2021 Year in Review: The chaos and confusion around India’s ecommerce rules

In July 2020, the government notified new rules for e-commerce companies, including mandatory display of 'country of origin' on their products, and said any non-compliance would attract penal action. The 'Consumer Protection (E-Commerce) Rules, 2020' apply to all electronic retailers (etailers) registered in India or abroad that offer goods and services to Indian consumers.

So, what has changed since then? Here's a review of the key developments in the ecommerce space in 2021.


India tightens the noose on ecommerce players: In January, India was all set to tighten the foreign direct investment (FDI) rules for ecommerce to check companies set up by the online marketplaces from trading on their own platform. The rules barred online marketplaces from holding inventory of their own or influencing the price of goods on their platforms. They also prohibited group companies or entities in which marketplaces have control of inventory to sell on their platforms, among other things.

Govt clarification on rules: In February, commerce and industry minister Piyush Goyal said the government is considering some clarifications to ensure that the ecommerce companies work in the true spirit of the rules and consumers have a free choice but said that there are no changes in the FDI rules per se.

On the ecommerce sector, Goyal said the current FDI policy was robust and well-designed. However, there are certain complaints from consumers and small retailers about certain practices of the ecommerce companies, which are under investigation.

FDI norms remain a hurdle: In March, the government considered extending restrictions placed on large ecommerce marketplaces such as Amazon and Walmart-owned Flipkart to their associates and related parties, to curb alleged circumvention of FDI norms and anti-competitive activities by these players.

Nodal officer rule: A new sub-rule included in the Consumer Protection (E-Commerce) Rules, 2020 came into effect from May 17, according to a notification issued by the consumer affairs ministry. Under the new rule, ecommerce companies would have to appoint a nodal officer to ensure compliance. Two days later the government formally asked ecommerce companies to do so.

New proposals, including ‘flash sales’ ban: In June, the ministry of consumer affairs proposed amendments to the Consumer Protection (E-commerce) Rules, 2020, which were first notified last July. The proposed changes included a ban on ‘flash sales’ and curbs on private labels. Later in June, the Centre’s “clarification”, which said the new rules allowed e-commerce portals to conduct conventional sale events while disallowing “only specific flash sales or back-to-back sales”, compounded confusion.

Govt clears stance on FDI in ecommerce: With domestic traders complaining about alleged FDI violations by foreign online players, commerce and industry minister Piyush Goyal early in July said the ministry would "very shortly" come out with certain clarifications on the ecommerce sector.

Later that month, industry associations, including those that count ecommerce majors Walmart-owned Flipkart and Amazon India as members, sought the revision of a host of contentious clauses in the draft ecommerce rules, including the deletion of those seeking to include related parties and logistics service providers within the definition of an ecommerce entity, ban flash sales, and mandate the listing of local alternatives while selling imported goods or services.

Sector seeks relief: In August, the consumer affairs ministry was to hold informal talks with traders, micro, small and medium enterprises (MSMEs) and representatives of ecommerce firms before finalising the proposed amendments. Companies across the spectrum hoped that the government would dilute certain clauses in the draft rules released in June.

Ecommerce rules face internal government dissent: In September, several key ministries including finance, corporate affairs and the Niti Aayog opposed the draft ecommerce rules put out by the ministry of consumer affairs. The finance ministry expressed concern that the rules could adversely impact the sector, which is also a large job creator.

Govt, industry discuss proposals: In October, the government initiated "detailed interactions" with companies and industry associations that had sent suggestions on the proposed amendments.

PMO to step in for consensus on ecommerce rules: In November, the Prime Minister’s Office was to weigh in on consultations between the consumer affairs ministry and various stakeholders on the proposed amendments.

Draft ecommerce rules soon, says govt: The government is in the final stages of drafting new ecommerce rules, ET reported on December 21. The new version would be released soon, said a senior official of the Ministry of Consumer Affairs, Food and Public Distribution who did not wish to be named.