In this pandemic era, e-commerce has become a crucial part of our lives. It has rooted itself in commerce of all items which were once available only in physical stores, be it groceries or medicines or clothing.
Despite an extensive presence of e-commerce platforms in our lives prior to the pandemic era, the sector remained broadly unregulated. A framework to regulate e-commerce platforms had been under discussion and deliberation for quite some time. For instance, the draft National E-commerce Policy was released by the Department of Industrial Promotion and Policy in 2019 to address broad issues and concerns of the e-commerce ecosystem. However, no specific guidelines or regulations were issued in consonance with the said policy.
The first significant step in regulating the e-commerce ecosystem, while keeping the consumers in mind, came as the recently notified Consumer Protection (E-commerce) Rules, 2020 (“E-commerce Rules”). The E-commerce Rules were notified by the Central Government on July 23, 2020 in pursuance of the Consumer Protection Act, 2019. The E-commerce Rules lay down broad guidelines and instructions for various players in the e-commerce ecosystem in order to empower the average consumer to make informed choices while purchasing goods/ services online.
The scope of the E-commerce Rules expands to–
- all goods and services bought or sold over digital or electronic network;
- all models, categories and forms of e-commerce entities and retailers;
- all forms of unfair trade practices across all models of e-commerce; and
- all e-commerce entities which are not established in India but offer goods or services to consumers in India.
Depending on the role of an entity in the e-commerce ecosystem the E-commerce Rules lay down specific requirements and guidelines. Accordingly, the E-commerce Rules detail the duties and liabilities of 4 (four) types of ecosystem participants – (a) E-commerce Entities; (b) Marketplace E-commerce Entities; (c) Sellers; and (d) Inventory E-commerce Entities. Specific rules for each category have been elaborated below.
The E-commerce Rules define e-commerce entity as any person who owns, operates or manages digital or electronic facility or platform for electronic commerce. Under these E-commerce Rules, all e-commerce entities are required to adhere to the following requirements and restrictions.
Compliance with the Consumer Protection Act, 2019 and other laws
The E-commerce Rules impose a mandatory obligation on the e-commerce entities to appoint a nodal point of contact who is a resident in India. The chief responsibility of such nodal officer is to ensure adherence to the provisions of the Consumer Protection Act, 2019 and any rules made thereunder. Additionally, all e-commerce entities are bound by the applicable guidelines and timelines issued by the Reserve Bank of India for effecting payments (or refunds) to sellers and/ or consumers, from time to time.
Display of Information
All e-commerce entities are required to display the following information pursuant to the new E-commerce Rules –
- Legal name of the e-commerce entity;
- Address of the headquarters and all branches of the e-commerce entity;
- Name and details of the website;
- Contact details of the appointed grievance officer(s); and
- Where imported goods/ services are offered on the platform, the name and details of the importer.
Under the E-commerce Rules, all entities are mandatorily required to establish an operational grievance redressal mechanism. In this regard, a grievance officer is required to be appointed by the e-commerce entity and the contact details are to be displayed on the platform of such e-commerce entity for the consumers. The E-commerce Rules also establish a timeline of 48 (forty-eight) hours for the acknowledgment of the consumer grievances by the officer. Once acknowledged, a grievance/ complaint filed by a consumer is to be resolved by the grievance officer within 1 (one) month from the date of the receipt of such complaint.
Cancellation Charges: The extant E-commerce Rules do away with the provision of cancellation charges imposed by the e-commerce entity on the consumers. However, in certain cases where the charges for cancellation by the consumer are borne by the e-commerce entity, the entity is permitted to impose a cancellation fee on the consumer.
Affirmative Consent: Further, e-commerce entity may record the consent of the consumer only through an explicit and affirmative action of the consumer and not automatically. For instance, the practice of recording consent through pre-ticked checkboxes will not be acceptable under the current E-commerce Rules.
Unfair Trade Practices: Under the framework, all e-commerce entities are restricted from adopting any unfair trade practices, manipulating the price of goods/ services on its platform and discriminating between consumers of the same class or making any arbitrary classification of consumers. This has been introduced to restrict any deceptive unfair trade practices and imposition of hidden or unjustified charges on the consumers to gain unreasonable profits.
