e-commerce and Regulation

E-tail regulation might be split among 9 bodies

Each could handle a designated area, says note by consumer affairs ministry

To get over the ambiguity on regulation of the burgeoning e-commerce business, a note prepared for a committee of secretaries (COS) has designated nine departments in the government with specific areas and issues in the sector to handle and oversee.

E-commerce has become the fastest growing business in the country, coupled with blockbuster funding from domestic and foreign investors. It has also faced allegations of tax evasion and rule-breaking by major e-tailers.
The draft note, prepared by the ministry of consumer affairs, earmarks responsibility to each ministry or department on the area of regulation they would oversee for e-commerce companies.

1.      Thus, taxation-related issues will be regulated by the department of revenue.

2.      The Reserve Bank of India will monitor only issues involving foreign exchange and banking issues.

3.      The ministry of corporate affairs would look into all allegations and complaints about predatory pricing, unfair trade practice and criminal fraud.

SUPERVISING E-COMMERCE

·         Taxation could be looked after by the department of revenue. ·         RBI to monitor foreign exchange and banking issues ·         Consumer grievances and consumer protection to be under the ministry of consumer affairs

Many traditional retailers and consumer goods companies have complained that online retailers are involved in predatory pricing, selling below cost of acquisition to destroy their business.

The lack of licensing, the draft note argues, has made monitoring and supervision of e-retailing difficult.

4.      Issues regarding foreign direct investment (FDI) and policy on e-commerce would be under the ministry of commerce, department of industrial policy and promotion. Amazon.com, for one, has been lobbying for the relaxation of FDI norms for its business to consumer line. Presently, no FDI is allowed here in retail (B2C) but allowed in wholesale (B2B).

5.      Issues of data protection and cyber security would be handled by department of electronics and information technology. There has been a move by the government to ask e-retailers to set up data centres in the country, citing loss of business as most of these are located outside India.

6.      Advertising and guidelines would be handled by the ministry of information & broadcasting. Especially as e-commerce companies have become one of the largest advertisers, on television, print and the net, and are known for their aggressive stance. It has been observed that many of the rules governing the print and broadcasting business cannot be applied on internet advertising because of the relative anonynomity of the business.

7.      The ministry of consumer affairs has contended the operations of e-commerce are too diverse and complex to be under the purview of one ministry or department. Therefore, what is needed is clear demarcation of related activities, to be handled by different departments or ministries.

8.       The ministry says it would oversee all issues regarding consumer grievances and consumer protection. However, there is need for clarity in defining 'internal trade', especially with regard to e-commerce activities to be handled by department of consumer affairs.

9.       Database by statistics departments.

E-commerce in India was valued at $3 billion in 2014 and is expected to swell to $15 billion in two years.

Flipkart had fuelled a controversy when it unveiled a 'Big Billion Day' sale late last year, leading to complaints from consumers and allegations of predatory pricing. This led to traditional retailers lobbying against the online ones.

American giant Amazon has been facing scrutiny from state tax departments over the warehouses that store products from various sellers listed on it. Recently, reports surfaced of Flipkart and Amazon also being targeted for alleged tax evasion in Kerala.

-from business standard

Govt mulling regulatory regime for e-commerce

During any probe on online frauds, the government will be troubled by problems in accessing data on servers and data centres situated overseas. (Illustration: Shyam)

In a bid to effectively regulate the country’s e-commerce market, which has more than tripled in the last 4-5 years, the government is considering a regime where there will be a clear demarcation of the sector’s activities to be handled by different ministries and regulators.

Pointing out that e-commerce activities are very complex and diverse to be kept under the jurisdiction of a single department or ministry, the department of consumer affairs has moved a note for the consideration of the committee of secretaries (CoS) and sought approval for a proposal for clear allocation of business rules with respect to the sector.

Currently, there is no single law in the country to regulate, monitor and supervise e-commerce. Also, what is making monitoring a very difficult task is the lack of  a mechanism of registration/licencing of online retailers, sources said.

·         Besides, the government has taken note of online retailers cleverly taking undue advantage  by operating out of low tax regions, they said.

·         During any probe on online frauds, the government will be troubled by problems in accessing data on servers and data centres situated overseas, they said.

·         They added that all such issues necessitate clarity and formalisation in how different government departments handle e-commerce activities.

According to the consumer affairs department’s proposal,

1.      the department of revenue will handle taxation related issues,

2.      the Reserve Bank of India should look into banking and foreign exchange issues.

3.      The consumer protection issues will be taken care of by the consumer affairs department,

4.      foreign investment and trade policy will be under the purview of the commerce and industry ministry.

5.      The ministry of IT and telecom will handle data protection, cyber security and issues related to registration of server and websites,

6.      competition policy related matters will fall within the corporate affairs ministry’s jurisdiction.

7.      Criminal frauds will be looked into by the finance, corporate and home ministries.

8.      A database on the sector will be maintained by the statistics department,

9.      the information and broadcasting ministry will take care of advertising norms and related matters.

This kind of a system is needed in the future because most of the complaints related to the sector are being referred to the consumer affairs department on the contention that since the department looks into ‘internal trade’ matters, it should handle e-commerce matters, too, as such activities also constitute ‘internal trade’.

