Nepal will crack down against wayward behaviour in the fast-growing e-commerce market by rolling out legislation with teeth.

The draft bill to manage e-commerce has proposed two to three years in jail and fines ranging from Rs300,000 to Rs500,000 for operators of online platforms and sellers if they fail to process returns or exchanges within the stipulated time.

The proposed law, which was registered in the National Assembly by Industry Minister Ramesh Rijal last Tuesday, has also envisaged stern action against e-commerce platforms for breach of guarantee and warranty advertised with the goods and services.

The bill says that sellers cannot sell goods to e-commerce platforms without an agreement. Stern action will be taken if e-commerce platforms do not clearly mention the details of the goods and services offered to customers.

The government has moved to enact the bill a decade after e-commerce launched in Nepal under pioneer online seller muncha.com.

The draft bill had been prepared in 2021 but failed to make progress due to frequent changes in government.

The absence of a law governing e-commerce has emboldened errant players. Many customers have complained of being given damaged products, getting the wrong product, price differentials and lack of a return and refund policy.

Consumer rights activists and e-retailers have been saying that an e-commerce law has long been overdue in Nepal. Lawmakers have been overtaken by business trends which allowed unscrupulous market activities to spread, they say.

The proposed law requires e-commerce platforms to keep transaction details for six years. It also says that e-commerce businesses can operate only through official websites or apps.

Consumer rights activists say that the penalties are not stringent enough to prevent fraudulent activities.

“The action provisioned in the bill is minimal considering the rising cases of online fraud while buying goods and services. Unless strict actions are provisioned, the consumer will keep getting cheated,” said Bishnu Prasad Timilsina, general secretary of the Forum for Protection of Consumer Rights-Nepal.

"It is not easy to file a complaint if one is cheated while buying goods and services. The bill does not say anything about compensation for the customer from the time the complaint is filed till the verdict is passed," said Timilsina.

"Moreover, thousands of gig workers are working for e-commerce platforms and delivering goods by motorcycle and bicycle, but the e-commerce bill has not mentioned them anywhere," said Timilsina.

E-commerce entrepreneurs say that even though the e-commerce law was a long time in the making, many essential parts have not been included.

“It took many years to bring policy to govern the e-commerce sector, but it is not sufficient compared to the e-commerce policy in other countries,” said Amun Thapa, CEO of online platform Sastodeal.

"For instance, there is unhealthy competition in prices among online retailers which also needs to be governed, but the bill has not covered it," said Thapa.

"In terms of data privacy, the bill contains adequate measures to secure data as much information about customers is obtained every time they buy goods and services. Almost 40 percent of the payments are made digitally, but the bill has not properly addressed digital payment,” he said.

"The bill has provisioned disclosure of warranty and guarantee, but it has not clearly mentioned how to file claims," Thapa said.

According to market insiders, e-commerce is one of the growth industries in Nepal. It is estimated that formal e-commerce has an annual turnover of Rs10 billion, and the market is growing by 150 percent annually.

Informal online retailers have a higher turnover than the estimated turnover of the formal sector, they say.

“Currently, e-commerce is being operated formally and informally. The number of online sellers selling goods and services informally has risen sharply in recent years. The e-commerce policy will help bring that informal online marketplace into the formal sector and also minimise cheating of customers,” said Thapa.

"This will bring online sellers selling goods on different social media platforms under the tax net, and also ensure that the return, exchange and refund policy is implemented. This will protect consumer rights,” he said.

Action will be taken against e-commerce platforms not listed in the electronic system of the Department of Commerce, Supplies and Consumer Protection, according to the e-commerce bill. Unlisted online businesses face fines ranging from Rs10,000 to Rs50,000.

Inspections will be made by the Department of Commerce, Supplies and Consumer Protection.

To operate an e-commerce business, traders need to set up an e-commerce platform which has a section for customer grievances. The e-commerce platform needs to be listed in the e-commerce portal of the Department of Commerce, Supplies and Consumer Protection.

The e-commerce platform needs to clearly state the latest sales price, details of delivery charges, time and date of delivery, and methods of making payment. If the buyer demands the goods on a specific day or at a specific time and place, delivery has to be made accordingly.

Goods can be returned if they are not as advertised or the wrong item is delivered.

As per the bill, individuals, firms, companies and organisations can import goods and services from foreign countries by following the existing laws, and they can also export goods and services.

The bill states that customer information should be kept secret. This confidential information should not be provided to others nor used for the seller's own purpose.

An agreement has to be made with the sellers to provide the goods and services before they are put on the e-commerce platform.

The e-commerce platform should return the money to the buyer or accept the return of the goods and services or accept the cancellation of the order if the goods and services are not as advertised or if they are delivered late or are damaged.