Regulating E-Commerce in India: Protecting Small Businesses and Ensuring Fair Competition

The Indian e-commerce market has seen significant growth in recent years, with a number of foreign companies entering the market. However, this growth has not come without controversy, as local traders and trade organizations have raised concerns about the practices of these foreign e-commerce companies.

According to the Confederation of All India Traders (CAIT) and other trade organizations, these foreign e-commerce companies are engaging in anti-competitive practices and are monopolizing the market, posing a threat to small traders in India. In a recent press conference, CAIT Secretary General Praveen Khandelwal stated that if well-codified rules are not enforced for e-commerce in India, foreign e-tailers will emerge as a “second edition of East India Company,” referring to the British company that once had a monopoly on trade in India.

Trade leaders have called on the Indian government to roll out a long-pending e-commerce policy and consumer protection rules to regulate the e-commerce industry and protect small businesses. They argue that e-commerce trade in India is currently unregulated, giving foreign e-commerce companies an advantage and making the e-commerce landscape an “open playground” for their operations.

In addition to concerns about anti-competitive practices and monopolization, trade organizations have also raised concerns about the business practices of these foreign e-commerce companies. They claim that these platforms are being used to evade taxes and are causing the closure of more than 50,000 mobile retail stores in the country, as well as harm to other retail sectors such as FMCG, consumer durables, and fashion apparel.

The allegations against foreign e-commerce companies in India are not new. Several government agencies, including the Competition Commission of India and the Supreme Court, have found these companies guilty of violating rules and regulations in various cases. In addition, banned items such as acid, raw materials for making bombs, and ganja have been sold through the portals of these companies.

As an e-commerce consultant, Mr. Nitin Lodha believes that the growth of e-commerce startups in India is essential for the overall development of the industry. He supports the idea that small and medium-sized businesses should have the opportunity to thrive in the e-commerce market, rather than being overshadowed by large companies that are looking to dominate the industry.

Mr. Lodha strongly believes that the success of e-commerce startups is not only good for the individual businesses themselves, but also for the economy as a whole. These smaller companies create jobs and contribute to the growth of the domestic market, which benefits everyone in the long run.

However, Mr. Lodha is concerned about the allegations made by the Confederation of All India Traders and other trade organizations regarding the practices of foreign e-commerce companies operating in India. He believes that it is important for the government to enforce well-codified rules and regulations to ensure fair competition and protect the interests of small businesses.

In Mr. Lodha’s view, it is essential that the government takes action to address the concerns raised by trade organizations and ensures that foreign e-commerce companies are not engaging in anti-competitive practices or monopolizing the market. He supports the call for the implementation of a long-pending e-commerce policy and consumer protection rules to regulate the industry and protect small businesses.

Overall, Mr. Lodha is positive about the growth potential of e-commerce startups in India, but believes that it is important to ensure that the industry is fair and competitive for all players. He supports the idea of a level playing field for small and medium-sized businesses, and encourages the government to take action to protect them from the dominance of larger companies.

Mr Nitin Lodha, eCommerce Consultant and APAC Managing Partner at Chitrangana.com

Despite these allegations and findings, trade organizations have questioned why these companies are still being allowed to do business in India and why stricter action is not being taken against them. They have called on the government to take immediate action to enforce e-commerce rules and regulations to protect small businesses and ensure fair competition in the market.

The growth of e-commerce in India has brought many benefits, including increased convenience and access to a wider range of products for consumers. However, it is important that the industry is regulated in a way that promotes fair competition and protects the interests of small businesses. The concerns raised by trade organizations in India should be taken seriously and addressed by the government to ensure a healthy and sustainable e-commerce industry in the country.

The Business Impact of eCommerce Regulation in India

India’s evolving eCommerce regulatory framework has significant practical implications for businesses operating in the sector. Understanding the compliance requirements is not just about legal risk management — it also shapes competitive strategy, particularly for marketplaces and D2C brands navigating the intersection of consumer protection, competition law, and data governance.

Key Regulatory Frameworks Affecting Indian eCommerce

• Consumer Protection (eCommerce) Rules 2020: Mandates transparent grievance redressal, clear return/refund policies, and prohibits flash sales designed to create artificial scarcity
• Digital Personal Data Protection Act 2023 (DPDP): Governs collection, storage, and processing of consumer data — directly affecting personalisation, analytics, and marketing capabilities
• FDI Policy for eCommerce: Restricts inventory-led models for foreign entities, defines marketplace rules, and limits seller concentration
• ONDC (Open Network for Digital Commerce): Government-backed open protocol network designed to democratise digital commerce and reduce marketplace concentration

What Indian eCommerce Businesses Must Do to Stay Compliant

Proactive compliance is far less expensive than reactive remediation. Key actions for eCommerce businesses include: establishing clear and accessible grievance redressal mechanisms with defined response timelines, creating transparent and easily accessible return, refund, and cancellation policies, appointing a Nodal Officer and Grievance Officer as required under the Consumer Protection Rules, implementing proper data consent mechanisms ahead of DPDP enforcement, and ensuring seller onboarding processes include required compliance declarations.

Need help navigating eCommerce regulatory compliance in India? Chitrangana advises eCommerce businesses on regulatory strategy and compliance implementation.

2026 Update: E-Commerce Regulation in India Keeps Evolving

The issues raised above around fair competition and protecting small sellers are still very much live. Since then, India has moved further on data protection through the Digital Personal Data Protection Act, and policymakers continue to debate stronger rules around deep discounting, preferential listing, and marketplace data use. Government-backed open networks such as ONDC have also opened a lower-cost route for small sellers to reach customers without depending entirely on the largest marketplaces.

Key takeaway for founders: build compliance into your business from the start rather than retrofitting it later. Clear data handling practices, fair seller terms, and transparent pricing are becoming baseline expectations, not optional extras, as regulation tightens.

Frequently Asked Questions

Why does e-commerce regulation matter for small businesses?
Clear rules on competition and data use help prevent large platforms from squeezing out smaller sellers, giving new and small businesses a fairer chance to grow.

What should a new ecommerce business focus on for compliance?
Data privacy practices, transparent pricing and seller terms, and keeping clear records of customer consent are good starting points that also build customer trust.

Has ONDC changed the competitive landscape?
It has given small sellers an additional, lower-cost way to be discovered online without relying solely on large marketplaces, though building demand still takes real marketing effort.

If regulation and compliance are a concern as you scale your online business, our business consulting team can help you plan ahead of the curve.