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India wants online retailers to take responsibility for fake reviews and counterfeits

People move past a hoarding of Amazon India outside a metro rail station in New Delhi,
Reuters/Anushree Fadnavis
Watch out.
Ananya Bhattacharya
By Ananya Bhattacharya

Tech reporter

After clamping down on deep discounting on Indian e-commerce websites, the Indian government now wants to protect consumers from other malpractices that are frequent on these portals: Counterfeit goods, fake reviews, lengthy delivery timelines, and rejected returns.

On Nov. 11, the government released a draft of the consumer protection (e-commerce) rules, 2019, which sets boundaries on price manipulation and quality control by the online retail industry.

First published in August, this is the third extension for public commentary on the draft rules. Stakeholders now have until Dec. 2 to react to the draft. Once published in the official gazette, the rules will come into effect within 90 days.

Consumer first

Here are some of the key suggestions made for the e-commerce industry in the draft rules:

Ensure quality: Online marketplaces cannot wash their hands off quality lapses on goods sold from their portals. In fact, from the marketing stage itself, companies must ensure that advertisements “are consistent with the actual characteristics, access and usage conditions” of goods and services.

Real reviews: E-commerce firms must keep a close check on the reviews posted on their portals. The platforms must also make sure that they do not “falsely represent themselves as consumers or post reviews about goods and services in their name; or misrepresent or exaggerate the quality or the features of goods and services.” This is important to win back buyers’ faith. After all, seven in 10 Indians think fake reviews have become the norm on e-commerce portals.

Cancel counterfeits: E-commerce sites can’t ignore counterfeit products being sold through them. One in three Indians has received a fake product from online shopping portals. Even beauty e-tailer Nykaa’s CEO called Amazon out for stocking inauthentic Huda Beauty products. “If the e-commerce entity is informed by the consumer or comes to know by itself or through another source about any counterfeit product being sold on its platform,  and is satisfied after due diligence, it shall notify the seller and if the seller is unable to provide any evidence that the product is genuine, it shall take down the said listing and notify consumers of the same,” the rules state.

E-commerce players have also started doing their bit. A day after the draft rules were published, Amazon brought its Project Zero initiative to India, combining its artificial intelligence capabilities and sellers’ reporting to catch fakes. The programme, already launched in the US, parts of Europe, and Japan, is designed to eliminate counterfeit products entirely.

Return run: Despite all the checks and balances, if the consumer is still dissatisfied—with the delivery timeline, presence of spurious goods, or any other valid reason—the e-commerce site must accept the return of the goods, as per the draft rules. Refunds must be processed within a maximum of 14 days from the return request being accepted.

Each e-commerce player will also be required to furnish the contact details of a grievance officer, who will be obliged to redress complaints within one month from the date of receipt.

“I agree with the structure that they’re trying to bring about but getting into nitty-gritty of what is fair reasonable is probably not the government’s business,” Vijay Anand, founder and CEO of accelerator Startup Centre, told Quartz. “Based on the service and product, delivery timelines and refunds must be left up to the individual seller. And the authorities are getting into edgy territory with marketing and facts, too. If a Samsung phone is promoted as the best phone in the world on a website, is the e-commerce company going to be held responsible?”

Moreover, Anand calls for clarity of terminology. Currently, the government includes goods and services sold online. The latter is much harder to measure and regulate under the same umbrella and should therefore be left out of the equation altogether, he reasons. Also, there’s a question mark around how these rules apply beyond websites, to social media commerce like products sold on Facebook pages and WhatsApp groups.

In addition to the quality controls, the draft rules reiterated the government’s tough stance on predatory pricing.

At war with price wars

The Nov. 11 draft rules state that an online retailer shall not “directly or indirectly influence the price of the goods or services and shall maintain a level playing field.”

And there’s no room for fudging the numbers to slip under the radar either. Sellers will be required to “display single-figure total and break up price for the goods or service, that includes all compulsory charges such as delivery, postage, taxes and handling and conveyance charges,” the department of consumer affairs has noted.

In the past, online sellers have complained that the country’s largest e-tailers, Flipkart and Amazon, indulge in deep discounting, thereby hampering the business of smaller vendors. To counter this dominance, the foreign direct investment policy which came into effect in February already barred online marketplaces from entering into exclusive deals for selling products on their platforms and said that not more than 25% of the inventory on an e-commerce platform can be from a single vendor. The new e-commerce rules are another step in the same direction.

E-commerce players were likely not chuffed the last time around. The FDI rules could reduce online sales by $46 billion (Rs3.3 lakh crore) by 2022, a PwC analysis said.  The tightening regulation could curb sales further in the $32 billion industry.

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