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LATEST NEWS UPDATES | The State and the Digital Giants -CP Chandrasekhar

The State and the Digital Giants -CP Chandrasekhar

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published Published on Jun 30, 2021   modified Modified on Jul 4, 2021

-NetworkIdeas.org

The NDA government has decided to further tighten its regulation of e-commerce, taking on in particular foreign giants like Amazon and Flipkart-Walmart, with implications for domestic organized retail majors like Reliance. The Department of Consumer Affairs in the Ministry of Consumer Affairs, Food and Public Distribution has called for comments on an amended version of the Consumer Protection (E-Commerce) Rules, 2020, which it posted on its website in late June 2021. The amendments, conveniently highlighted using track changes, go beyond strengthening consumer protection per se. The intent seems to be to rein in dominant players in an area.

Among the many objectives that possibly motivate the government’s interventions in the e-commerce space there are at least three that visibly matter here. The first is to preempt the possible abuse of market power to swindle customers financially or otherwise. The second, is to prevent use of such market power to crush the competition, consisting of a multitude of small and medium vendors and retailers. And the third is to exert control on how the large volume of data on suppliers and customers that e-commerce entities gather is used.

Consumer protection rules are not the only means available to pursue these objectives. In fact, the principal instrument the government has used thus far to rein in foreign e-commerce giants like Amazon and Walmart (which acquired Flipkart) is the set of regulations governing foreign direct investment (FDI) in the sector. FDI with 100 per cent foreign equity holding is permitted in e-commerce activities through the automatic route. But a review of the policy released in December 2018 had clarified that foreign direct invested e-commerce entities are only allowed to engage in Business to Business (B2B) and not Business to Consumer (B2C) transactions. Specifically, the guidelines noted that 100 per cent FDI under automatic route is permitted only in a marketplace model of e-commerce, where the platform merely was a place where suppliers and consumers discovered each other and transacted, and not in the inventory-based model, where the platform hosts companies that use it as their dominant or sole market or the e-commerce entity directly or through a subsidiary acquires and holds inventory of particular brands of popular to sell through its own channel. The latter could include sale through its marketplace of goods carrying the platform’s unique private labels.

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NetworkIdeas.org, 30 June, 2021, https://www.networkideas.org/news-analysis/2021/06/the-state-and-the-digital-giants/?fbclid=IwAR1JL3oNC44d-qwyK7dXlaMXCGFqUYTmY7qsX-y5dE68AdX_GYNYGKzd72A


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