Evolution of Consumer Protection in E-Commerce: India’s Journey

E-Commerce – Justice And Jurisprudence : Part III – Evolution of Consumer Protection in E-Commerce: India’s Journey

Introduction: The evolution of consumer protection in the realm of Indian e-commerce traces a compelling narrative that spans ancient civilizations to the contemporary digital era. Rooted in ethical principles from Vedic texts, the journey unfolds through medieval India, Mughal rule, and the post-independence period. With a pivotal turn in 1991 marked by liberalization, privatization, and globalization, India’s economic landscape transitioned into a digital economy. This article intricately explores this historical trajectory, shedding light on legal frameworks, challenges posed by globalization, and the role of transformative legislation like the Consumer Protection Act of 1986 and subsequent amendments. As India adapts to the complexities of the digital age, understanding its rich consumer protection legacy becomes imperative.

Also Read: 

E-commerce Jurisprudence: Navigating Consumer Protection Laws in India: Part I

E-Commerce – Justice And Jurisprudence : Part II: Consumer Protection in Indian Trade: From Ancient Laws to Post-Independence Regulations

IN THE ERA OF GLOBALISED INDIA

With the acceptance and implementation of Liberalisation, Privatisation, and Globalisation in 1991, the fate of the Indian economy changed. The infusion of technologies drastically evolved the mechanical and physical industrialized era. Computers and Technologies became inescapable and with time the nature of the Indian economy switched from a physical to a digital economy. With the explosive growth of the Internet in the 1990s, a new era in technology and business was foretold. Globalization transformed the lives and lifestyles of people. With the opening of the economic doors, a flood of products and services rushed into the market which not only affected the right to choose available among the consumers by providing tremendous options for complementary and supplementary goods and services but also drastically increased the trade competition among the domestic and foreign producers or suppliers of the aforesaid goods and services leading to price competition. The price competition did increase the purchasing power giving the consumers better living standards due to the reduction in prices but the negative impact was seen indirectly with the increase in unfair trade practices, malpractices, black-marketing, etc because of the reduction in the profit margin among the producers and traders. Currently, many users utilize numerous applications and websites as standard tools for a variety of online businesses. Retailers are building up their online stores to draw customers who want to experience the benefits of buying in a global online environment. Customers may choose from a wide variety of services, items, and prices with ease, quickly, and globally. The quality, accessibility, and safety of goods and services have been significantly impacted by contemporary technology advancements. The customers are nonetheless, however, the victims of dishonest and unethical business tactics. The conventional role of the consumer has been questioned by the internet.

Over the years, the nations have seen the creation of several international organizations that work to control trade-related matters, eradicate poverty, promote economic progress, and offer financial aid to member countries. Commerce is global, however, the law governing commerce is not globally uniform. The old set of rules and practices governing communication and trading is largely incompatible with the emerging system of communication and trading practices in a borderless world created by the Internet. Thus, to pave the way for the development of e-Commerce and an internationally acceptable level of legal uniformity and compatibility of rules and practices, the United Nations Commission on International Trade Law (UNCITRAL) established by the United Nations General Assembly in 1996 has adopted the Model Law of Electronic Commerce in 1996.

Based on the UNCITRAL Model Law of Electronic Commerce 1996, India has enacted the Information Technology (IT) Act 2000. The IT Act 2000 was passed by the Parliament of India on 17 May 2000. Presently, the Bible of Cyber law in India is the Information Technology Act, of 2000. There are various other laws and enactments which provide helping hands to it both in the civil and criminal enactments. With the expansion of the horizon of cyberspace in daily lives day by day to an extent that even a single day cannot be imagined without using technology. Acceptance of the Model Law is intended to provide national lawmakers with a set of globally recognized guidelines on removing various legal barriers to expanding electronic commerce and creating a more secure legal environment for it. The IT Act 2000 (Amended in 2008) has some basic yet crucial features such as[1]:

• The use of electronic signatures, submitting documents electronically, and maintaining records electronically are all given legal status;
• It facilitates the electronic filing of documents with Government agencies;
• Electronic financial transfers are given legal authorization under this provision;
• outlines remedies for privacy and confidentiality violations and renders them a punishable offense by a fine and/or a sentence of imprisonment;

To serve the dynamic needs of society, the IT Act has been amended by Information Technology Amendment Bill 2006 and 2008. The original IT Act 2000 was enacted with the intent to support the IT industry, and foster e-commerce, and e-governance however with the gradual passage of time the lawmakers noticed the growing misuse of electronic devices, computer system, and the internet. Thus, The Act was amended multiple times to curb the growing cybercrimes and the 2008 amendment includes the following[2]:

