E-com players rue government’s new policy on flash sales, operations

The proposed new e-commerce rules have upset e-commerce players operating in India. Companies including Amazon and Flipkart are protesting against the new rules proposed by the Consumer Affairs Ministry. The government has received numerous complaints from e-commerce companies who believe the new rules impact India’s e-retail market, expected to be worth $200 billion by 2026.

Vague classification of ‘conventional flash sales’

One of the biggest contentions of e-commerce companies is the ban on flash sales on their platforms. The government has clarified the new rules do not ban ‘conventional’ flash sales only specific flash sales or back-to-back sales which limit customer choice, increase prices and prevent a level playing field are not allowed. However, e-commerce companies say the government has not clarified the classification of ‘conventional flash sales’.

Secondly, e-commerce companies argue the decision to allow e-commerce companies to keep flash sales data a secret is vague. They are not sure about the government’s decision to permit e-commerce companies to announce discounts on their platforms. The government has said, this decision will be taken on the basis of consumers’ response. This leaves a lot of scope for government intervention on the matter, say e-commerce companies.

Ban on associated parties to disrupt e-commerce operators

The draft rules also ban parties related to the e-commerce companies and their associated enterprises from being listed as sellers on marketplaces. Earlier, the government had directed e-commerce companies including Amazon to reduce their stake in preferred sellers to 24 per cent. However, the new rules completely ban e-commerce companies from holding any stake in their sellers. This is likely to disrupt e-commerce companies and compel them to restructure operations. The rule holding e-commerce marketplaces responsible for sellers’ activities has also a bug bear as they argue being marketplace they are only responsible for hosting sellers, and should not be held accountable for sellers’ actions

Wrongful petition by offline retailers

E-commerce companies allege the new rules are a result of strong lobbying by brick and mortar sellers, who have been complaining e-commerce has taken away their business via ‘unfair’ means. However, e-commerce companies argue their share in overall Indian retail market is minimal. Citing figures from a recent report by Statista, companies reveal, pre-pandemic, e-commerce’s share in retail was 3.6 per cent which rose to 10 per cent during the pandemic. It has now stabilized at 5 per cent. In comparison, e-commerce penetration in US’ retail market pre-pandemic was 11 per cent. It rose to 22 per cent during the pandemic and has now stabilized at 17 per cent.

E-commerce companies are also protesting against the antitrust investigations launched by the Competition Commission of India into the business practices of Amazon and Flipkart and have initiated legal action against this rule.