Protecting consumers: Rules for ecommerce must be comprehensive, clear

The recent ecommerce draft guidelines, brought out by the Bureau of Indian Standards (BIS), are a move in the right direction at a time when online shopping in India is witnessing fast growth. The self-regulatory rulebook is aimed at addressing concerns of consumers as well as other stakeholders, and are, therefore, well meaning. However, the involvement of multiple ministries and departments in framing policies and rules, whether mandatory or self-regulatory, sends out a confusing signal. For instance, the ecommerce policy is still being made at the commerce and industry ministry. Without that umbrella policy, the guidelines framed by the BIS, which functions as a statutory body under the Ministry of Consumer Affairs, Food and Public Distribution, may translate into a piecemeal exercise. An early release of the ecommerce policy will bring greater transparency to regulations.

 

As for the latest draft guidelines, to which the industry can respond by mid-February, an effort must be made to tweak the rules in a way that they address the varied business models followed by ecommerce companies. The diverse models have evolved over time. How a large online marketplace operates is very different from a food-delivery platform. And how a niche inventory-based single-brand fashion e-commerce company runs its business has no similarity to a quick commerce entity’s operations. Therefore, the guidelines must factor in these variations to help e-commerce businesses stay nimble while protecting consumers from fraudulent practices.

 

Estimated at around $137 billion, India’s ecommerce market is projected to expand at a compound annual growth rate of over 20 per cent between 2025 and 2030. The BIS has taken note of this growth in ecommerce to frame the guidelines for self-governance, citing challenges in consumer protection and trust. The draft outlines a framework with a three-phase approach covering pre-transaction, contract formation, and post-transaction stages. Each phase would require elaborate compliance processes by ecommerce platforms, including KYC (know your customer) checks on business partners/sellers, product listings, details on seller contacts, a level playing field for all stakeholders, among others. While some of the proposed steps like having a human interaction for help/guidance would be useful for a large majority of the buyers, others like stating the carbon footprint in product labels and online platforms could be challenging.

 

Despite its recent high growth, the size of the ecommerce market in India is still a fraction of the country’s retail sector, which was estimated at around $950 billion last year. This leaves a huge window of growth in ecommerce, especially with increasing internet penetration and adoption of smartphones. With that in mind, regulatory intervention in e-commerce should be light-touch so that businesses, a large part of which are startups, are not stifled with multiple compliance obligations. However, the government and the stakeholders must work together to ensure consumer protection across the retail universe, both in physical stores and ecommerce platforms, in terms of quality of products, return and refund policy, and payment issues. For that to be enforced with zero tolerance for violations, a central regulatory body has to be put in place with powers to penalise errant businesses. Rules made by different ministries and departments would only end up complicating business processes, increasing compliance costs, and thwarting growth in a sector that has shown promise.