Marketplace E-commerce Entity
A “Marketplace e-commerce entity” means an e-commerce entity which provides an information technology platform on a digital or electronic network to facilitate transactions between buyers and sellers. Since marketplace e-commerce entities provide a technology platform to the consumers and sellers, they are required to comply with the following further requirements in addition to the above stated requirements applicable on all e-commerce entities.
Display of Information
Marketplace e-commerce entities are required to display clear and easily accessible information and instruction in order to enable the consumers make informed choices prior to purchasing any goods/ services from the platform. Accordingly, the marketplace e-commerce entity is required to–
- make the sellers sign an undertaking stating that descriptions and images pertaining to goods/services of the sellers are accurate in regard to the appearance, nature and quality of such good/service;
- display appropriate and accurate information of the sellers listed on their platform. This will essentially include the name, address, customer care number of the seller, ratings, reviews and feedback about such seller, etc;
- display information relating to return, refund, exchange, warranty and guarantee, delivery and shipment, modes of payment, and grievance redressal mechanism;
- display information on available payment methods, the security of those payment methods, any fees or charges payable by users, and the contact information of the relevant payment service provider; and
- display parameters which are significant in determining the ranking of goods or sellers on its platform and the explanation of such parameters in plain and intelligible language.
Further, the E-commerce Rules require all marketplace e-commerce entities to include in its terms and conditions, a description of any differentiated treatment which it gives or might give between goods or services or sellers of the same category.
Compliance under the Information Technology Act, 2000
Marketplace e-commerce entities essentially provide a technology platform to the sellers listed on their platform and hence are required to comply with the provisions of the Information Technology Act, 2000 and applicable rules made thereunder. For instance, all marketplace e-commerce entities shall be bound by the Information Technology (Intermediary Guidelines) Rules, 2011 which essentially establish the duties of intermediaries (in this case the marketplace e-commerce entity) to regulate the content being shared, display, uploaded and communicated on their platform.
Under the current E-commerce Rules, sellers are restricted from offering any goods/ service on any e-commerce entity unless there exists a written contract with such e-commerce entity. The sellers will also have the duty to appointment a grievance officer for consumer grievance redressal in relation to their goods/ services and display such officer’s contact details.
Display of Information
Sellers are required to display –
- all contractual information, mandatory notices and information provided by applicable laws, and the expiry date of the good being offered for sale, where applicable;
- all relevant details about the goods and services offered for sale by the seller including country of origin, name and details of importer, and guarantees related to the authenticity or genuineness of the imported products;
- relevant details related to delivery and shipment, guarantees and warranties of such goods or services
Prior to the E-commerce Rules, no specific framework regulated the activities of sellers on e-commerce platforms. Now, pursuant to the extant framework sellers will be restricted from –
- falsely representing as a consumer and posting false reviews, comments and ratings or misrepresent the quality of the goods/ services;
- outrightly refusing to take back goods, or withdraw or discontinue services purchased or agreed to be purchased; and
- refusing to refund consideration, if paid, for goods/services which are defective, deficient or spurious, does not match the characteristics as advertised or as agreed to, or if such goods or services are delivered late from the stated delivery schedule.
INVENTORY E-COMMERCE ENTITIES
Under the E-commerce Rules, “inventory e-commerce entity” means an e-commerce entity which owns the inventory of goods or services and sells such goods or services directly to the consumers and shall include single brand retailers and multi-channel single brand retailers. Accordingly, inventory e-commerce entities include brands like bewakoof.com (onwed by Bewakoof Brands Pvt. Ltd.) and chumbak.com (owned by Chumbak Design Private Limited), which are popular models of single brand inventory e-commerce entities.
Since inventory e-commerce entities provide a technology platform for their own products and sell directly to the consumers, both guidelines applicable on sellers and e-commerce entities are applicable on inventory e-commerce entities. Accordingly, adequate transparency is required to be maintained by the entity to safeguard (a) the right of consumers to make informed choices and (b) the consumers from any false or fraudulent representation of the goods/ services sold on the platform.