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Flipkart, Amazon may be hit by proposed ban on flash sales, stricter rules

E-commerce firms including Walmart-owned Flipkart and Amazon India will likely take a hit if the consumer affairs department’s proposed changes – including a ban on flash sales and curbs to scaling up private labels – get the go-ahead.

According to the changes under the Consumer Protection Rules, 2020, e-tailers would be barred from offering ‘flash sales’ for any goods or services on their platforms. They will also face difficulty in scaling up private brands, especially those that are synonymous with the name of the firm.

ET has seen a copy of the note.

The department has sought feedback from all stakeholders, including ecommerce firms, on the changes by July 6.

The Ministry of Electronics and IT and the commerce ministry are also expected to discuss with the Department of Consumer Affairs on the matter, sources told ET.

Previously, the government had framed rules to discourage deep discounting by ecommerce platforms. But this is the first time that it has categorically proposed to bar flash sales.

Flash sales are typically planned ahead of the launch of new smartphones or other devices. Only a limited stock is released during such events. Flash sales create a buzz among consumers because of the discounts that come with new launches.

These are key events as they push sales in an important category for e-tailers – smartphones — their largest revenue segment.

Flipkart and Amazon India did not immediately respond to ET’s queries.

According to the note, flash sales have been described as events with the ‘intent to draw a large number of consumers’ at ‘significantly reduced prices.’

Industry executives said the proposed changes favour offline retailers as they have the discretion to hold any flash sale-like event.

Ever since the government amended the foreign direct investment rules for ecommerce in 2019, e-tailers have voiced concern and they have also not been enthusiastic about some of the changes it had been planning over the last 12-18 months. The latest move is another step in the same direction, sources aware of the matter said.

Public policy experts and lawyers also said the changes were ‘wide-ranging’ and would have ‘significant implications’.

Private labels

The changes also cover private brands.

“Ecommerce firms shall not use information collected by marketplace ecommerce entities, for sale of goods bearing a brand or name which is common with that of the marketplace ecommerce entity or promote or advertise as being associated with the marketplace ecommerce entity, if such practices amount to unfair trade practice and impinges on the interests of consumer,” according to the note.

The note also outlines changes that are in the domain of antitrust practices in the purview of the Competition Commission of India (CCI). It has also ventured into areas like how to treat consumer consent for their data and whether or how that data can be shared with others.

E-commerce platforms, as per the note, also should share data and relevant details ‘as soon as possible, but not later than seventy-two hours of the receipt of an order’ if any law enforcement agency demands it with valid reasons.

“This will be challenged within ministries itself. Of course, the ecommerce companies will also oppose it in their feedback. It’s not clear yet how flash sales would be anti-consumer,” a public policy official who tracks ecommerce said.

“Some of the compliances are already in place and it may add another layer of process if the proposed changes are implemented,” an executive at an ecommerce firm said.

Other proposed amendments say ecommerce firms must appoint grievance officers and compliance officers while they also register with the Department for the Promotion of Industry and Internal Trade.

Besides, a firm with dominant position in any market shall not be allowed to ‘abuse its position’.

The consumer affairs department has also reiterated some of the requirements that were mentioned in Press Note 2 for foreign ecommerce firms. A seller, if it is a related party, should not sell on the same e-commerce platform, it said.

“At first glance it will be interesting to see how practically these changes will be implemented. These changes are wide-ranging and will have significant implications,” said Archana Tewary, partner, J Sagar Associates.

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