Existing shortcomings/ complaints:

1.      However, the consumer affairs department has asked for more clarity in the definition of ‘internal trade’. The department said though it can take care of consumer protection issues and grievances, e-commerce also has several other issues including tax evasion, online frauds, predatory business practices, data privacy/cyber security and FDI.

2.      On other problems related to e-commerce, the department said since there is no list of genuine/licensed online sellers, consumers do not have any mechanism to distinguish between genuine and fraudulent e-commerce players.

3.      Besides, many of the sellers also do not provide proper contact information, the department said.

4.      Also, consumers have been confused by different operating procedures followed by online traders for placing orders and purchasing, it said.

5.      The department added there are several complaints related to delivery of services and products as well as in cancelling orders and getting refunds for returned items.

6.      The department said small and medium enterprises (SMEs) with very limited resources are troubled by multiplicity of rules and regulations of e-commerce, and therefore are not able to make use of business opportunities.

- from Financial Express

E-commerce to be policed by up to nine government agencies including RBI, Home Ministry, Finance Ministry

NEW DELHI: A panel of top central government bureaucrats is set to soon consider a proposal for potentially extensive regulation of the country's ecommerce industry, a move certain to raise the hackles of the sector whose furious pace of growth has alarmed traditional businesses and spawned calls for greater oversight of their business practices.

The department of consumer affairs has mooted the proposal for final consideration of the highpowered committee of secretaries (CoS) that could bring ecommerce under the purview of up to nine government agencies and regulatory bodies, including RBI, home ministry, the department of revenue in the finance ministry, and ministry of corporate affairs.

All ministries concerned have been asked to give their inputs on the issue before it is taken up by the committee of secretaries, widely regarded as the most important decisionmaking body after the Union Cabinet.

At present, most complaints about the ecommerce sector are referred to the department of consumer affairs. However, this department argues in a draft note prepared for the panel that the ecommerce sector's operations were too complex to be under the purview of any single ministry and therefore "a clear demarcation of the activities of ecommerce should be handled by different departments".

The note also points out that the "complexity" and the "diversity" of ecommerce has created confusion about appropriate regulation, and the government therefore needs to demarcate the jurisdiction of various departments.

"The emergence of ecommerce has given rise to the need for specific guidelines of monitoring and regulation of the industry. However, at present issues linked to ecommerce do not come under the purview of a single legislation or department/ministry," the note added. The note, however, acknowledges that ecommerce firms have shown significant growth because of several advantages they offered consumers — notably easy and direct accessibility of goods across boundaries, wide and varied choices, affordable prices and savings. Experts decried the move to bring the sector under a regulatory umbrella.

"There are enough rules, the industry doesn't need any new rules. If the government has consumer protection in mind, we welcome steps which would reduce fraud across retail — both online and offline," said Arvind Singhal, chairman of retail consultancy Technopak.

"Online trade is a modern day reality and the government cannot put the genie back in the bottle. The beauty of ecommerce trade is the very fact that it eases buying and selling, and cuts time. The moment you push it under the heavy weight of regulations, they will only rob the ecommerce industry of its advantages over other forms of retail trade," Singhal said, adding that if the new rules were being made only at the behest of the traditional retailers, India's reputation would suffer in the minds of global investors.

The surging popularity of ecommerce among shoppers and the heady sales growth enjoyed by top players such as Flipkart, Amazon and Snapdeal has got traditional retailers to complain to the government about what they claim are unfair business practices employed by the online lot.

Traditional retailers have complained their online counterparts sell goods below cost and the predatory pricing disrupts their businesses.

India's ecommerce sector, according to government estimates, is expected to touch Rs 50,400 crore in sales by 2015-16 excluding tickets and online sales, up from around Rs 13,900 crore in 2012-13 — an annual growth clip of 50-55%. A recent report by Japanese bank Nomura forecast Indian ecommerce to be worth $43 billion in five years, of which nearly $23 billion will come from online retail. The principal protagonists in the sector have raised copious amounts of cash in 2014 — Flipkart, for instance, received about $1.9 billion in funding last year and saw its valuation leap nearly ten-fold in the space of ten months to $11 billion.

Despite the heady growth, the ecommerce sector is still just 0.5% of the overall retail industry, indicating the large headroom it has to grow.

·         The consumer affairs department's note highlighted that government agencies were increasingly complaining about issues in accessing data on servers or data centres of online retailers while investigating online fraud and also about the lack of mechanism for registration of online retailers due to which monitoring and supervision of the industry was very difficult.

·         Certain wings of the government also felt that due to the inherent anonymity and dynamic nature of the Internet, advertising laws and mechanisms that apply to print and electronic media platforms do not work well when it came to the ecommerce sector.

Various trade associations, consumer fora as well as members of Parliament have raised concerns about the functioning of ecommerce websites.

Traditional retailers have complained that the growth of online retail in the absence of specified regulations or permissions from local and state authorities was threatening their survival and thereby jeopardising the employment of 3.3 crore people.

The move to explore greater regulation in India comes at a time neighbouring China, home to the world's biggest ecommerce firm Alibaba Group, has also cracked down on the sector.

Earlier this week, the Chinese State Administration for Industry and Commerce accused Alibaba's consumer ecommerce platform Taobao of allowing unauthorised stores to sell counterfeit goods, due to what they termed as widespread bribery between merchants and Taobao employees.

- from Economic times