This article has been authored by Likhita Agrawal, a third-year student at Maharashtra National Law University, Nagpur.
In the world of science and technology, where everything is moving towards digitalization, commerce and business is no exception. The buying and selling of goods and commodities are prevalent in every part of the world. In the busy life of people, it has brought convenience regarding shopping and purchasing. In India, B2C that is Business to Consumer e-commerce is a market which was valued around USD 38.5 billion in 2017 and it is predictable to escalate to USD 200 billion by 2026, while B2B which is Business to Business e-commerce is estimated to grow nearly to USD 300 billion by then. Moreover, this practice is conducted on a virtual platform where there is no physical interaction and connection of both the parties of the transaction, buyers and sellers and thus, there are chances of commercial malpractices. To regulate the same, and to provide a precise legal framework, the Government has come up with rules known as Consumer Protection (E-commerce) Rules, 2020 (hereinafter referred to as “Rules”).
The Rules were brought up by the Central Government by virtue of its power under Section 101(1) (zg) of the Consumer Protection Act, 2019 (hereinafter referred to as “Act”). The objective of introducing these Rules was to ensure the protection of interests of the consumers dealing in electronic transactions by including the e-commerce entities within the scope of consumer protection laws.
Applicability of the Rules
The Rules are applicable to all the e-commerce entities which includes the e-commerce models, marketplace model and inventory-based model. All goods and services which are bought or sold though digital or electronic mode are also mandated to follow the Rules. The Rules also circumscribe the multi-channel single brand retailers and single brand retailers that carry their business via electronic mode.
Furthermore, along with the concerned Rules, the e-commerce entities are controlled by some other legislations. Firstly, Legal Metrology (Packaged Commodities) (Amendment) Rules, 2017 necessitates them to exhibit some specified information on their databases. The Information Technology Act, 2000 mentions about the directions about the electronic communications. It provides that the Government may make regulations for the security procedures and practices to regulate electronic contracts. Rule 4(1) (a) of the Consumer Protection (E-Commerce) Rules states that each e-commerce entity shall be a registered company under The Companies Act, 2013 or a foreign company under the Companies Act, 2013 or an office, branch or agency outside India owned or controlled by a person resident in India as said in the Section 2 of the Foreign Exchange Management Act, 1999. The provisions of Intellectual Property Rights laws like The Copyright Act, 1957 and the Trademark Act, 1999 also apply to such e-commerce entities.
Two Models of Marketplace: Inventory E-Commerce Entity and Marketplace e-commerce entity
Rules are divided into two categories:
i. Inventory e-commerce entity means an e-commerce entity which owns the inventory of goods or services and sells these goods or services directly to the consumers and shall include single brand retailers and multi-channel single brand retailers.
ii. Marketplace e-commerce entity means an e-commerce entity that generates virtual platform on a digital network to enable transactions between both the parties.
Duties of the E-Commerce Entities under the Rules
The Rules talk about rigid duties for the e-commerce entities and to ensure its proper compliance, the Rules also impose necessary penalties for those who contravene the provisions laid down by the Rules. Every such body has to mention its basic information like legal name, geographic address of its headquarters and all of its branches, name along with the details of its website and details to contact and communicate like e-mail address, fax, landline and mobile numbers of customer care as well as of grievance officer on its platform in a comprehensible manner.
Every e-commerce entity is mandated to institutionalise a grievance redressal mechanism and must designate a Grievance Officer for the same purpose and the details of name and contact shall be mentioned on its platform. This Grievance Officer has to acknowledge the complaint within forty-eight hours of its receipt and should provide the appropriate remedy to the complainant within a span of one month. Every e-commerce entity is restricted from imposing charges for cancellation of the orders by the consumers subsequent of the confirmation of order. However, this is subject to the exception that if such charges are also carried by the e- commerce entity, and if the purchase order is cancelled unilaterally for any reason, then the entity may impose a cancellation fee. The Rules specifically emphasize on explicit consent of the buyer regarding the purchase of the good through a proper affirmative action as well as pertaining to the refund norms. It also refrains the e-commerce entities from price exploitation and unreasonable categorization among the consumers.
Rules against Unfair Trade Practices
The Consumer Protection Act, and the respective Rules, forbids the e-commerce entities from conducting any unfair trade practice in the course of the businesses. The Act itself mentions a comprehensive elucidation regarding unfair trade practice, the Rules also levy stringent measures against any sort of deceptive, manipulative or any other unfair trade practices by players in its e-commerce business.
Customer ratings and reviews form an important basis in decision-making process for the consumer. False reviews and bogus ratings can affect the selection of product among variety of ranges. The Rules restrict any e-commerce platform from misleading display of consumer and posting reviews or ratings about the goods or services itself. The E-Commerce Rules requires all inventory-based e-commerce models and sellers existing on the e-commerce platforms to confirm the existing quality and description of the goods and services with the aforesaid portrayal in the advertisements and marketing.
Penalties for Contravention
The provisions of the Act will apply in any case of infringement of the Rules, consequently, e-commerce entities may be obligated to comply with relevant sanctions and directions by the authorities. Non-compliance with such directions may result in fines or imprisonment. The E-Commerce Rules also incorporate requirements under the Legal Metrology Rules and other applicable laws and in the absence of any clarity, penalties under the aforementioned legislations may also be levied from the e-commerce entity in case of non-compliance.
Identifying the Probable Shortcomings of the Act
The Rules have not covered some important issues which are needed to be looked over again. One of them being the data protection of consumers particularly related to financial and banking details, as this is a prevalent issue relating to threat in infringement of cybersecurity and data privacy. The Rules did not mention any provision regarding the consequences of infringement of Right to Privacy which has been granted as a fundamental right.
Furthermore, the Rules are silent on a very relevant issue which could lead to various problems in the future, that is regarding jurisdiction of the foreign based e-commerce entities. Subsequently, in the matter of conflict of interest among e-commerce entities or between the customer and e-commerce entity, the ambiguity of the jurisdiction can emerge as a great problem.
Additionally, the Rules mandate huge compliance of Grievance Redressal Mechanism and to comply with the same can probably be troublesome for the start-ups and new small businesses, like graduate students and housewives who tend to sell their products online. Such sort of home growing business is not equipped with such infrastructural resources and usually have a middleman for business. The Rules fail to mention about the cap or restriction on the heavy delivery charges imposed on the e-commerce entities. The Rules should specifically state the delivery charge for different ranges of products.
The Rules are brought with a view to develop efficiency and uniformity in the e-commerce trading business throughout the country. Prior to this, the area was not governed by any specific legal framework, thus there was an urgent need to regulate this in respect of the notion of consumer protection. These Rules have the potential to solve many problems pertaining to e-commerce transactions and is a relevant inception in the prevalent time due to rise in the buying and selling through technology.