Draft e-Commerce Bill in Nepal: Major Highlights and Issues

The smartphone revolution and increasing internet penetration is creating fertile ground for the e-commerce market. On the other hand, the pandemic and restrictive order during 2020 also changed the thought process of consumers towards e-commerce.

Meanwhile, the absence of a governing law has been a serious concern for the e-commerce market because of several cases of e-commerce fraud recently.

The government claims that they have been consulting and working with experts, consultants, and the United Nations Development Programme to add necessary inputs for the e-commerce bill.

According to Shiva Raj Sedhain, director of the Department of Commerce Supplies and Consumer Protection, the draft of Electronic Business Act 2077 was finalized and shared with concerned authorities at the end of December 2020.

“We interacted and have taken suggestions from e-commerce entrepreneurs, ICT experts, Umbrella Business Associations, Law Commission, Nepal Rastra Bank, Ministry of Communication and Technology and other concerned stakeholders,” shares Sedhain.

Important points in the draft

The draft has defined the roles and responsibilities of e-commerce and has also included a provision for consumer protection policies. It has defined terms like ‘intermediary business’; has made it mandatory to have a website or app for an e-commerce business; add details of the goods including shape, manufacturing date, and brand of the goods in the website.

In terms of consumer protection, the draft mentions that the e-commerce companies must have a strong return policy; the e-commerce should facilitate all warranty or guarantee facilities of the goods; and the consumers can file their report at the Chief District Office if they feel they have been cheated in the online transaction.

Aalok Subedi, CEO of MeroAdda, an online platform that allows the general public direct access to lawyers and attorneys says that the e-commerce community will have a clear idea about the registration process with the introduction of the e-commerce bill.

According to Sagar Dev Bhatta, founder of merokirana.com, the draft is Small and Medium Enterprise (SME) friendly and it has not set criteria for paid-up capital. “Anyone who wants to start an online business can come to the market,” he shares.

Although the online selling mechanism looks simple, it has unique challenges for e-commerce companies. According to the entrepreneurs, the draft has been prepared without a careful study about how e-commerce works.

Here are a few of those points which the e-commerce disagree with reasoning their challenges in following those provision:

Adding manufacturing date

A provision in the draft mentions that detail of the goods, their brand, their shape, and manufacturing date must be disclosed on the sites.

Though the company can display the brand, shape, and other detail, the companies say that adding manufacturing dates is an arduous and almost impossible task.

Bhatta from Kirana.com shares that even the e-commerce company gets the details of the goods just a few hours before delivery, so they cannot add the manufacturing dates.

“We follow a just-in-time inventory system where the goods are acquired only when there is a demand from customers. So, the e-commerce company gets details a few hours before delivery,” says Bhatta.

Apart from that, some e-commerce order bulk goods which come with different manufacturing dates produced in different batches.

“Due to this reason, it is almost impossible to update the listing now and then,” share the e-commerce entrepreneurs in their suggestion document to the government.

The complexity of warranty and guarantee

Similarly, the draft has a provision that asks the e-commerce site to facilitate a warranty or guarantee of any product or service that has a warranty or guarantee.

E-commerce companies express their disagreement with such provision and say that they cannot facilitate warranty or guarantee throughout the period.

“In case if the product we have delivered is defective, the customer has to return it within the time frame of the return policy. For eg: if any electronic device is found to be defective upon its delivery, the customer can ask us to return the product within 10-15 days,” shares Bhatta. However, after that, the e-commerce company will not be responsible for any issues regarding the products, he says.

“We will give a warranty card with the product. But we won’t be able to facilitate throughout the warranty period. The customers need to go to the authorized dealer or company if they face issues later,” says Bhatta.

Immediate information about the availability of the goods

Likewise, another provision makes it compulsory for the e-commerce portals to give immediate information of the goods ordered by the customer whether the goods or service can be made available.

According to the e-commerce entrepreneurs, the company needs to know from the distributor whether the item requested is in stock. They say that it is not possible to provide immediate information and IT Stock Management is not yet available in all sectors in Nepal.

“Also, there may be an order queue. And we don’t have sophisticated technology yet where we can integrate it with the inventory to book the orders,” says Bhatta.

According to the e-commerce companies, it takes a maximum of seven days to get the information from the seller and provide it to the buyer.

The need of strong policies for businesses

The draft has incorporated major points for strong consumer protection policies, but what it lacks are the policies for the protection of the business.

“Once a customer ordered food worth Rs 7,000 from a food delivery company. But once the delivery person reached the customer’s place, they denied that they had ordered any food. This happened with one of my friend’s food delivery company,” shares Alok Subedi.

“Where do we complain when such cases occur?” He opines that the government must frame a strong mechanism for the protection of the companies as well.

Likewise, the lack of a digital signature system in Nepal has also led to many cases of e-commerce fraud. Digital signature guarantees the authenticity of electronic documents in digital communication and uses encryption techniques to provide proof of original and unmodified documentation.

ICT expert Manohar Bhattarai, who is also vice-chair of the High-Level Commission for Information Technology says that it is high time to include the digital signature system in the contract between buyer and seller.

