Rethinking Nepal’s e-commerce bill

This article was originally published in on August 3, 2023 by Anmol Purbey. Mr. Purbey ​​is a researcher at Samriddhi Foundation, an economic policy think tank based in Kathmandu. The views expressed in this article are the author’s own and do not represent the views of the organization. Author can be reached at [email protected]

The introduction of Nepal’s new e-commerce bill has sparked widespread attention and debate among stakeholders. While the bill aims to address consumer protection concerns in the rapidly growing e-commerce sector, it has come under scrutiny for its inherent flaws and the potential negative impact on businesses.

The new e-commerce bill has drawn significant criticism due to various issues. These include inconsistent definitions and ambiguity, the impractical burden of establishing separate electronic platforms for businesses, excessive liability and punitive measures that may hinder e-commerce growth, insufficient adaptability to technological advancements, and the tendency to duplicate existing provisions, raising questions about its effectiveness. Moreover, the bill’s emphasis on punitive measures over customer compensation undermines its intended “consumer protection” objective.

It is true that some form of minimum standards that define the rules of engagement between the parties is a necessity. But do all forms of business practices require detailed regulation on all aspects of their operation?Moreover, a larger issue that seemingly needs to be talked about is whether such regulation is even required in the first place.

Regulation, while undoubtedly important in certain contexts, may not always be the best approach when it comes to electronic commerce. The current legislation, at least as it appears by its reading, raises questions about the efficacy of extensive regulation in the e-commerce sector, especially considering that the model of e-commerce is likely to remain relatively solid for the foreseeable future.

One of the significant concerns with overregulation is the potential impeding innovation. In a rapidly evolving digital landscape, e-commerce businesses often rely on flexibility and adaptability to stay competitive. Excessive regulations restrict the creativity and agility needed for startups and small businesses to thrive. Furthermore, imposing strict regulatory requirements burdens businesses, particularly MSMEs, with compliance costs and administrative overheads. Small enterprises, already facing various challenges, may find it challenging to navigate through complex regulatory frameworks. This burden could deter potential e-commerce players from entering the market, limiting the diversity and competitiveness that a thriving e-commerce sector should foster.

Another critical consideration is the rapid pace of technological changes in the digital realm. While e-commerce continues to evolve, the current legislation might not be agile enough to adapt swiftly to emerging challenges. A rigid regulatory framework could quickly become outdated, rendering it ineffective in addressing new complexities that arise from advancements in technology or changes in consumer behavior.

In order to foster a thriving e-commerce ecosystem, Nepal’s approach to regulation must strike a delicate balance between consumer protection and supporting innovation and entrepreneurship. Rather than creating a new layer of bureaucracy, adapting and implementing relevant provisions from the Consumer Protection Act can provide a more pragmatic solution for the digital marketplace. Additionally, it is crucial for the government to adopt a flexible approach in the regulatory framework, considering the fast-paced nature of electronic commerce. Introducing provisions for periodic reviews and updates, along with agile policymaking and collaboration with industry experts, can ensure that regulations remain effective in addressing emerging challenges. Avoiding cumbersome regulations that lead to rent extraction is equally essential to promote entrepreneurship and foster economic growth in the e-commerce sector.

Nepal’s bill-making process might benefit from some changes to ensure a more inclusive and participatory approach, during the pre-legislative phase. Currently, the bill-making process lacks engagement with stakeholders, leading to potential shortcomings in understanding the real-world implications of proposed legislation. Including stakeholders in the early discussion phases can bring diverse perspectives and valuable insights, enabling policymakers to craft more well-rounded and effective bills. By actively involving businesses, experts, consumers, and civil society representatives, the bill-making process can become more transparent, accountable, and reflective of the needs and concerns of the broader population. Emphasizing stakeholder participation in the pre-legislative phase can lead to better-informed decisions and foster a sense of ownership and support for the resulting legislation.

In 2021, the Indian government proposed amendments to the Consumer Protection (E-Commerce) Rules (2020) to protect consumer interests. However, the Indo-American Chamber of Commerce (IACC) had raised concerns that these new rules will choke e-commerce growth in India.

Similarly, China’s e-commerce law had faced criticisms for creating problems such as burdensome compliance requirements and stringent liability for platforms. These challenges reportedly hindered innovation and competitiveness while potentially neglecting the interests of both the market and consumers.

Furthermore, the concerns raised about the UK’s Online Safety Bill in 2022, such as its complexity, incoherence, and risks to freedom of expression, privacy, and the rule of law, highlight the potential negative consequences of implementing stringent e-commerce regulations.

Thus instead of imposing rigid rules, the focus should be on promoting a regulatory framework that fosters responsible business practices, encourages innovation, and protects consumer interests. This could involve implementing and adapting existing consumer protection laws to suit the e-commerce landscape.

By reevaluating and refining the bill, Nepal can aim to create a regulatory framework that not only addresses consumer protection concerns but also encourages entrepreneurship, innovation, and investment in the e-commerce sector. Embracing a more adaptive approach to regulation can pave the way for a thriving digital marketplace that benefits both businesses and consumers alike.

To ensure the sustained growth of e-commerce in Nepal, the focus should be on creating an adaptable regulatory environment that can accommodate technological advancements while safeguarding consumer interests. Only then can the country truly harness the potential of electronic commerce as a driver of economic growth and prosperity.