Consumer Protection with respect to E-Commerce – E-Commerce though not particularly defined in any legislation, is in general parlance defined as “activities that relate to buying and selling of goods and services over the Internet.” The reach of e-commerce has grown simultaneously with the growth of the internet worldwide.

E-commerce Platform

The platform that e-commerce has provided the Indian traders for trade and commerce is noteworthy and huge. On one hand, online shopping portals like Flipkart, Amazon, Nykaa, Myntra ensure several options for a wide range of goods online with quick and effective delivery systems, on the other hand, the Indian Railways, State Electricity Boards, banks, movie theatres, etc are also using e-commerce for payment and booking purposes. However, the sad reality on the other side of the coin is that even with such increased scope, there is a disadvantage of entering into such online transactions, being the ambiguity in the laws relating to them.

Enforcement

A year after the enforcement of the new act its more than three decades old law has been repealed, the Government has now issued the Consumer Protection (E-Commerce) Rules 2020 (E-Commerce Rules) with effect from 23 July 2020.

The E-Commerce Rules prescribe an elaborate framework for ecommerce entities:

To oversee and prevent any unfair trade practices or misleading advertisements on part of the sellers on their platform.
To obtain express consent from its consumers for the purchase of any good or service offered on its platform.
The price of the goods or services offered cannot be manipulated to gain unreasonable profits.[1]

Consumer Protection in the Age of E-Commerce

Consumer Protection with respect to E-Commerce – The e-commerce development includes a number of legal as well as consumer challenges. E-Commerce is not just using network-based technologies to carry out business.

It is about moving a whole organization to a fully electronic environment through a change in their work procedures, reengineering their business processes, integrating them with their business partners beyond their traditional boundaries. Electronic Commerce has brought a complete revolution in the way businesses are conducted. There is a paradigm change from paper-based transactions to fully electronic organizations. In this changing scenario, the law is struggling to keep up.

What is e-commerce?

Consumer Protection with respect to E-Commerce

“E-Commerce allows consumers to electronically exchange goods and services with no barriers of time or distance.”

In the upcoming future the boundaries between “conventional” and “electronic” commerce will become blurred as more and more businesses move sections of their operations onto the Internet.[2]There are three types of E-Commerce. They are:-1) B2B (business to business)2) B2C (business to consumer)3) C2C (consumer to consumer)

Did e-commerce has ensured the rights of consumers?

Consumer Protection with respect to E-Commerce – Furthermore, the importance of e-commerce as a significant and distinct industry came to be recognized in India over the last decade but the law governing it has only recently picked up the pace. The Consumer Protection Act, 2019 serves as parent legislation and empowers the Central Government to take measures to prevent unfair trade practices in e-commerce and to protect the interests and rights of consumers participating in e-commerce.

To introduce a more solid regulatory framework that facilitates transparency and fairness in the operations of e-commerce entities in India, the Ministry of Consumer Affairs, through the Department of Consumer Affairs notified the Consumer Protection (E-Commerce) Rules, 2020.

Some Key Obligations Applying To Ecommerce Entities And Sellers

Consumer Protection with respect to E-Commerce

1. Scope and Application

The E-Commerce Rules apply to:

(a) All goods/services bought or sold over digital or electronic network, including digital products,

(b) Marketplace e-commerce entities and inventory e-commerce entities,

(c) All e-commerce retail, including multi-channel single brand retailers and single brand retailers in single and multiple formats such as single brand retailers who use multiple distribution channels such as offline retails stores in addition to e-commerce, and

All forms of unfair trade practices across all models of e-commerce.

Marketplace based model are those entities which provide an information technology platform to facilitate transactions, Naptol and ShopClues.
Inventory based model own the inventory of goods/services and sell them directly to consumers like Myntra.[3]
The E-Commerce Rules also apply to entities which are not established in India but systematically offer goods or services to consumers in India like Sephora.

2. Implications for B2C and B2B entities

The CPA 2019 and E-Commerce Rules administer consumer purchases. The term ‘consumer’ is defined under the Act as “any person who buys goods or services for consideration but it excludes any person who makes a purchase for ‘commercial purpose’, with the exclusion of goods bought for the purpose of earning a livelihood by means of self-employment.”

Sole Partnership

Thus, sole partnerships and entrepreneurs are not excluded from the above definition. If any customer on a purely B2B platform were to purchase goods and services for ‘self-employment’, they would be considered ‘consumers’ and the B2B platform would be liable under the E-Commerce Rules. Further, the E-Commerce Rules introduce the concept of a ‘user’, which has a wider definition than consumer and includes any person who accesses or avails any computer resource of an e-commerce entity.

E-commerce Entities

A user may include an individual as well as companies. E-commerce entities are required to provide specific information to users regarding the sellers on their platform, the goods or services available on the platform, and the payment methods available on the platform [4]. Therefore, the Rules intend to only govern consumers, the reference to a ‘user’ gives rise to uncertainty as to whether B2B e-commerce entities are also required to provide the specific information to users who are not categorized as consumers.

3. Presence in India

The E-Commerce Rules specifically recognize and government entities is not establish in India but systematically offer goods or services to consumers in India such as offshore online marketplaces.

The E-Commerce Rules requires e-commerce entities to have the following:

(a) A company incorporated in India, or

(b) A company incorporated outside India which has a place of business in India, via electronic mode, and conducts any business activity in India, or

The e- entities must appoint an Indian resident as a nodal person of contact to ensure compliance with the CPA 2019.[5]

This proviso appears to be a step to ensure regulatory and enforcement control over foreign entities who offer goods and services in India and is in line with a categorization under the Personal Data Protection Bill, 2019.

