New E-Commerce Rules for Consumer Protection in India 2020 | Complete Details

At its etymological core, ‘e-commerce’ means the process of buying and selling products and services through the use of the internet.

The Organisation for Economic Cooperation and Development (OECD) very cogently defines an e-commerce transaction as the sale or purchase of goods or services, conducted over computer networks by methods specifically designed for the purpose of receiving or placing orders.

The Information Technology Act, 2000 

The IT Act, 2000 was the first law on e-commerce in India and it sought to give effect to the UNCITRAL Model Law on Electronic Commerce, 1996. The Act sought to give legal recognition to transactions taking place through electronic means of communications and what is now known as e-commerce. It recognized electronic records and digital signatures and determined the time and place for dispatch and receipt of electronic records.

It provided regulatory and punitive frameworks for various cyber-crimes and other offenses. It facilitated the amendments of allied laws to bring consonance to an increasingly tech-savvy society.

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. For instance, e-commerce has been specifically brought under the purview of the Consumer Protection Act, 2019, and is defined as the ‘buying or selling of goods or services including digital products over digital or electronic network’.

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 concrete regulatory framework that facilitates fairness and transparency in the operations of e-commerce entities in India, the Ministry of Consumer Affairs, Food, and Public Distribution through the Department of Consumer Affairs notified the Consumer Protection (E-Commerce) Rules, 2020. These Rules were notified on 23rd July 2020 and became effective from that date itself.

The scheme of these Rules may be categorized as follows:

What are E-Commerce Entities?

The E-Commerce Rules defines “e-commerce entities” as any person who owns, operates, or manages a digital or electronic facility or platform (i.e., an online interface in the form of any software including a website or mobile applications) for electronic commerce.

The definition however does not include sellers offering their goods or services on e-commerce marketplace platforms. For example, a seller offering his wares on a platform such as Olx or eBay would not come within the definition of an e-commerce entity under the Rules.

E-commerce entities can be generally categorized into two models:

An inventory e-commerce entity

• These entities own the inventory of goods and services and sell them directly to consumers. They include single-brand retailers such as Nike, Reebok, or Ikeas or they may include multi-channel single-brand retailers such as Urban Ladder.

A marketplace e-commerce entity

• These entities provide information technology on a digital or electronic network to assist transactions between buyers and sellers. Examples of these entities are Amazon, Snapdeal, or Flipkart.

The E-Commerce Rules require the e-commerce entity to either be a company incorporated under the Companies Act, 1956 of the Companies Act, 2013, or a foreign company as per the provisions of Companies Act, 2013, or an office, branch or agency outside India owned or controlled by a person resident in India as per the provisions of the Foreign Exchange Management Act, 1999.

The e-commerce entity is required to appoint a nodal person of contact or an alternate senior resident designated functionary to ensure compliance with the Consumer Protection Act, 2019, and its Rules.

What do the E-Commerce Rules apply to?

• All goods or services bought or sold on the digital or electronic networks including digital products.
• All models of e-commerce, including marketplace and inventory models of e-commerce.
• All e-commerce retail, including multi-channel single-brand retailers and single-brand retailers in single or multiple formats; All forms of unfair trade practices across all models of e-commerce

The Rules do not apply to natural persons conducting systematic and habitual personal activities that are not in the nature of the professional or commercial activity.

The Rules, however, do apply to foreign commercial entities that systematically offer goods or services to consumers in India, for example, entities like Sephora or Walmart.

What are the Duties of E-Commerce Entities?

• Visibly display to its customers, its

legal name, (b)  principal geographic address of its headquarter and all branches, (c) name and details of the website, and (d) contact details like e-mail address, fax, landline, and mobile numbers of customer care as well as grievance officer.

• Establish a grievance redressal mechanism

A grievance officer must be appointed and his name, contact information, and designation must be specified on the platform. The receipt of any consumer complaint must be acknowledged by such an officer within 48 hours and redressed within 1 month of its date receipt.

• Specify names and details of importers
• Cancellation charges must not be charged on any consumers unless similar charges are also borne by the entities for unilateral cancellation of purchase orders
• Record explicit consumer consent for purchase through affirmative action. No such consent shall be obtained automatically, for instance through pre-ticked checkboxes
• Accept consumer refund requests in accordance with guidelines prescribed by the RBI
• Desist from price manipulation of goods or services offered on its platform. For this purpose factors such as prevailing market conditions, the essentiality of the good or service, extraordinary circumstances under which the good or service is offered, and any other relevant consideration will be regarded in determining the justification for the price charged.
• Refrain from discriminating between consumers of the same class or arbitrarily classifying them in a manner prejudicial towards their rights.

