Don’t let the new e-commerce rules ruin innovation

Source: Livemint

Relevance: Implications of Consumer Protection (E-Commerce) Rules, 2020.

Synopsis: Small internet outlets have flourished lately, but may find their operations hampered by compliance burden under the Consumer Protection (E-Commerce) Rules, 2020.. A brief look at some problematic provisions.

Background
Reason behind increase in online businesses in India
  • The internet has made it easier for anyone to monetize their passion than ever before. Anyone can post a product online and dozens of people will be willing to buy it.  This removed much of the pain once associated with starting a new business.
  • In India, the proliferation of digital platforms means, every element of the commercial workflow is readily available as a disaggregated service that anyone who cares to use can access. This has made it possible for small businesses to take advantage of the web without the help of platforms like Shopify.

For example: Most home-food businesses use Instagram as their menu, displaying their dishes on the app as a series of images or short videos to select from. Others use Instagram Stories or WhatsApp Blasters to announce spot sales.

  • Unlike elsewhere in the world where small businesses need to sign up to large digital platforms, in India they can assemble the services they need into customized digital workflows tailored to meet the unique requirements of their businesses. This allows them to set up fully functional stores at a fraction of the cost that platforms like Shopify charge.
    • A digital workflow is the automation of a company’s processes and the internal steps needed to get its business done.
How the draft ecom rules can create problems?

The draft ecom rules apply to all entities that “own, operate or manage digital or electronic facilities or platforms for electronic commerce”, which implies that services such as those described above would fall within its ambit—as they make “digital or electronic facilities” for electronic commerce available to small home chefs and micro businesses. This can cause the following problems:

  • Increased compliance burden: What this means is that all these services will have to appoint nodal and grievance officers in much the same way as big e-commerce players do. While all these compliances make sense in the context of large marketplace websites that display the goods of multiple sellers on their website, they are counterproductive when applied to digital services that offer commercial workflows to help small businesses manage their orders, payments and deliveries.
  • Cost of compliance: The cost of putting in place these processes will shut down these services, leaving the small businesses that rely on them without the technical support they need to sustain their operations.
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