4. Duties of E-commerce Entities

The E-Commerce Rules require all e-commerce entities to:[6]

(a) Display basic information such as their name, contact details and address notably on the platform;

(b) Establish consumer grievance redressal mechanisms. Including a customer care number and a grievance redressal officer. For the platform and details should be published on the platform;

(d) Mention the name and details of the importer for imported goods or services;

(e) Ensure consumer consent for the purchase of goods or services is express through a clear and affirmative action, not in an automatic manner such as a pre-tick checkbox; and

(f)Affect all refunds according to RBI prescriptions and within a reasonable period.

Further, in line with provisions of the CPA 2019, the E-Commerce Rules require e-commerce entities to abstain from:

(a) Adopting unfair trade practices;

(b) Imposing cancellation charges when the entity cancels the purchase, unless similar charges are also borne by the e-commerce entity due to a cancellation by a seller;

(d) Discriminating between consumers of the same class or making arbitrary classifications of consumers. Affecting their rights under the CPA 2019.

5. Liabilities of Marketplace Entities

In addition to the duties listed above, the E-Commerce Rules impose specific requirements on Marketplace Entities.

These are:

(a) Restate the due diligence requirements on intermediaries under the IT Act and the IG Rules;

(b) To ensure that descriptions of goods and services are accurate and correspond straight with the features of such goods and services through an undertaking;

(d) Taking actions to maintain a record of sellers who repeatedly offers goods or services that have been removed by the platform under intellectual property laws or the IT Act.

Marketplace Entities also require to display certain details to users. These include information that helps consumers to make informed decisions such as:

All information provide through sellers to Entities should display to the users of the platform ;
Information relating to available methods of payment, returns and refunds, exchanges, warranties, delivery and shipment ,information on the available payment methods; and
Any aggregated ranking or feedback about the seller or goods,

6. Duties of Sellers using Marketplace Entities

Sellers offering goods or services through Marketplace Entities must provide precise information. To Marketplace Entities, including seller entity details, prices, relevant details, delivery details, if any guarantees or warranties, and other mandatory notices. And information required by applicable laws.

Also, sellers must have a prior written contract, to ensure accurate advertisements, and to appoint a grievance officer for timely grievance redressal. The requirement to appoint a grievance officer may be difficult for small or individual sellers such as sole proprietorships, and no exception has been provided for such cases. Sellers must also avoid adopting unfair trade practices, false representations, and refusing refunds as required under the CPA 2019. This can be done through contractual obligations.

7. Liabilities of Inventory Entities

Given the model of Inventory Entities, the E-Commerce Rules require them to meet the terms with all the obligations imposed on Marketplace Entities as well as sellers. Basically, all display requirements applicable to Marketplace Entities will also apply to Inventory Entities, including all information prescribed under the LM Rules[7]. E-Commerce entities must also avoid practicing unfair trade. Practices, false representations, and refusing refunds as required under the CPA 2019.

Also, Inventory Entities that openly or completely vouch or guarantee for the authenticity of the goods or services sold by them or would have to bear legal responsibility

8. Non – Compliance

The provisions of CPA 2019 will apply to any violations of E-Commerce Rules. And in such cases, e-commerce entities may be required to comply with all the relevant sanctions and directions by the system. Non-compliance with such directions may result in penalties or imprisonment.

Conclusion

Consumer Protection with respect to E-Commerce – The E-Commerce Rules in fact appear to go hand in hand with the Consumer Protection regime under the Consumer Protection Act, 2019 even though delay in notification of the E-Commerce Rules is helpful given the recent restraints on the freedom of movement of a consumer and the consequent increase in dependence on e-commerce.

E-commerce pandemic

In the wake of the pandemic, e-commerce has been a blessing for all consumers. Especially when it comes to meeting not just the day-to-day needs or essentials. But even other important requirements such as insurance. Procuring essential furniture items, and IT hardware to ensure unhampered work from home. However, as everyday online scams and unfair trade practices are increasing.

Consumers

They have had the consumers reel under the fear of exposing themselves to dishonest sellers and service providers.

The slew of rules is unquestionably a step in the right direction of platform neutrality in e-commerce. Marketspace, transparency, stringent penalties, and a subtle balance between the obligations of the entities and sellers. However, how efficiently these E-commerce Rules would be enforced. Is something that we would have to see with the passage of time.

Reference

Consumer Protection with respect to E-Commerce

[1] By Sarthak Sarin, An Overview Of The Implications Of Consumer Protection Rules For Relevant Stakeholders, INC42.COM, (Feb 04,2021, 1:15 PM) https://inc42.com/resources/an-overview-of-consumer-protection-e-commerce-rules/#:~:text=Ecommerce%20Entities-,The%20E%2DCommerce%20Rules%20prescribe%20an%20elaborate%20framework%20for%20ecommerce,in%20place%20adequate%20internal%20mechanism

[2] By Ad. Vishal Chaturvedi, Laws governing Consumer Protection in the Age of E-Commerce, its implication, and far-reaching effects. LEGAL SERVICES INDIA,(Feb 04, 2021,1:25 PM), http://www.legalservicesindia.com/article/1573/Consumer-Protection-in-the-age-of-E-Commerce.html

[3] The Consumer Protection (e-Commerce) Rules, 2019 § 3 clause (g), (f)