper issued by the ONDC suggests that it will not be a controller.

The issue and grievance management (IGM) system ONDC proposes is a three-stage process. If a consumer’s issue cannot be resolved internally, the consumer may take it to the grievance redress officer of the network participant, who will evaluate liability if accepted and resolve the issue. If no network participant accepts liability, the complainant may use an online dispute resolution mechanism where the network participants help resolve the dispute through conciliation, mediation or arbitration. If the dispute is unresolved, the aggrieved party may resort to litigation.

This appears ineffective. Leaving construction, supervision and regulation to network participants seems inconsistent with ONDC’s objectives. It is questionable whether the system will establish sufficient, if any, trust. Far from being a game changer, ONDC may simply look on, as cheats, fraudsters and counterfeiters take advantage of the lack of effective regulation. ONDC and its government sponsors should be worried that it is a toothless tiger from the outset. Urgent review is needed.

Manisha Singh is a partner and Simrat Kaur is an associate partner at LexOrbis.

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