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October 14, 2021

Make the word ’Affiliate Entity’ integral part of proposed E-commerce Rules: CAAT

by CA Shivam Jaiswal in Compliance Law, Corporate Law

Make the word ’Affiliate Entity’ integral part of proposed E-commerce Rules: CAAT

Copy of Letter to Shri Piyush Goyal from Confederation of All India Traders

Confederation of All India Traders

“Vyapar Bhawan”
925/1, Naiwala, Karol Bagh, New Delhi-110005.
Phone +91-11-45032664, Telefax: +91-11-45032665
Email: teamcait@gmail.com Webeite: http://www.cait.in

Ref. No.: 3290/1/50

Ref. No.: 3290/1/50

Shri Piyush Goyal
Hon’ble Minister for Consumer Affairs
Government of India
New Delhi

Dear Shri Piyush Goyal Ji,

Subject : Phrase “Affiliate Entity” in proposed e-commerce Rules under Consumer Protection Act

We invoke your kind attention towards the proposed e-commerce rules under the Consumer Protection Act on which the Ministry of Consumer Affairs has already received suggestions and objections about more than a month ago and the Country is awaiting the implementation of the said rules.

In this context, we wish to state that in order to prevent the consumers from restricting their choice in buying goods, it is very necessary to include the restriction on “affiliate entity” of a marketplace to sell its products on its portal, in the proposed rules. The affiliated entities means any seller in which the owner of marketplace has any economic or equity interest. The consumer interest permeates the need of sufficient provisions, provided for the prohibition of monopolistic, restrictive and unfair trade practices by e-commerce companies. The consumers have a right to be informed at pre-purchase stage about the quality, quantity, potency, purity, origin, standard and price of goods for their protection against any fraud and therefore they have the right to be assured access to a variety of goods at fair market price. In this context, we have to state as under.

The proposed e-commerce rules will be equally applicable to foreign and domestic companies which are engaged in any type of supply of goods or services through any mode of online system, without any discrimination in order to protect the interest of consumers. It is a wrong perception that only the foreign e-commerce companies abuse the dominance. The same abuse can also be conducted by big domestic e-commerce companies as well. There is a need to protect the consumers from the abuse of dominance from all e-commerce companies both foreign and domestic. Therefore, inclusion of every possible restrictions needs to be included in the proposed e-commerce rules. To the extent that e-commerce companies whether foreign or domestic should not enter into any kind of monopolies through their own affiliates, there is a need for measures of effective surveillance in the rules.The rules should be designed to guard against different aspects of market imperfections. For instance, affiliate entities, which can increase the dominance of the combine or has resulted in a large share in the market can be looked at in terms of the restrictions that should be imposed for assuring no participation of any affiliated entity on its marketplace portal. Likewise, manipulation of prices, conditions of delivery or flow of supply in the market which may have the effect of imposing on the consumer unjustified costs or restrictions are regarded as restrictive trade practices which may hamper the interests of the consumers and therefore the phrase “affiliated entity” needs to be incorporated in the rules.

Since 2016, it has been noticed that in absence of any clear mandate of rules or an e-commerce policy, the existing e-commerce companies have devised a mechanism of abusing their dominance by routing the sales that occurred on their respective e-commerce platforms through their affiliated entities and thus restricting the choice of the consumers and absence of “affiliated entities” in the rules will give every liberty to both foreign & domestic e-commerce companies to take advantage of the absence of this important word and promoting maximum sales through their own offshoots. Through these affiliated entities, the owner of marketplace will have the choice to enter into a sort of cartelization that will enable it to limit the choice of the consumers and can also manipulate the prices which will prove to be detrimental to the interests of the consumers. Therefore, the restriction of using affiliate entity as a seller needs to be included in the e-commerce rules. This restriction is reasonably necessary, having regard to the character of the goods to which it applies, to protect the consumer against injury in connection with the purchase, consumption, installation or use of those goods. The removal of this restriction would deny to the consumers or users of any goods, other specific and substantial benefits of advantages enjoyed or likely to be enjoyed by them as such whether by virtue of the restriction itself or of any arrangements or operations resulting therefrom.

Restricting unfair trade practices is the basic fundamental of consumer protection and therefore exclusive dealings; concert or collusion-cartel, price discrimination, re-sale price maintenance, area restriction and predatory pricing are deemed legally to be prejudicial to consumers interest.The onus is, therefore, on the entity, body or undertaking charged with the perpetration of the restrictive trade practice. The removal of the affiliate entity would be likely to have a serious and persistent adverse effect on the interests of the consumers. Through any means maintaining the prices of goods or charges for the services at an unreasonable level by limiting, reducing or otherwise controlling the sale, supply or distribution of goods or the supply of any services is highly detrimental for the consumers.

We are sure that the this important communication will have your immediate attention and there will not be any dilution in the proposed e-commerce rules which may pave the way for consolidation of sales and thus damage greatly the interests of the consumers.

Thank You. With kind regards
Truly yours

Praveen Khandelwal
National Secretary General
Confederation of All India Traders

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