• tightening cybersecurity measures
• establishing a legal framework for digital signatures
• recognizing and regulating intermediaries
• regulating interception, monitoring, and decryption of electronic records
• cyber forensics
• cyberterrorism, etc

On the other hand, the Consumer Protection Act of 1986 was amended and revised from time to time and thus Consumer Protection Act 2019 brought new facets and additions to serve society in a better format. 2019 Act includes two significant additions: the concept of “unfair contracts,” which is intended to protect consumers from arbitrarily heavily biased and unjustified contracts that lean in favour of producers or service providers, and “product liability,” which makes both sellers and producers of goods or services accountable to reimburse for any injury done to a customer by faulty goods, produced or sold, or for inadequacy in services.[3] The new rules incorporate a body known as the Central Consumer Protection Authority, which is in charge of overseeing matters connected to consumer rights violations, unfair business practices, and false or deceptive advertising that is detrimental to the interests of the general public, as well as promoting, defending, and upholding consumer rights.[4] The new Consumer Protection Bill 2019, with its pillars of transparency and accountability, has been regarded as a major step in the consumer empowerment landscape.[5] Along with bolstering measures to safeguard consumers, it has made it possible for customers to act rationally and sensibly before using any services or making any purchases. Strict rules and the imposition of fines and sanctions would protect customers against deceptive practices. It was created to offer significant benefits to customers and to streamline the whole system for handling consumer complaints.

It is not surprising that e-commerce has had a significant influence on customers all around the world in such a short amount of time. It was essential to introduce codified legislation to serve the interests of the consumers in the e-commerce area because the current environment has undergone such drastic changes for both enterprises and consumers, posing new issues. The Consumer Protection (E-Commerce) Rules, 2020 are applicable to all online businesses that deal in products or services, including online businesses that are not based in India but routinely provide merchandise or services to Indian customers.[6] E-Commerce Rules prescribes the following:[7]

• Liability to e-commerce market players;
• Obligations of vendors on the marketplace platform; and
• responsibilities and obligations of inventory e-commerce enterprises

Now, in order to guarantee adherence to the Act’s and Rules’ requirements, each e-commerce business must designate a nodal person or an alternative senior designated functionary.[8] In addition to the rules and duties imposed on market players, the inclusion of fall-back liability serves as an aiding rule. Fall-back liability, according to the E-commerce Rules, is the responsibility of the e-commerce company in the event that a vendor registered with the business is unable to provide the products or services that a customer has requested because the vendor was irresponsible in carrying out their obligations and responsibilities in the way specified the company, resulting in a loss for the customer.[9] Among the main problems clients have is that most service providers, on e-commerce platforms, only offer the contact information for their customer support hotlines which provide personalized replies, and thus are rarely able to offer a workable remedy. Nonetheless, under the Rules, e-commerce businesses are required to provide the contact information for their grievance officer in addition to other information like email, landline, calling numbers, etc of client service.[10] The 2020 Rules and the proposed modifications outline specific criteria for e-commerce companies that are different from those for equivalent businesses in traditional stores, such as the need to offer a grievance redressal system, designate specific staff for compliance, and place limitations on the related party and affiliated organizations. Additionally, an e-commerce entity must not permit deceptive marketing on its site, among other criteria.[11]

Each year, the number of customer complaints in e-commerce increases. The majority of grievances against e-commerce businesses are around merchandise non-delivery, damaged goods, incorrect item arrival, paid an amount not returned after cancellation, poor service, false promises, assured/ offered gifts not being delivered, overcharged sum not being reimbursed, delayed delivery, etc. Consumer confidence and trust in online transactions remain at risk despite several reforms that have been made to e-consumer protection, for example – Jurisdiction issues, material disclosure of information by seller issue, false luring advertisements, etc. Herein, Judiciary has played a drastic role to keep consumer trust and the online market intact.

