E-Commerce Rules: What About Flash Sales? How Does It Affect You?

Amazon and Flipkart’s flash sales may soon be banned under draft e-commerce rules. We explain what these rules are.

The government highlighted that e-commerce companies won't be allowed to hold 'flash sales' in India.

(Photo: Aroop Mishra/The Quint)

The Department of Consumer Affairs on Monday, 22 June, proposed amendments in the Consumer Protection Act and has sought comments and suggestions on it by 6 July.

The proposal comes as offline retailers in India raised their concerns about unfair practices by e-commerce giants including Amazon and Flipkart, as they expand their operations in the country.

We explain what these proposed changes are, and how these new rules will impact the booming e-commerce space going forward.

What Are the Proposed Changes?

In the draft, the government highlighted that e-commerce companies won't be allowed to hold 'flash sales' in India. During flash sales, e-commerce platforms observe high spikes in customer orders as they offer heavy discounts on products, sometimes up to 80 percent.

The ministry also proposed that e-commerce firms should appoint a chief compliance officer, a nodal contact person, and comply with the new IT rules applicable to e-commerce platforms for redressing the grievance of consumers on the e-commerce platform. E-commerce entities will also be liable to provide information within 72 hours of receiving an order or request from government agencies.

Under the new framed guidelines, Amazon, Flipkart and other e-commerce players will have to refrain from selling their own products on the platform.

Apart from this, all e-commerce entities should also be registered with the department for promotion of industry and internal trade (DPIIT) and will have to ensure that they do not manipulate any search results using any algorithms.

What is Flash Sale? Can Companies Host A Flash Sale?

The Indian government proposed to ban all flash sales – a sale of specific products that lasts for a short period of time and offers discounted deals starting from 50 to 70 percent on MRP.

The government, in the amended policy, defines flash sale as “the sale organised by an e-commerce entity at significantly reduced prices, high discounts or any other such promotions or attractive offers for a predetermined period of time on selective goods and services or otherwise with an intent to draw large number of consumers.”

Here are the list of all the flash sales that might be banned in the near future.

On Amazon:

• Amazon Mega Fashion Sale
• Prime Day
• Grand gaming days
• Freedom Sales

On Flipkart:

• Grand Gadget Sale
• Big Billion Day Sale
• Fashion Sale
• Monsoon Sale

On Myntra

• United in Sports Event
• India Premier Sale
• Big fashion Festival Sale

What About OnePlus, Xiaomi Sales?

Chinese smartphone makers Xiaomi and OnePlus have used flash sales to increase their sales since their inception in their country.

"Certain e-commerce entities are engaging in limiting consumer choice by indulging in ‘back to back’ or ‘flash’ sales wherein one seller selling on platform does not carry any inventory or order fulfilment capability but merely places a ‘flash or back to back’ order with another seller controlled by platform. This prevents a level playing field and ultimately limits customer choice and increases prices,” the ministry said in a statement.

The government has argued that such sales create a false sense of demand, and often leaves consumers in the lurch, because they are unable to buy devices within short time frames.

Several experts have also alleged that these e-commerce companies also artificially lower the number of devices they put up on flash sales, which is also in contravention to the promises a consumer might expect.

Will Offline Retailers be Benefitted?

The proposed plan is expected to benefit offline retailers who have in the past argued that e-commerce giants Amazon and Flipkart give deep discounts and eat into their businesses.

The Confederation of All India Traders (CAIT), which had also demanded stricter e-commerce norms to protect the interest of offline traders, has welcomed the draft norms.

CAIT Secretary General Praveen Khandelwal told The Economic Times that the new draft is "a guiding stone to purify the e-commerce landscape of the country which has been greatly vitiated by various e-commerce global companies to the extent that not only the domestic trade has been damaged but even the consumers are also feeling the heat of their unethical business practices."