India: E-Commerce And Legal Metrology

Last Updated: 8 November 2017
Article by N.U. Subaya and Janini Somiah

Technology has brought about a notable transformation in most of our lives over the last few years. The advancements in technology have been rapid and diverse and have forever changed the way many of us do things, including shopping for daily requirements. FMCG companies are also leveraging on this new way of doing business. A typical indicator of this is the increase in online sales over the past few years, with various FMCG products being launched and first made available on online marketplaces.

In an ever changing marketplace, it is but expected that the laws intended for consumer protection keep pace with the way the market and the industry function. The Department of Legal Metrology, at the local level and through its enforcement officers has, ever since 'e-commerce' has become one of the most popular ways of sale of products, been attempting to state that the provisions of the Legal Metrology Act, 2009 (LM Act) are equally applicable to e-commerce entities, as would be applicable to entities undertaking their businesses through regular brick and mortar stores. This attempt did not appear to be very successful as there were no express provisions in the LM Act applicable to e-commerce entities, and the other existing provisions were being stretched to make the same applicable. An obvious fallout of this was frivolous action being initiated, by the Department of Legal Metrology, against several online marketplaces most of which did not see a logical conclusion for lack of clear regulation on the same.

The Ministry of Consumer Affairs, Food and Public Distribution, with a view to bring clarity on the applicability of the provisions of the LM Act and on the manner in which e-commerce entities would be required to comply with the provisions, recently amended the Legal Metrology (Packaged Commodities) Rules, 2011 (PC Rules). While, the amendments were introduced in June this year, it has been stated that they would come into force only from January 1, 2018. This would mean that e-commerce entities are being given a period of 6 months to understand and give effect to the changes being brought about and the officials under the LM Act would begin their enforcement activities from January 1, 2018.

The changes being introduced in the PC Rules relate to the obligations of e-commerce entities in ensuring that the information required to be set out on pre-packaged commodities, such as the name and address of the manufacturer, net weight, etc., are adequately displayed on 'digital and electronic networks' used for e-commerce transactions. This amendment is a welcome and required move undertaken by the Ministry, as consumers of products through e-commerce networks can clearly understand products, including where they are manufactured etc., prior to purchasing the same. The amendments, however, do not clarify the manner in which these declarations are required to be set out. One can only assume that the Ministry has allowed for e-commerce entities to choose the manner in which these declarations could be set out, as long as the same are clearly visible to the consumers. Could this, however, mean that an e-commerce entity could set out the images of the products, on its website, in such a manner that all the declarations that have been printed on the packages itself are clearly visible to its consumers, and this would be in compliance with the revised requirements. At this point, it appears that this would be possible. It would, however, be helpful for the Ministry to clarify this position to save the industry time, effort and expenditure defending any proceedings for want of clarity.

E-commerce entities would now be required to understand the provisions of the PC Rules applicable to them and establish methods and procedures to ensure compliance. An important aspect to note would be that while making the above changes to the PC Rules, the Ministry has understood the manner in which 'marketplace based models of e-commerce' operate and function. The Ministry has therefore attempted to provide certain exemptions to such models of e-commerce such that in case of a 'marketplace based models of e-commerce' the correctness of the declarations is the responsibility of the manufacturers or sellers or dealers or importers and not that of such e-commerce entity. The e-commerce entity however, to avail of this exemption, would be required to satisfy the various criteria that have been set out in the PC Rules to establish that it is a marketplace based model of e-commerce. These provisions are similar to those set out in the Information Technology Act, 2000.

E-commerce entities, may, however, find it difficult to comply with the PC Rules in relation to certain aspects, as there appear to be ambiguities in the manner of compliance. For example, the term 'e-commerce entity', as defined in the PC Rules, relates primarily to companies and not other kinds of entities such as partnership firms, proprietorship concerns, limited liability partnerships, etc. This raises the question as to whether the aforesaid entities would not required to comply with the PC Rules, though they are undertaking an e-commerce business. Another issue is in relation to marketplace based models of e-commerce. The requirement under the PC Rules state that all e-commerce entities are required to ensure that the statutory declarations are displayed on the electronic and digital networks, without making any distinction between regular e-commerce entities, and marketplace based models of e-commerce. The exemption provided for marketplace based models of e-commerce is only in relation to the correctness of the declarations subsequent to them being set out. This requirement may be difficult for marketplace based models of e-commerce to comply with, as such models do not actually involve themselves in the buying and selling of the products, and only provide a platform for other persons to buy and sell their products. Such entities do not control the products being sold in any manner and hence may not be able to set out the information in relation to the same on the digital and electronic networks.

There are therefore a myriad of issues that arise while understanding the manner in which the requirements under the PC Rules would have to be complied with and each of these issues would have to be understood completely prior to ensuring compliance with the requirements.

N.U. Subaya, Partner (subaya@duaassociates.com )

Janini Somiah, Manager (janini@duaassociates.com )

*The views expressed are personal and may not necessarily reflect the views of the Firm.

** This article was first published in the BCIC's Bi-monthly Newsletter "SYNERGY".

Dua Associates, 130/1, 2nd Floor, Ulsoor Road, Bangalore 560042, India

Tel: +91 80 2558 8799

Fax: +91 80 2558 8801

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