In Ranju Aery Vs SpiceJet Ltd, the Supreme Court held that a part of the cause of action will be duly considered to arise at the complainant’s place if the acceptance of the contract has been made online including e-mail irrespective of the contract initially made over the online system of commerce or not and the cause of action will continue to arise at:[12]

• the place of performance of the contract
• the place of payment being made or to be made
• the place of refusal of the contract has been made in case any

In Shaik Umar Farooq v/s. Flipkart Internet Pvt Ltd & Anr. the court ruled that the vendor and the e-commerce platform were both equally and severally responsible for this “unfair trade conduct” and mandated that the customer get compensation.[13] According to the Commission, there is a “tripartite contract” between the buyer, the vendor, and the service provider, and Flipkart cannot escape responsibility for the sale of goods beyond the highest selling value i.e. MRP made through its website.[14] According to the contract terms, the web portal served as a middleman between vendors and buyers.[15]

It is abundantly obvious that the welfare of the customer has always been given priority in Indian courts, regardless of the type of service rendered. The independent Judicial body has played a crucial role in providing justice to the millennial generation who are actively engrossed and accepting scientific advancement without knowing its implications with its artful interpretation. The judiciary has time and ever tried to fulfilled the gaps in the bridges between the needs of the society and the legislative reforms. The court’s role becomes crucial when legislators fail to establish a welfare state, yet they cannot meddle in public matters just to demonstrate their superiority.[16]

CONCLUSION AND SUGGESTION:

India has come a long way from being a predominantly rural and agricultural nation on the Information Superhighway Information Superhighway from being a predominantly rural and agricultural nation. The adoption of a cyber law was prompted by the requirement for the establishment of an efficient and technologically focused legal system. Even though the legislature has made a legitimate attempt to meet the dynamic needs of society but the lacunas and loopholes served as gold-digging areas for the e-commerce players having minified intent to earn and gain fast money at the cost of consumers’ good faith and trust.

While the government has a birds-eye view and focuses on “Ease of Doing Business” for which India ranked 63rd in Doing Business 2020 as per the World Bank’s Report.[17] A lot of initiatives have been taken up by the government to promote and support the growing e-commerce market which is valued in millions and trillions such as the ‘Make in India’ initiative, ‘Digital India’, E-governance support such as ‘SPICe+’ feature, online tax payment, etc. However, the sooner the Indian Government realizes the better it is that India’s retail market is highly unorganized.[18] As per information provided by the Ministry of Consumer Affairs, the volume of customer grievances regarding e-commerce enterprises in India increased by 42% between April 2017 and March 2018, going from 54,872 grievances to 78,088 objections.[19] In comparison to just 8% in 2019, over 48% of complaints sent to the National Consumer Hotline between January and August 2022 related to e-commerce companies.[20] These complaints, which include issues like non-delivery of goods, shipment of the incorrect or faulty product, late shipping, refund, replacement concerns, etc., have risen dramatically over the last five years starting in 2018, representing an increase of almost 1400.5%.[21] The growing files of complaints made the lawmakers realize that not only facilities for ease of doing business required but also the quality of this business is required to be managed, thus leading to several amendments and reforms.

There is now some ambiguity in the air following the Ministry of Consumer Affairs’ publication of the proposed changes to the Consumer Protection (e-commerce) Rules 2020–21, which, if implemented, might have significant consequences.[22] The Consumer Protection Act and the IT ACT 2000 (including IT ACT Amended 2008) have taken into consideration multiple possibilities that could happen to a customer even holding foreign firms responsible for aggravating a customer even if there is no office in the state.[23]

Consumer law’s fundamental objective is to promote ethical business practices so that the buyer is well-educated about the purchase. Due to the anonymous nature of the online market, there is a higher requirement for precise information at each technological stage of contract conclusion as well as efficient ways to detect and fix input problems before the contract is finalized. It was noted in the United Nations Conference for Trade and Development (2017) that in the case of e-commerce[24]:

• Customers are more vulnerable because of the transaction’s impersonal character, which erodes their relationship with service providers,
• Customers may not have easy and simple access because of the distributed information available on the internet known as information asymmetry,
• Internet users seem to be more susceptible to fraudulent and dishonest behaviour,
• Concerning responsibility and arrangements for shipment, refund, and replacement of items, customers may have trouble getting in touch with suppliers or finding a way to communicate with enterprises,
• The hazards associated with data security and data privacy protection are greater, and
• When it comes to cross-border deals, there might be problems with enforcement in case of issues.

Cyber Laws along with the Consumer Protection Act together with multiple rules, regulations, ordinances, etc still contain few grey areas which are required to be tackled in the growing domain of e-commerce for the protection of consumers dealing with them, some of which are as follows:

• Data Protection against the personal, sensitive and confidential information provided by the consumers to avail of the facilities:

To avail of the services and purchase the goods, a countless number of information is being gathered ranging from date of birth, place of birth, gender to Place of living, highest education, marital status, etc. The draft Data Protection Bill 2019 has been withdrawn and a revised draft introduced by the MeitY for public input.[25] Even though the proposed Bill endeavours to resolve the personal data protection issue once it is passed. With the passing of each year, the issue of data protection has been pushed off and has not been concretely finalized.

