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Regulations: IRDA Undoing Commission Cap Will Boost Mis-selling

An anti-consumer move by IRDA which can bring back mass mis-selling

 

TS Vijayan,...

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Online buyers may get ‘shield’ under the Consumer Protection Act

The Cabinet note proposes widening the net of Consumer Protection Law to online retailers and e-commerce sites, while also setting up a new authority to deal with unfair trade practices and consumer issues

 

The Consumer Affairs Department had moved a Cabinet proposal looking to cover e-commerce and online retail under the Consumer Protection Act, say media reports. The Cabinet note has recommended that a Consumer Protection Authority, with powers to act against sellers or marketers of unsafe or hazardous products and service. This Authority will have the power to investigate, take suo moto action, search and seize documents.

 

This comes in the light of greater penetration of the internet and of online retail and e-commerce websites like Flipkart, Amazon and Snapdeal among others. There have been many complaints about deficient services and reversed orders on these portals. Reports have surfaced where instead of mobile phones, stones and soap bars were being delivered to customers from some of the ‘fly-by-night’ shopping portals.

 

Considering that the e-commerce space is still in its early stages, an institutional framework, which can help deal with these challenges, will help. The newly proposed Authority is also expected, as per the Cabinet note, to smooth over a lacuna in the regulatory framework under the Consumer Protection Law, where no specific agency or organ of the executive is tasked with dealing with unfair trade practices.

 

The news report however, also said that the law would only apply to direct retailers and service providers, and not facilitators of sales or marketing. This may turn out to be a problematic loophole. Already e-commerce firms in India run under a marketplace model to circumvent prevalent laws. Firms running purely a marketplace where they connect the buyer to another seller may be able to escape thee provisions.

 

Studies have pegged the online retail sector at $3.5 billion, and this is set to grow steeply in the coming years. India's technology laws are behind the curve and a strong push at making an early start in order to cover the e-commerce space may be the best thing to protect consumer rights in this nascent sector.

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