Are the New e-Commerce Rules Curbing Online Shopping or Levelling Between Online and Offline Shopping?

Varnika Singh

INTRODUCTION

The government proposed changes to the Consumer Protection (e-commerce) Rules 2020 on 23^rd July 2020[1], outlawing any flash sales[2] in order to keep track of humongous discounts offered on e-commerce websites. The consumer affairs Ministry in its official statement stated that “Conventional flash sales by third party sellers are not banned on e-commerce platform. But certain e-commerce entities are engaging in limiting consumer choice by indulging in ‘back to back’ or ‘flash’ sales wherein one seller on a platform does not carry any inventory or order fulfilment capability but merely places a ‘flash or back to back’ order with another seller controlled by platform. This prevents a level playing field and ultimately limits customer choice and increases prices”[3].

This regulation shall apply to all e- commerce entities irrespective of the fact that they are based in India or not but the fact that they conduct any kind of business here in India.[4] “ E-commerce entity means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce, including any entity engaged by such person for the purpose of fulfilment of orders placed by a user on its platform and any ‘related party’ as defined under Section 2(76) of the Companies Act, 2013, but does not include a seller offering his goods or services for sale on a marketplace e-commerce entity,[5]”. There’s no denying that sales of e-commerce entities like this boost revenue for companies like Amazon and Flipkart—even if it’s primarily due to the marketing that tricks customers into spending a lot of money for a small amount of savings. However, the government is concerned that these platforms are utilising technological tools to manipulate these transactions for big vendors. Meanwhile, the government wants to safeguard traditional retailers and avoid a situation of monopoly and also not to restrict the freedom of choice of the customers.

FLASH SALES

“Flash sale means a sale organized by an e-commerce entity at significantly reduced prices, high discounts or any other such promotions or attractive offers for a predetermined period of time on selective goods and services or otherwise with intent to draw large number of consumers.[6]” When any E-Commerce site like Amazon, Myntra or Flipkart announce a sale where we get huge discounts on almost every thing; electronics, beauty items, footwear, clothes or home decoration stuff, all are on sale of huge discounts with offers like; Buy 2 Get 1 free, Flat 80% Off, Flat 70-40% Off. With catchy sale headings like End of Reason/Season sale, which automatically attracts people towards it because of it being a basic human tendency to get drawn towards lower prices for the same quality. No one in the world would like to buy the same commodity for Rs.1000 on discounted price whereas it’s actual or on store price might be around Rs.2000.

ADVANTAGES AND DISADVANTAGES OF FLASH SALES

One of the most significant advantages of flash sales, particularly for small businesses, is the increase in traffic to both websites and storefronts. For a limited time, the company is very visible to a big number of consumers who might not have considered purchasing their items otherwise. This enhanced exposure raises brand recognition and establishes the foundation for future transactions either in-store or via online payment processing. Companies aiming to expand their reach may use flash sales to boost income during slow periods and to reach out to specific groups of potential customers quickly[7]. In a research done on a small group of 46 hotels in 2016, the goal of this qualitative study was to look into the advantages, disadvantages, and performance metrics of hotel room inventory distribution through flash sales websites and results indicated that managers from independent hotel properties were happier with the flash sales experience than managers from branded properties.

But in some instances even big companies like Beats by Dr. Dre founded in 2016 which is a leading audio brand in the world right now. In April 2021, amazon reduced the prices of Powerbeats from 150 dollars to 80 dollars around Mother’s day which became a very affordable and a wonderful gift for mothers from their children. This increased the sales of this particular commodity which was not so when the prices were high[8]. So flash sales also can benefit big companies if the sale takes place at a particular point which will be beneficial for them as it is said; strike the iron when it’s hot and understanding the market forces of demand and supply.

Some businesses have discovered that flash sales offer more disadvantages than advantages. The surge in online traffic could strain servers that manage websites, payment processing, and merchant accounts. Businesses that rely on flash sales for revenue must learn to balance the risks in order to make a profit and keep clients over time. Also some mal practices could be followed by some customers, like they could the goods on sale in bulk and latter sell them in the open market at higher prices and make profits by selling them under their brand names. A situation like this can give rise to unhealthy competition in the market.

By looking at such aggressive discount prices a question pops up that how can an object of say Rs.2000 be sold at Rs.600 after discount? Is 2000 rupees the actual price of that good or has it been put up to lure the shoppers and make them feel that they are buying such a costly garment for such a cheap price?