• Protection from negative effects of competition leading to selling the same product at differential prices:

Whenever a customer makes an online purchase or uses a service, they are presented with a new price under the dynamic pricing model used by e-commerce firms.[26] Even though the Maximum Retail Price (MRP) has been set out to put a line of control on the prices charged by the seller to their customers. However, the MRP talks about the maximum amount beyond which a seller cannot charge, and thus multiple sellers charge differential amounts at multiple websites at their discretion. For example, the amount for the same product will be different on Amazon, Flipkart, and other such service providers. Since the online domain is as huge as the ocean, an unaware and unvigilant customer is the ultimate sufferer.

• Protection against the Acceptance of unalterable Terms and Conditions:

Generally, every website and application make their customer bound to their contracts by making them abide by the terms and conditions which are been accepted by the customers not by their will and choice but by the need of the hour. The Terms and Conditions which are been accepted by the users are uncustomized, and unalterable and have to be accepted by using click and ticking the checkbox to accept the terms and conditions commonly known as the one-click contract method. Thus, even when the customer does not wish to accept any specific clause of the service or facility provider, the customer has only two choices namely – to accept the terms and conditions at the cost of their choice or decide not to avail of the said facility.

• Protection against Behavioural Advertisements:

The luring advertisements are now being personalized to attract customers. Nowadays, social media influencers are being hired to customize advertisements and attract customers. Although it is now illegal to use a user’s digital footprint to charge variably that are based solely on one‘s actions however using market and consumer’s behavioural trends to run advertising campaigns is very much valid which not only causes information gaps between both the consumers and the professionals but also limits the consumer freedom of choice and personal freedom.[27]

•  Lack of awareness:

The legislative made the laws but the mere formulation of laws and bye-laws will not serve the purpose. The executive body realized its responsibility and importance of spreading awareness among the public with the increase in online financial fraud in the nation. Thus, numerous scams and fraud awareness campaigns, and advertisements are being run at an active pace. But it seems that the need to create awareness about e-shopping frauds, e-service provider frauds, how to identify fraudster shopping websites, etc will only be realized once the number of frauds in the said domain will increase.

• Other Issues:

Apart from the above-mentioned list of unheard and unattended issues, the number of problems is growing with the advancement of technology and the failure of the legislature to meet the needs. Other issues on which the lawmakers need to ponder their attention on are hacking, misuse of personal information, dealing with blockchain, artificial intelligence, robotics, etc.

With the development of an invisible world in which consumers from all over the globe do business difficulties in implementing traditional laws are inevitable. Consumers usually lack the opportunity and skills to conduct full-fledged research and obtain all the required information before entering into any commercial transaction. In India, the concept of “E-Consumerism” is an ignored phenomenon. The goal of e-Consumerism is to expose the unethical behaviours of manufacturers and service providers in Internet marketing. It is seen as a new social dimension and a form of protest. It strives to give customers the strength they need to seek restitution, reparation, and remedy for the discontent brought on by goods and services purchased online. Thus E-Consumerism is a movement of consumer, by the consumer, and for the consumer for the protection of their rights in the online market.[28]

Consumer protection includes the key element of consumer empowerment. More emphasis should be given to prompt training and education regarding the usage of online platforms to impart consumer rights among the users that are accessible to them and the channels via which these rights if infringed may be rectified. Consumer confidence essentially consists of the conviction that they will receive what they anticipate and that they may seek redress if something goes wrong.

AUTHOR: ADVOCATE VIDHI JAIN

NOTE: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

[1] Sagnik Mukherjee, Consumer protection and e-commerce jurisprudence in India available at: https://blog.ipleaders.in/consumer-protection-and-e-commerce-jurisprudence-in-india/#Jurisprudence_in_e-commerce  published on November 6, 2021

[2] Katie Terrell Hanna, Information Technology Amendment Act 2008 (IT Act 2008) available at:  https://www.techtarget.com/whatis/definition/Information-Technology-Amendment-Act-2008.  Published on July, 2022

[3] Satvik Varma, Consumer Protection Act 2019: Enhancing Consumer Rights available at: https://www.barandbench.com/columns/consumer-protection-act-2019-enhancing-consumer-rights  published on September 2, 2019

[4] Ibid

[5] Consumer Rights in India available at: https://amritmahotsav.nic.in/spotlight-of-the-week-detail.htm?107/

