In recent times there has been a rapid increase in competition in both national and global markets where the sellers, manufacturers, and service providers may be tempted to engage in unscrupulous, exploitative, and unfair trade practices. However, with the emerging technology, the traditional marketplace has been replaced with e-commerce websites that provide products, services, and at times even experiences at your doorstep.
The evolution of consumer rights across the world has been drastic. The shift from caveat emptor (let the buyer beware) to caveat venditor (let the seller beware) has made the consumers more aware of their rights. The rise of consumer awareness and protection in India started with the Consumer Protection Act, 1986. This legislation empowered the consumers with a redressal mechanism for all consumer related issues faced by them. Being drafted and passed in the 80’s the legislation did no embody any e-commerce related provisions. After a boom in the online commerce sector, the Act is now replaced with the Consumer Protection Act, 2019 (CPA, 2019) which includes “online transactions through electronic means or by teleshopping or direct selling or multi-level marketing”. The latest legislation keeps takes into consideration the challenges faced by the modern consumer in both physical as well as virtual spaces.
Under the CPA, 2019 the Ministry of Consumer Affairs, Food and Public Distribution passed the Consumer Protection (E-Commerce) Rules, 2020 (E-Commerce Rules) via a notification dated 23rd July 2020. These rules specifically tackle the issues between e-commerce platforms and the users or consumers of the platform.
Applicability and scope:
The rules apply to goods and services bought or sold via digital or electronic networks. Several other forms of e-commerce platforms are also covered under the ambit of the rules, these include marketplace and inventory e-commerce models, multi-channel single-brand retailers, and single-brand retailers in single or multiple formats. An exception to this norm is that the rules don’t apply to any actions of a natural person, in their personal capacity, which is not associated with any regular commercial activity.
Most importantly the rules are also applicable to those e-commerce entities which are not established in India but systematically offer goods and services to Indian consumers.
What is an E-Commerce Entity?
The Rules distinguish between two categories of e-commerce entities based on the type of platform provided. These include marketplace e-commerce entity and inventory e-commerce entity
- Marketplace based model of e-commerce means providing an information technology platform by an e-commerce entity on a digital & electronic network to act as a facilitator between buyer and seller. Some examples include platforms like eBay, Shopclues, etc.
- Inventory based model of e-commerce means an e-commerce activity where the inventory of goods and services is owned by an e-commerce entity and is sold to the consumers directly. Platforms such as Zara, Bewakoof, etc. use this e-commerce model to conduct business.
What do the Rules state?
The rules deal with all forms of unfair trade practices across all models of e-commerce. It further states a list of duties and obligations for e-commerce entities (both marketplace and inventory) and sellers on marketplace e-commerce entities. The rules state some general duties for e-commerce entities such as:
- Providing the legal name, address, contact details, etc. of the e-commerce entity in a prominent manner on its platform
- The entities shall not be involved in any unfair trade practices of any kind.
- A nodal person of contact should be appointed who is a resident of India. This designated person shall ensure compliance with the CPA, 2019 and its delegated legislations
- The e-commerce entities shall give information about the importer in seller, in case any, on its platform
- The e-commerce entities should give their best attempt and partner with the National Consumer Helpline of the Central Government.
- The entities shall not manipulate their prices in order to gain unreasonable profits.
- Refund requests should be processed by the e-commerce entities within a reasonable period of time as prescribed by the Reserve Bank of India or any other competent authority.
The Rules also lay some special e-commerce related duties on the concerned entities with respect to cancellation charges. It states that the e-commerce entity shall not levy cancellation charges on the customer unless such charges are being borne by the entity itself as well.
Another important issue taken into consideration by the Rules is related to consumer consent. In some cases, consumers happen to purchase the product without giving explicit consent to do so. This acts against the interest of consumers. The Rules emphasize that the consent of a consumer for purchasing goods or services should be recorded only when consent has been given explicitly through affirmative action. This will ensure that consumers make an informed choice and are not forced into purchasing goods or services.
Marketplace E-Commerce Entities:
The Rules dig deeper by specifying certain liabilities and duties of marketplace e-commerce entities and the sellers operating with such entities. In a broad sense these liabilities include the following:
- The e-commerce entity should give details about the terms and conditions stating its relationship with the seller to keep the consumers more aware of the source of the product or service.
- A database including relevant details about the sellers who have previously defaulted under the Copyright Act, 1957, the Trade Marks Act, 1999, and the Information Technology Act, 2000 should be maintained by all such entities.
- The entity shall ensure that the characteristics of the goods advertised are similar to the actual product.
- Information regarding return, refund, exchange, warranty and guarantee, delivery and shipment, modes of payment, and grievance redressal mechanism shall be made available on the platforms to allow consumers to make informed decisions.
The sellers using the marketplace to offer goods or services should not be involved in any form of unfair trade practices. Fake reviews for products is a grossly misleading tactic used by sellers online to earn more profits. The Rules strictly advise against any sort of misrepresentation by the sellers on platforms. Further, in case the goods or services are defective, deficient, or spurious the sellers shall not refuse to take the goods back or refund for such products or discontinue the services which have been paid for.
Grievance Redressing Mechanism:
The E-Commerce Rules paved way for a distinguishing yet important feature by means of setting up grievance redressal mechanisms on various levels. The Rules state that every e-commerce entity shall establish an adequate grievance redressal mechanism having regard to the number of grievances ordinarily received by such entity from India, and shall appoint a grievance officer for consumer grievance redressal, and shall display the name, contact details, and designation of such officer on its platform. These officers further need to acknowledge the receipt of consumer complaints within a time frame of 48 hours and adequately redress the complaint within one month of filing such complaint. A ticket number shall be allotted to the complainant which will aid them to track the status of such complaints. Apart from both types of e-commerce entities, the sellers selling their product or services through the marketplace e-commerce entity shall also establish a similar grievance redressal mechanism following the same time frames.
Obligating the entities and sellers to establish such mechanisms can effectively reduce the number of issues being faced by the consumers and provides the entities and sellers with a fair chance to right a wrong committed on their end. It will boost consumer confidence to make use of e-commerce platforms without the fear of getting deceived.
The E-Commerce Rules are a great first step towards regulating the e-commerce sector. The sector has not been adequately tapped by the Indian legislators and therefore it would need more detail-oriented regulations to ensure transparency and fairness on such platforms. However, the Consumer Protection Act, 2019, and the Consumer Protection (E-Commerce) Rules, 2020 can only achieve the aims envisioned under it through a robust enforcement mechanism and strict compliance with the laws provided therein.
 Section 2(7)(ii)(b) The Consumer Protection Act, 2019