The chink in the e-commerce draft

While the new norms are part of the draft policy’s guidelines to fight counterfeit and fake products on platforms, they might end up helping brands and e-commerce firms sign exclusive sale deals.

Illustration: Uttam Ghosh/Rediff.com

The draft e-commerce policy, released by the Department for Promotion of Industry and Internal Trade (DPIIT), gives backdoor entry to exclusivity agreements between brands and online marketplaces, militating against general FDI guidelines for e-tailers.

While FDI in e-commerce policy does not allow online marketplaces to have exclusive tie-ups with brands, the draft e-commerce policy allows brands to forbid platforms from selling their products, which would give other portals exclusive access to those brands.

The DPIIT last week released the first official draft of the much-awaited e-commerce policy. From protecting consumer data to regulating Chinese e-commerce apps, the draft charts a plan to increase onshore digital commerce.

While the new norms are part of the draft policy’s guidelines to fight counterfeit and fake products on platforms, they might end up helping brands and e-commerce firms sign exclusive sale deals.

According to the draft, anti-counterfeiting measures have been prescribed under the policy, under which e-commerce entities are required to publicly share all relevant details of sellers who make their products available on websites.

All sellers are required to furnish an undertaking of product genuineness to platforms, which must make it accessible to consumers.

Mechanisms to inform trademark owners and licensees about any possible counterfeit product being sold on a platform have been included in the policy.

“Platforms will be required to seek authorisation from trademark owners before listing high-value goods, cosmetics or goods having an impact on public health on their websites.

"A complaint mechanism, along with the requisite procedure and timeline, has been prescribed. Anti-piracy measures are required to be put in place by the platforms.

"Transparency, consumer-oriented strategies and preventing sales of prohibited items (as prescribed by the Directorate General of Foreign Trade) have been addressed under the policy,” the draft policy states.

Industry experts say if the draft policy is enforced trademarks or brands will have the right to refuse any e-commerce platform from selling their products.

“The draft e-commerce policy gives a greater say to trademark owners on goods bearing such trademarks being sold on e-commerce portals.

"They (or their licensees in India) may prohibit other sellers from selling any products bearing such trademarks and may also directly enter into exclusivity arrangements with specific e-commerce portals to sell products bearing such trademarks.

"Accordingly, the draft policy permits a workaround to the restrictions on the exclusivity arrangements which had been introduced in the last amendments to norms on FDI in e-commerce policy, through press note 2 of 2018,” said Atul Pandey, partner at Khaitan & Co.

This is in contradiction to norms introduced in FDI in e-commerce policy brought out by the erstwhile Department of Industrial Policy and Promotion (DIPP).

It had prohibited e-commerce companies from entering into an agreement for exclusive sale of products.

“The issue of brand selling is contentious in the draft because it gives an edge to big players and will lead to monopolistic markets.

"The draft has been prepared by the bureaucracy without holding any consultation with stakeholders and therefore seems to be far away from ground realities in several terms,” said Praveen Khandelwal, secretary general, Confederation of All India Traders.