[6] Vidhi Madan, ‘Fall-back liability’ under the Consumer Protection (e-Commerce) Rules, 2020: Stricter norms in digital diaspora available at: https://www.lakshmisri.com/insights/articles/fall-back-liability-under-the-consumer-protection-e-commerce-rules-2020-stricter-norms-in-digital-diaspora/#  published on October 19, 2021

[7] Ibid

[8] Siddharth Jain, Consumer Protection (E-Commerce) Rules, 2020: Reining In An Unruly Horse available at: https://www.barandbench.com/columns/consumer-protection-e-commerce-rules-2020-reining-in-of-an-unruly-horse  published on July 29, 2020

[9] Vidhi Madan, ‘Fall-back liability’ under the Consumer Protection (e-Commerce) Rules, 2020: Stricter norms in digital diaspora available at: https://www.lakshmisri.com/insights/articles/fall-back-liability-under-the-consumer-protection-e-commerce-rules-2020-stricter-norms-in-digital-diaspora/#  published on October 19, 2021

[10] Siddharth Jain, Consumer Protection (E-Commerce) Rules, 2020: Reining In An Unruly Horse available at:  https://www.barandbench.com/columns/consumer-protection-e-commerce-rules-2020-reining-in-of-an-unruly-horse  published on July 29, 2020

[11] Draft Amendments to the Consumer Protection (E-Commerce) Rules, 2020 available at: https://prsindia.org/billtrack/draft-amendments-to-the-consumer-protection-e-commerce-rules-2020

[12] Prashant Mali, Legal Remedy for Defective Product or Service from E-commerce Companies available at: https://www.moneylife.in/article/legal-remedy-for-defective-product-or-service-from-e-commerce-companies/51494.html  published on September 8, 2017

[13] Navya Benny, Flipkart & Its Sellers Jointly Liable For Charging Over MRP: District Consumer Forum available at: https://www.livelaw.in/news-updates/flipkart-charging-price-over-mrp-unfair-trade-practice-district-consumer-forum-207764  published on August 29, 2022

[14] Ibid

[15] Ibid

[16] Vishalj, Judicial Activism available at:  https://www.legalserviceindia.com/legal/article-2063-judicial-activism.html

[17] EASE OF DOING BUSINESS available at: https://www.makeinindia.com/eodb

[18] Draft Amendments to the Consumer Protection (E-Commerce) Rules, 2020 available at: https://prsindia.org/billtrack/draft-amendments-to-the-consumer-protection-e-commerce-rules-2020

[19] Rashi Varshney, Consumer Complaints Against E-Commerce Companies Grew 42% In A Year  available at: https://www.medianama.com/2018/07/223-consumer-complaints-against-e-commerce-companies-grew-42-in-a-year/ published on July 27, 2018

[20] The Economic Times, 48% of complaints on National Consumer Helpline against e-commerce players during Jan-Aug available at: https://economictimes.indiatimes.com/industry/services/retail/48-of-complaints-on-national-consumer published on September 7, 2022

[21] Rashi Varshney, Consumer Complaints Against E-Commerce Companies Grew 42% In A Year  available at: https://www.medianama.com/2018/07/223-consumer-complaints-against-e-commerce-companies-grew-42-in-a-year/ published on July 27, 2018

[22] Sagnik Mukherjee, Consumer protection and e-commerce jurisprudence in India available at: https://blog.ipleaders.in/consumer-protection-and-e-commerce-jurisprudence-in-india/#Jurisprudence_in_e-commerce  published on November 6, 2021

[23] Ibid

[24] Draft Amendments to the Consumer Protection (E-Commerce) Rules, 2020 available at: https://prsindia.org/billtrack/draft-amendments-to-the-consumer-protection-e-commerce-rules-2020

[25] Vinod Kothari Consultants, Reintroduction of the Data Protection Bill: Analysing the Implications for FinTech available at: https://vinodkothari.com/2022/11/reintroduction-of-the-data-protection-bill-analysing-the-implications-for-fintech/ published on November 19, 2022

[26] Mayank Udhwani & Ragini Agarwal, Establishing A Fair E-Commerce Marketplace: The Goal May Still Beyond Reach available at: https://www.livelaw.in/columns/establishing-a-fair-e-commerce-marketplace-the-goal-may-still-beyond-reach-161335?infinitescroll=1 published on August 12, 2020

[27] Ibid

[28] Gagandeep Kaur, Consumers in E-Commerce: A New Challenge For Consumer Protection Jurisprudence In India Available at: http://www.dehradunlawreview.com/wp-content/uploads/2020/07/4-Consumers-in-E-Commerce-A-new-challenge-for-consumer-protection-jurisprudence-in-india.pdf