Stating that predatory pricing by e-commerce firms may lead to wiping out of competition and may be detrimental to consumers in the long run, a parliamentary panel has recommended that the government should announce a more clear-cut definition of what constitutes unfair trade practice along with practical legal remedy to tackle the issue.
The committee, headed by Member of Parliament Partap Singh Bajwa, in its report on ‘The Consumer Protection (E-Commerce) Rules, 2020’ tabled in Parliament on Wednesday, has also recommended fixing a cap on delivery charges levied by e-commerce firms, as well as providing for penal provisions for violation of rules related to misinformation.
The committee noted that while e-commerce enterprises offer many benefits, the development of segment has rendered consumers vulnerable to new forms of unfair trade practices, violation of privacy and issues of unattended grievances.
“... predatory pricing as a short term strategy, adopted by some of the market giants with deep pockets to sustain short-term losses and reduce the prices of their products below the average variable costs may lead to wiping out competition from the market and could be detrimental to the consumers in the long run,” the committee said.
It, however, added that from a legal standpoint it is very hard to substantiate allegations of predatory pricing, since the impact of such practice on the competition in the market would be very difficult to prove. “The committee, therefore, recommends that there should be a more clear-cut definition of what constitutes unfair trade practice and practical legal remedy to tackle such circumventing practices by e-commerce entities, specifically multinational companies and kirana small vendors,” the report said.
Penalty for misinformation
The panel has also suggested that the Ministry of Consumer Affairs, Food and Public Distribution issue broad guidelines for the fixation of delivery charges charged by the marketplace entities along with a cap on the highest limits of the delivery charges in peak hours of service. “The Ministry should clearly distinguish in the Rules itself the cases of misinformation, no information and the information which is otherwise correct but creates a false impression and provide for penal provision for each case in the Rules itself,” it said.
The Ministry should also clearly define ‘drip pricing’ — wherein the final cost of the product goes up due to additional charges — and provide for protecting consumers against this by including penal provisions for violation.
For protection of privacy of users and security of their data, the panel has recommended that users’ personal data may be categorised as per level of sensitivity and appropriate protection level may be assigned for each level. “The committee further recommends that the Ministry should ensure that a secured and robust system of payment gateway is made available to consumers so that the transaction related data of the users is not compromised in any way,” the report said.
It also suggested that all major e-marketplace entities should establish their data centre in India, so that the consumer data are not hosted in a server located beyond the borders of the country, “which may be misused by an enemy country”.
Pointing that many MNCs as well as off-shore based companies are involved in the e-commerce segment, the committee said there is a need to devise some regulatory mechanism so that the local vendors/kirana shops are not wiped out of the market. “The committee, therefore, recommends that sufficient protection to such small/local vendors should be given in the Rules itself and the Ministry should devise out ways in which such small retailers may also become part of e-commerce.”
Amid increasing cases of fake reviews, unfair favouritism in the display of goods, the committee said it did not agree with the Ministry’s clarification regarding the legal provisions to deter deceptive tactics used by merchants to gain competitive advantage over others. “The committee, therefore, recommended that some corrective mechanism to discourage deceptive tactics including manipulation of algorithms, fake product reviews and ratings must be created so that the interest of consumer is not harmed in any way.”
The committee also recommended that the duties and responsibilities of customer care service provided by the marketplace entity should be clearly spelt out in the Rules itself. The Ministry should also direct the e-commerce entities to provide dedicated customer care number as well as a mechanism to monitor the time taken by the customer care executives to resolve an issue, it said.