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Govt’s New Policy to Ban ‘Big’ Discounts on Flipkart, Amazon: All You Need to Know

Govt’s New Policy to Ban ‘Big’ Discounts on Flipkart, Amazon: All You Need to Know

The government is also looking to stop brands from selling the same product online and offline at different prices.

Looking for a massive discount? Thinking about buying your next mobile phone online? Well, the good times for consumers on e-commerce platforms like Flipkart and Amazon may come to an end as the government considers coming down hard on “deep discounting.”

As per the draft e-commerce policy published by the Centre on Monday, this regulation on pricing, which is part of a potential piece of legislation regulating the entire e-commerce sector, may also encompass food delivery sites like Swiggy and Zomato, online service aggregators like UrbanClap and financial-payments platforms like PayTm and Policy Bazaar.

According to the Times of India, this aspect of the draft e-commerce policy is something that offline retailers have long pushed for.

Executives working in e-commerce platforms argue that sellers offer discounts and not them. However, there are those who quietly acknowledge “there was an element of discounts, which resulted in the massive cash infusion to sustain the operations,” reports ToI.

One senior executive at a major e-commerce platform told the publication that it would significantly impact their business. “This will definitely impact our business, as the basic tenets of e-commerce business—such as not spending on physical infrastructure—enables us to pass on the cost savings to our consumers in the form of discounts,” the person said.

For representational purposes only. (Source: Pixabay)
For representational purposes only. (Source: Pixabay)

For these firms, revenues are increasing, but losses are rising. According to this Financial Express report, losses for 12 major companies went up by 6% in 2017-17. These losses could be higher in the last financial year, the publication claims because of rising and more attractive discounts.

Since the turn of this decade, the driving force behind e-commerce was the ambition to exploit the market opportunities available. In the past decade, e-commerce players, have managed to formalise informal markets or aggregate fragmented ones. Besides ambition, however, it is a truckload of funding, which has driven operations.

Making matters harder for consumers, the regulation on discounts could be extended beyond the likes of Flipkart and Amazon, to group companies.

The government is also looking to restrict the practice whereby brands sell the same product online and offline at different prices. “A sunset clause, which defines the maximum duration of differential pricing strategies (such as deep discounts) that are implemented by e-commerce platforms to attract consumers, would be introduced,” the document states.

Yes, this is the government’s much-needed attempt at regulating these platforms. Implementation, however, could be a major hurdle as the move could directly impact consumers in urban India, who have thronged to these platforms, buying quality products at a discount.

To the uninitiated, the government lays out the rationale behind its draft e-commerce policy, which is essentially much-needed regulation.

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“This document seeks to achieve this goal through a multi-pronged approach, including the following: creating a facilitative regulatory environment for leveraging access to data, building better understanding of real and financial flows for future innovation by promoting the use of RuPay, creating a level playing field for foreign and domestic players in the Indian market by addressing some of the challenges confronting domestic players especially start-ups, addressing non-competitive practices and stimulating the participation of micro, small and medium enterprises in the digital economy.”

Other major policy points discussed in the draft policy include a provision of potentially directing e-commerce and social media platforms to store consumer data locally—a move that is likely to significantly affect global industry behemoths like Amazon and Facebook.

E-commerce companies will also be asked to completely disclose the reasons for collecting user data to consumers while also framing a ‘simplified and an easily understandable form’ of their terms and conditions. More importantly, the draft policy also calls for the creation of a Central Consumer Protection Authority (CCPA) which will act as the regulator for e-commerce platforms.

(Edited by Gayatri Mishra)

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