India plan for tighter e-commerce rules faces internal government dissent -documents

Altex Industries

21/09/2021 10:09

* Finance ministry objects to 12 curbs drafted by consumer
ministry -memo
    * Three key Indian govt departments object to new rules
-memos
    * Proposals had already drawn protest from Amazon, Tata
    * Rules needed in sector set to be worth $188 bln -consumer
min

 (Adds consumer affairs ministry reaction in para 11, 19)
    By Aditya Kalra
    NEW DELHI, Sept 21 (Reuters) - India's plan to tighten rules
on its fast-growing e-commerce market has run into internal
government dissent, memos reviewed by Reuters show, with the
Ministry of Finance describing some proposals as "excessive" and
"without economic rationale".
    The memos offer a rare glimpse of high-stakes policy-making
governing a market already featuring global retail heavyweights
from Amazon  AMZN.O  to Walmart  WMT.N , plus domestic players
like Reliance Industries  RELI.NS  and Tata Group. The sector is
forecast by Grant Thornton to be worth $188 billion by 2025.    
    It's not clear how the objections from the finance ministry
- a dozen in total - will ultimately be reflected in the
proposed rule changes, first floated in June https://www.reuters.com/world/india/india-plans-tighter-e-commerce-rules-amid-complaints-over-amazon-flipkart-2021-06-21.
 But watchers of the influential government arm say its
complaints won't fall on deaf ears in the upper echelons of
Prime Minister Narendra Modi's administration.
    "The ministry of finance raising such concerns would likely
spur a rethink of the policy," said Suhaan Mukerji, managing
partner at India's PLR Chambers, a law firm that specialises in
public policy issues.
    India in June shocked the e-commerce world with proposals
from its consumer affairs ministry that sought to limit 'flash
sales', rein in a push to promote private-label brands push and
raise scrutiny of relationships between online marketplace
operators and their vendors. There is not yet a formal
implementation timeline for the new rules.
    Though the rules were announced after complaints from
brick-and-mortar retailers about alleged unfair practices of
foreign companies, they also drew protest from Tata Group, with
more than $100 billion in revenue https://reut.rs/3hQinGB, which
is planning an e-commerce expansion.
    But the finance ministry, the ministry of corporate affairs
and the federal think-tank NITI Aayog - an active player in
policy-making - have all raised objections in memos reviewed by
Reuters, saying the proposals go far beyond their stated aim of
protecting consumers and also lack regulatory clarity.
    An Aug. 31 memo from the Finance Ministry's Department of
Economic Affairs said the rules appeared "excessive" and would
hit a sector that could boost job creation as well as tax
revenue.
    "The proposed amendments are likely to have significant
implications/restrictions on a sunrise sector and 'ease of doing
business'," said the three-page memo. "Care needs to be taken to
ensure that the proposed measures remain 'light-touch
regulations'."
    The finance ministry did not respond to Reuters' requests
for comment.
    A spokesman for India's consumer affairs ministry said in a
statement that "internal discussions among various stakeholders
including government agencies is (a) sign of mature and healthy
decision making process in a democracy." 
        
    'UNPREDICTABILITY' IN POLICY-MAKING
    Voicing its own objections on July 6, NITI Aayog's vice
chairman, Rajiv Kumar, wrote to Piyush Goyal, who is minister
for commerce as well as consumer affairs minister, saying the
rules could hit small businesses.
    "Moreover, they send the message of unpredictability and
inconsistency in our policy-making," Kumar wrote in the letter,
a copy of which was reviewed by Reuters.    
    Minister Goyal and NITI Aayog's Kumar did not respond to
Reuters requests for comment. 
    The arguments put forth by the finance ministry and NITI
Aayog are in line with concerns raised by sector operators, and
even the U.S. government https://reut.rs/2n6rBoM. They say New
Delhi has in recent years changed e-commerce policies too often
and taken a hard-line regulatory approach that especially hurts
American players.
    But Indian consumer affairs minister Goyal https://reut.rs/39lsazN
 and brick-and-mortar retailers disagree and have repeatedly
said big U.S. firms have bypassed Indian laws https://reut.rs/3EBODqI
 and their practices hurt small retailers.
    The consumer affairs ministry has said the new rules were
aimed to "further strengthen the regulatory framework" and were
issued after complaints of "widespread cheating and unfair trade
practices being observed in the e-commerce ecosystem."  
    Its statement said a large number of state governments,
industry bodies, e-commerce companies and others have supported
the regulations and the ministry wants to have the best workable
rules for consumers and business.
    
    FLASH SALES, REGULATORY OVERLAP
    But the proposals have met with resistance in more than one
ministry.
    In a July 22 memo, the corporate affairs ministry objected
to one proposed clause to be enshrined in new rules that says
e-commerce firms should not abuse their dominant position in
India. The ministry said the provision was "unnecessary and
superfluous", and that the subject was best handled by India's
antitrust watchdog.
    "It is undesirable to introduce a mini-competition law
regime in the consumer" rules, said the memo. The corporate
affairs ministry did not respond to Reuters requests for
comment.
    The finance ministry has taken a much harder stance on the
proposals and raised a total of 12 objections.
    Among them, it said, a proposal that makes online shopping
websites liable for its sellers' mistakes would be a "huge
dampener" and could force companies "to revisit their basic
business models".
    It also lodged a protest against the banning of flash sales,
which see deep discounts on offer on websites like Amazon and
are popular during festive seasons. 
    "This is a normal trade practice. The proposed restriction
... seems without economic rationale," the ministry wrote.

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
FACTBOX-India's new e-commerce rules that could jolt foreign,
local players     urn:newsml:reuters.com:*:nL3N2O41NH
ANALYSIS-India e-commerce rules cast cloud over Amazon, Walmart
and local rivals    https://reut.rs/3CwhryM
SPECIAL REPORT-Amazon documents reveal strategy to dodge Indian
regulators      https://reut.rs/3EBODqI
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Aditya Kalra in New Delhi; Editing by Kenneth
Maxwell)
 ((aditya.kalra@tr.com; +91-11-49548021; Twitter @adityakalra;))