To answer questions like this, and to not let unfair trade practices or cheating or fraud or misrepresentation the Consumer Protection (E- Commerce) 2020 has been devised. The older act of consumer protection, 1986 did not cater to the present situation, to the growing online arena and the advent of Coronavirus in December 2019 and the imposition of nation-wide lockdown further forced people to shift from offline to online shopping because they had no choice. But this act will help the native people to get back on the track and come down to level field with the online world. Because as computers can never replace books, as very well said by Julian Barnes, “Books look as if they contain knowledge, while e-readers look as if they contain information.”, similarly online shopping cannot replace the feeling and sense of satisfaction of offline shopping.

STANCE OF GOVERNMENT

Rules like this will help the government in the Make in India movement[9], which was started by the government in 2014 to encourage corporations to manufacture in India and to promote committed manufacturing investments. Companies will be willing to come to India because somewhere down the line they’ll think that the government will not let any kind of monopoly to run the economy.

And not all kinds of Flash Sales will be banned if this regulation is passed, only the ones which have a motive to either promote a particular brand or to demote another. For instance if one of these sites puts up a sale particularly for a brand A and advertise it and this negatively affects a company B, so this kind of a sale can be banned by the government as it also comes under unfair trade practices which is defined as “unfair trade practice means a trade practice which, for the purpose of promoting the sale, use or supply of any goods or for the provision of any service, adopts any unfair method or unfair or deceptive practice.[10]”. This will not completely bar these websites from running sales if their conscience is clean i.e. Bona Fide genuine ) not Mala Fide ( bad intention). “Consumers and online platforms, like Amazon and Flipkart, as well as businesses “have nothing to worry about.” said by Nidhi Khare, additional secretary in the consumer affairs ministry.

Meanwhile, it’s worth noting that, while there’s a lot of talk about limiting the influence of e-commerce companies in India, their presence isn’t. Unlike China, where e-commerce accounts for more than half of all retail sales, India’s e-commerce accounts for only 4% of all retail sales. But still the urban population of India uses E-commerce to a huge extant.[11]

CONCLUSION

Overall, yes these laws will somewhat regulate the e-commerce in Indian market which spiked up due to many reasons, some being natural and some not so natural like Coronavirus which forced people as they could not go out to shop but had to buy some basic appliance but the intent behind these rules is to set an even ground for the offline retailers to bounce back and to avoid any kind of monopoly from getting established in the economy which is not a good sign for any economy world-wide. And not all flash sales will be banned as stated above.  As said by Jamie Dimen who is the chairman and chief executive officer of JPMorgan Chase, the largest of the big four American banks, since 2005 and was previously on the board of directors of the Federal Reserve Bank of New York” The question is how do you do it [more consumer protection] so that it actually works that way? And that takes analysis, and sometimes collaboration between government and business, to understand how that works.”, this is what the government is trying to do, by dealing with e-commerce sites in a way that there working isn’t restricted but regulated which somewhere down the line will automatically benefit the customers or the consumers.

[1] Ministry of Consumer Affairs, Food and Public Distribution (Department of Consumer Affairs)

[2] Consumer Protection (E-Commerce) Rules 2020 section 16

[3] Special Correspondent, Govt. moots proposal to ban ‘flash sales’ on e-commerce sites, THE HINDU(June  22, 2021, 15:40 IST)

[4] Consumer Protection (E-Commerce) Rules 2020 section 2

[5] Consumer Protection (E-Commerce) Rules 2020 section 3(b)

[6] Consumer Protection (E-Commerce) Rules 2020 section 2(e)

[7] Berezina, K., Semrad, K. J., Stepchenkova, S., & Cobanoglu, C., The managerial flash sales dash: Is there an advantage or disadvantage at the finish line?, INTERNATIONAL JOURNAL OF HOSPITALITY MANAGEMENT( 2016), https://vtechworks.lib.vt.edu/bitstream/handle/10919/78851/The%20managerial%20flash%20sales%20dash.pdf?sequence=1&isAllowed=y

[8]Rick Broida, Flash sale: Beats Powerbeats 4 slashed to $80, lowest price ever (Update: Expired), CNET, (April 27, 2021 6:29 a.m. PT),https://www.cnet.com/tech/mobile/flash-sale-beats-powerbeats-4-slashed-to-80-lowest-price-ever/

[9] https://www.makeinindia.com/

[10] Consumer Protection Act 2019 section 2(47)

[11] Suneera Tandon, E-commerce to touch 8% of India’s retail trade by 2025: Report, LIVE MINT(18 Sep, 2020, 06:35 PM IST)