WHAT DOES THE GOVERNMENT’S PROPOSAL ON BAN OF FLASH SALE MEAN?

INTRODUCTION

The Indian Government has suggested a series of reforms to the e-commerce regulations of the nation to safeguard the customers and prevent unfair trade practices throughout the online shopping environment. The most notable measures recommended by the Ministry of Consumer Affairs consist of a ban on some types of flash sales and disciplinary action on the e-commerce platforms if a vendor fails to deliver the products or keep the commitments made on the platform.

The regulations came after the traditional merchants complained that the global e-commerce giants were evading Indian legislation by exploiting complicated business models. As per the government, the recommended amendments seek to increase “transparency in e-commerce platforms and further strengthen the regulatory regime.”1

On the suggested amendments, the government has solicited input, comments, and recommendations. People can provide their thoughts on the subject to the authorities by the 6th of July, 2021.2

WHAT’S THE NEED?

The frequent occurrence of malpractices by the e-commerce giants is having a detrimental influence on customers and the business morale of the market, bringing great grief and agony to many people. Some of the cases of malpractices involved buyers claiming to be given a false iPhone 11 Pro brought during Flipkart’s Big Billion Days Sale and has uploaded a video detailing the reasons for which he believes the product is fake.3 Similar to this case, a resident of Delhi purchases an iPhone 11 through Amazon’s Great Indian Festival Sale but received a counterfeit product instead.4 These issues of customer fraud are one of the reasons, the government is going tough on the e-commerce giants.

Furthermore, according to research company techARC, resellers on prominent e-commerce platforms like Amazon and Flipkart are turning to fraud. Around 40-45 percent of online smartphone sales are fraudulent conducted by resellers and only about 20-22 percent of the sales are through online websites and the rest are sold offline.5 What they are doing is, when a new smartphone is exclusively introduced online or a flash sale or a special discount sale occurs, they are buying the cell phones in excessive quantity using several accounts. They are then resold offline at a higher cost and generally at a premium because they are at present “out of stock” on online sites.6 Therefore, both the customer as well as the brands are deceived.

As per the government, it was discovered that there was a clear absence of regulatory control in the e-commerce sector which necessitated immediate action. Furthermore, the sudden rise in e-commerce channels has brought to spotlight their trade malpractices such as manipulating search results to endorse specific retailers, giving priority to some retailers, operating retailers through indirect means, interfering with customer’s freedom of choice, selling products that are about to expire and so on.

DOES THE BAN IMPOSE THAT ALL SALES WILL BE BANNED?

Conventional flash sales by third-party sellers are not banned. However, some e-commerce platforms are restricting the choice of the customer by engaging in “back-to-back” or “flash” sales in which a retailer on the website who is having insufficient inventory to fulfill the order, places a “flash or back-to-back” order with another retailer on the website. This denies an equal platform, limiting consumer options and raising the costs. The recommended amendment describes a “flash sale” as an e-commerce platform’s offering of drastically lowered costs, large discounts, or other such special schemes for a limited period.

WHAT OTHER AMENDMENTS ARE PROPOSED?

The administration has also suggested a prohibition on mis-selling of products and services supplied on these channels as one of the main changes. The term “mis-selling” refers to an e-commerce business that sells products or services by intentionally misrepresenting the facts. The channels which engage in “cross-selling” must offer appropriate disclaimers that are easily visible to the consumers. Cross-selling refers to the selling of products or services that are linked to or complementary to a customer’s purchase from an e-commerce platform with the goal of increasing the earnings of that platform.

It also proposes that deceptive ads be prohibited from being displayed or promoted. Foreign products or services must also include the name and information of the importers as well as the ‘country of origin’ and also provide a filter system that will identify items depending upon their ‘country of origin’ and offer alternative options.

Furthermore, it has suggested ‘ranking’ for products and services provided on the websites with the ranking standards guaranteeing that local items and retailers do not face discrimination or bias. Also, to guarantee that customers are informed about the expiration date of the items that they are purchasing on the e-commerce website, every retailer would be required to provide a “best before” or “use before” date, allowing customers to make an accurate and aware purchase selection.

The government also recommends ‘Fall-back liability’ for all e-commerce businesses, to guarantee that customers are not harmed if a retailer is unable to provide products or services owing to irresponsible behavior by the retailer in performing the responsibilities as defined by the e-commerce organization.

In terms of the registration of the organization, the ministry has suggested that every e-commerce business wishing to function in India must register with the Department of Promotion of Industry and Internal Trade (DPIIT).7 The government has also recommended that e-commerce firms guarantee that these registration numbers and transaction invoices are posted noticeably to consumers on their website in a clear and accessible way.

This registration would aid in the creation of a directory of legitimate e-commerce businesses and will allow the customers to check the authenticity of the organisation before carrying out transactions on the website.

CONCLUSION

According to the government, these proposed amendments will not allow the dominating e-commerce platforms to misuse their dominance and influence and to safeguard the rights of consumers and prevent their exploitation. It also aims to increase the transparency on the platforms and enhance the regulatory system to combat the unfair trade practices that are prevalent at present and to foster free and fair competition.

Author(s) Name: Subhankori Banerji (Student, Bennett University, Greater Noida)

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References:

1 Government proposes ban on flash sales and other changes to e-commerce rules in India | 91mobiles.com

2 Flash Sales Proposed to Be Banned on E-Commerce Websites as Government Plans to Tighten Rules | Technology News (ndtv.com)

3 User Claims to Receive Fake iPhone 11 Pro From Flipkart’s Big Billion Days Sale, Shares Video | Watch | India.com

4 Man orders iPhone 11 via Amazon Great Indian Festival sale; Gets fake iPhone instead: Know details | Technology News – India TV (indiatvnews.com)

5 Reseller fraud boosts smartphone sales on Amazon India, Flipkart — Quartz India (qz.com)

6 Smartphone Fraud Exposed: Flipkart, Amazon Resellers Are Cheating Brands And Consumers – Trak.in – Indian Business of Tech, Mobile & Startups

7 https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1729201

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