What are the Liabilities of Marketplace E-Commerce Entities?

• Obtain an undertaking from sellers on its platform that the descriptions, images and other content pertaining to goods or services sold on the platform are accurate and correspond directly with the features (appearance, nature, quality, purpose, etc) of the goods or services actually sold.
• Inform its users:

1. Details about the seller, such as name of business, registration thereof, geographic address, customer care number, rating or feedback, any other information that enables customers to make informed pre-purchase decisions.

2. Upon a written request by a customer who has purchased goods or services on its platform, provide the seller’s information for the purpose of communication with the seller, to facilitate effective dispute resolution.

3. A ticket number for the customer to track the status of complaints

4. Terms of return, refund, exchange, warranty and guarantee, delivery and shipment, modes of payment, and grievance redressal mechanism,

5. Details on available payment methods and their security

• Ensure the sellers comply with their duties under the Rules.

When are E-commerce Entities Exempted from Liability?

• The entity is only providing third-parties with access to a communication system where information is transmitted, temporarily stored or hosted.
• The entity does not:

1. initiate the transmission

2. select the receiver of the transmission and

3. select or modify the transmission

• The entity observes due diligence and complies with central government guidelines. The entity cannot escape liability if:

1. it conspires, abets, aids or induces any unlawful act, or

2. on receipt of actual knowledge or notification by any governmental agency, that the platform is being used to commit unlawful acts, it fails to expeditiously remove or disable access.

What is the Due Diligence expected from E-Commerce Entities by virtue of The Information Technology (Intermediary Guidelines) Rules, 2011?

Entitles must publish rules and regulations, privacy policy and user agreements for access or usage of their platforms. In case of non-compliance, the entity has the right to immediate termination of usage and removal of non-compliant information.

In their terms and conditions, the marketplace e-commerce entities must give a description of any differential treatment between goods or services or sellers of the same category. They are also required to maintain records of sellers who have repeatedly offered goods or services that have been removed or have violated provisions under the various Intellectual Property Laws.

What are the Duties and Liabilities of Inventory E-Commerce Entities?

• To provide accurate information on its platform relating to the return policy, delivery and shipment, payment methods, mandatory notices under applicable laws, total price of the goods or services offered along with their break-up, and consumer grievance redressal mechanism.
• To abstain from falsely representing as a consumer to post reviews about goods or services or misrepresenting the quality thereof
• To ensure marketing advertisements are consistent with actual characteristics, access or usage conditions
• To take back goods, and not to withdraw a service purchased or agreed to be purchased or to refund consideration when goods or services are defective, deficient, or spurious.
• To be liable for any action related to the authenticity of goods or services offered, where the authenticity has been vouched for or guaranteed as authentic by the entity.

What are the Duties of Sellers on E-Commerce Entities?

• The seller must furnish the following information:

a). Its legal name, geographic address of its headquarter and branches, the name, and details of its website, e-mail address, customer care contact details, its GSTIN, and PAN details.

b). as the total price of such goods or services along with its break-up, mandatory notices and information required under applicable laws, details of grievance officer, details with respect to the country of origin, details of the importer, accurate information related to terms of exchange, returns and refund, delivery and shipment, and guarantees and warranties

• To abstain from falsely representing as a consumer to post reviews about goods or services or misrepresenting the quality thereof
• To ensure marketing advertisements are consistent with actual characteristics, access or usage conditions
• To take back goods, and not to withdraw a service purchased or agreed to be purchased or to refund consideration when goods or services are defective, deficient, or spurious.
• To renounce unfair trade practices during the offer of goods or services on the e-commerce entity’s platform or otherwise
• To have a written contract with the e-commerce entity whose platform they wish to sell their goods or services

Thus it is unmistakable that at its roots, the primary objective of the E-Commerce Rules, 2020 is to protect the rights and interests of consumers and prevent unfair trade practices, fraudulent transactions, and control sale of counterfeits. These Rules must be adhered to with immediate effect as non-conformity with these Rules by any e-commerce entity will be construed as a contravention of the Consumer Protection Act, 2019, and will attract penal action as specified therein.