“E-commerce companies need to ensure who has ordered from their company. For that digital signature is critical evidence for the company,” says Bhattarai. The government must strengthen the digital signature system to develop the e-commerce sector, he views.

Mandatory provision for website or app limits youngsters to get into entrepreneurship

One of the provisions in the draft mentions that every e-commerce has to create a website (webpage) or mobile application. The entrepreneurs strongly differ on this point.

“Nowadays, college students explore entrepreneurship by selling products through the internet. This provision will discourage the youngsters to come into entrepreneurship,” shares Alok Subedi.

Similarly, Kiran Timsina, co-founder at Urban Girl shares that this provision in the draft is not friendly for small businesses. “Those who sell from Instagram and Facebook must have their company registered. But they must be allowed to sell without a website or app through social media,” says Timsina.

The ambiguous provision regarding fines

The draft writes that e-commerce entrepreneurs will be charged a fine of up to Rs. 1,00,000 to Rs. 2,00,000 if they don’t follow any of the regulations in the law.

The e-commerce players see this provision as problematic and they feel this will confuse the entrepreneurs.

“Mostly youngsters with limited initial capital come to the business. So, the amount of fine is too huge for them,” Bhatta says.

Also, the government must set the fine according to the gravity of the mistake. “For instance: if someone new in the business doesn’t mention the contact number of grievance committee in the company, this is a serious issue. But if they forget to mention other minor detail, that isn’t something critical” Bhatta says.

Vague definition

The draft defines “Intermediary Business” as a business facilitating electronic commerce via a network of electronic mediums between buyers and sellers. This term shall also include wholesaler, retailer, commercial agent, broker, or distributor.

The entrepreneurs say that the definition is vague as an electronic transaction takes place in different ways. “This definition doesn’t just refer to e-commerce but this incorporates other businesses which do electronic transactions,” says Bhatta.

Electronic Transaction takes place through Point of Sale (PoS) machine, online services like ride-sharing platforms or it can be about corporate houses adopting to trading and distributing products beyond the traditional platform.

According to Alok Subedi, as almost all businesses have to do electronic transactions or use technology, provision for all these businesses must be included in the same policy. “We are not in the situation where we can separately define e-commerce as every business is integrating electronic transaction, says Subedi.

The confusion here is though the draft mentions the definition of ‘Intermediary business’, it does not have detail about the specifics of types of intermediaries like e-commerce, online marketplace, classified business, and other kinds.

“For example, Foodmandu works as a facilitator between the restaurant and the customer. They charge a fee for facilitation. In case if the customer complains about the food, who will be liable, the restaurant or Foodmandu? This must be clear in the law,” shares Bhatta.

The need of educating customers about a secured transaction

The government representatives believe that the introduction of the law will safeguard the interest of general consumers. Provision for consumer rights is quite well defined and clear in the draft. It makes it mandatory for companies to have an efficient return policy and compensate if the consumer is not satisfied with the transaction.

According to the draft, in the cases, state as a party, the complaint has to be made in the Chief District Office (CDO) if they feel they got cheated. The official assigned by CDO will investigate the matter and put it before the public prosecutor for the prosecution.

ICT expert Bhattarai opines that though the protection policies are strong, the enforcement seems challenging. “The strength of the law is defined when it’s effectively implemented. And enforcement is very difficult in a country like Nepal, “says Bhattarai.

Entrepreneurs view that mentioning the consumer rights provision in the bill is not enough. They urge the government representatives to aware of the consumers through different campaigns.

“We have seen customers do the payment in the personal account of the vendor. For example, someone ordering a dress from an Instagram page and transferring money through a digital wallet to the seller’s personal account is highly unsafe. They must use the company’s account for the payment. This way, the transaction will be official and the buyer can get a refund if the product is wrong or if the product doesn’t arrive,” Sagar Bhatta explains.

This also ensures that the company is registered.

He also shares that many customers still don’t take a bill and even share the PIN of their ATM card with others. This is another area the government must aware the customers.

The need for consumer court

There are ample examples of customers being cheated by unregistered online shops, most of them existing on Facebook and Instagram pages. But as there is no separate and dedicated public entity that handles and addresses customer complaints. So, almost all the frauds go unaddressed.

According to Consumer Activist Bishnu Timilsina, the government must work on the work procedure of a consumer court. Section 41 of The Consumer Protection Act 2018 has provisions relating to consumer court.

However, the court is yet to be established and currently, the district court has the right to handle the consumer-related cases. However, the ills and technicalities of the court discourage customers to file their cases in the district court.

“It is tedious to fight for the case. A consumer comes eager to fight but loses energy due to the prolonged process. So, the case gets dismissed after few months,” says Timilsina.

He believes that the consumer court needs to have a separate procedure. “The customer should be able to case a file through a message and should get their compensation in their bank account. This sort of mechanism would only work for a consumer court.”

ICT expert Bhattarai also views that the mechanism of consumer court must be simple and quick, unlike other court systems.

Ministry of Commerce, Industry, and Supplies, and Department of Commerce are discussing the recommendations from the concerned stakeholders. Most probably, they will finalize the draft within a few days.