New Delhi: India’s plan to tighten the rules for its fast-growing e-commerce market has met with dissent within the government, as Reuters-verified memos show that the Treasury Department described some proposals as “exaggerated” and “without economic justification”.
The memos offer a rare glimpse into the high stakes policymaking that rules a market that already includes global retail heavyweights from Amazon to Walmart, as well as domestic players like Reliance Industries and Tata Group. Grant Thornton estimates the sector at $ 188 billion by 2025.
It is not clear how the Treasury Department’s objections – a dozen in total – will ultimately be reflected in the proposed rule changes, which were first published in June. However, observers from the influential government arm say his complaints will not fall on deaf ears in the upper echelons of Prime Minister Narendra Modi’s government.
“The Treasury Department, raising such concerns, would likely encourage a rethink,” said Suhaan Mukerji, managing partner of PLR Chambers, a law firm specializing in public policy, India.
India shocked the e-commerce world in June with proposals from its Department of Consumer Affairs aimed at limiting “flash sales”, curbing private label promotion and reviewing relationships between online marketplace operators and their vendors. There is still no formal implementation period for the new rules.
Although the rules were announced following complaints from brick-and-mortar retailers about alleged unfair practices by foreign companies, they also sparked protests by the Tata Group, with sales of more than $ 100 billion, planning to expand e-commerce.
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But the Treasury Department, the Department of Corporate Affairs and the federal think tank NITI Aayog – an active player in policy making – have all objected in memos reviewed by Reuters, stating that the proposals go far beyond their stated goal of protecting consumers and are lacking regulatory clarity.
An August 31 memo from the Treasury Department of Commerce said the rules were “excessive” and hit a sector that could boost job creation and tax revenue.
“The proposed changes are likely to have significant implications / constraints on a future sector and ‘ease of doing business’,” the tripartite memo states. “Care must be taken that the proposed measures remain ‘light regulations’.”
The ministry did not respond to Reuters’ request for comment.
“Unpredictability” in Policy Making
On July 6, NITI Aayog Vice Chairman Rajiv Kumar voiced his own objection and wrote to Piyush Goyal, Minister of Commerce and Consumption, saying the rules could affect small businesses.
“They also send the message of unpredictability and inconsistency in our policy-making,” wrote Kumar in the letter, a copy of which has been verified by Reuters.
Kumar von Goyal and NITI Aayog did not respond to Reuters requests for comment.
The consumer ministry, which drafted the rules, did not respond either. His secretary, Leena Nandan, told Indian media this month that stakeholders had expressed “wide and varied views” on the proposed new rules, but that there was no timetable for announcing their implementation.
The Treasury and NITI Aayog’s arguments are consistent with concerns of sector operators and even the US government. They say New Delhi has changed e-commerce policy too many times in the past few years and has taken a tough regulatory approach that is particularly harmful to American gamblers.
But Indian Consumer Affairs Minister Goyal and brick and mortar retailers disagree, and have repeatedly said that large US companies have circumvented Indian laws and their practices are harming small retailers.
The consumer ministry said the new rules aim to “further strengthen the regulatory framework” and were issued following complaints about “widespread fraud and unfair trading practices in the e-commerce ecosystem”.
Flash sales, regulatory overlap
But the proposals have met opposition in more than one ministry.
In a July 22 memo, the Department of Corporate Affairs rejected a proposed clause to be included in new rules that says e-commerce companies should not abuse their dominant position in India. The ministry said the provision was “unnecessary and redundant” and the issue would be best dealt with by India’s antitrust authorities.
“It is undesirable to introduce mini-competition law into consumer regulations,” the memo said. The Department of Corporate Affairs did not respond to Reuters’ requests for comment.
The Ministry of Finance has judged the proposals to be much harsher and raised a total of 12 objections.
A proposal that would make online shopping websites liable for the mistakes made by their sellers would be a “huge damper” and could force companies to “rethink their basic business models.”
It also protested the ban on flash sales, which offer deep discounts on sites like Amazon and are popular during the holiday season.
“This is normal trade practice. The proposed restriction … appears to be without economic justification,” the ministry wrote.