India: E-Commerce Rules 2020, A Boon Or A Bane?

Introduction:

Buying products off of an online marketplace or an e- commerce ecosystem might seem a bit daunting of a task especially after all the recent reports of scams and unfair trade practices that users of such platforms are falling prey to. In order to deal with such an issue, the Government had to take certain steps in order to protect the consumer from such malpractices and to reinstate their trust in such online ecosystems and to enable its care-free utilisation.

Keeping that in mind, the Consumer Protection (E- Commerce) Rules, 2020 ("Act") have been notified by The Ministry of Consumer Affairs, Food and Public Distribution ("Ministry") on July 23, 2020, under the Consumer Protection Act, 2019 ("Act"), with an intent to prevent unfair trade practices in e-commerce and to protect the interest of the consumers and to ensure that there is transparency in the e-commerce platforms and also to further strengthen the regulations that govern the same.

Scope and Applicability:

These rules have quite a wide scope and applicability as they are intended to apply to all goods and services that are bought or sold over digital or electronic networks and applies to all models and formats of e-commerce retail with the exception of natural persons transacting in their own personal capacity as the same does not constitute a professional or commercial activity which is undertaken on a regular or a systematic basis.

As the said Rules purely apply to entities that operate and offer their goods and services digitally, we can say that services like cab hailing, ticket vending platforms, educational technology services etc. are governed by it.

Obligations of the Platforms and the Sellers:

The Rules prescribe a set of obligations that the Platforms and the Sellers covered by these Rules need to adhere to. These obligations ensure that the interest and rights of the consumer are secured. In order to ensure that the same happens, the Platform holder has to appoint a Nodal Officer or an Alternate Senior Functionary is tasked with ensuring that the Platform holder complies with the Rules and the Act.

However, the Rules seem to be silent on the minimum qualifications required for such a person to be hired and also the actions that need to be undertaken in order to satisfy such a requirement.

They also have to set-up a time-bound grievance redressal mechanism that allows the customer to lodge their complaints/ grievances and to track the same and also have to provide the customer with the details of the relevant seller(s) in case of a dispute, but the extent to which the disclosure of information is necessary hasn't been prescribed. Also, a grievance officer has to be appointed in order to facilitate this process however the Rules are silent on the adequacy of the said mechanism and poses an opportunity for certain bodies or organizations to formulate certain agreed upon standards. These obligations also extend to Sellers that are selling their products on these platforms.

The Platform is also required to furnish certain information like the country of origin of goods when it comes to inventory based or marketplace platforms but the Rules are silent on the assessment of goods assembled, packaged or manufactured in one country, licensed by an entity based in another country. Marketplace Platforms are also required to display information regarding the mode of shipping, payments methods, mode of refunds and also their terms and conditions which deals with their relationships with the sellers.

These Rules also imposes certain restrictions and obligations when it comes to the pricing of their products, returns in case of defective/ deficient/ spurious goods and services, late delivers (except due to force majeure) and due to false customer reviews. It also specifies that no cancellation charges can be imposed unless similar charges are payable by the Platform due to the said cancellation. They also deal with the authenticity of the goods being sold on these Platforms and if the said Platform vouches for the authenticity of the product/ service sold, it would bear the appropriate liability in relation to the same. The Platforms also need to maintain a record of all the sellers whose offerings have repeatedly violated trademarks, copyrights or the Information Technology Act.

Contravention of the Rules:

In case of contravention of these Rules, the provisions enshrined under the Act will apply and in such a case, the e-commerce entities in question would be required to comply with authorities that shall be investigating such a contravention and shall be imposed with fines or imprisonment, if found guilty. These Rules also have incorporated certain requirements that have been prescribed under the Legal Metrology Rules (LM Rules) and other laws that are applicable. In the absence of clarity, penalties mentioned in the LM Rules may also be levied on the e-commerce entities in question.

Conclusion:

These Rules have significantly increased the responsibilities that e-commerce Platforms have towards their consumers. However, these Rules are not perfect as there are still certain questions that need answering regarding things like the implementation and application of the Rules and whether they are ultra vires the Act as they apply to entities outside the country, obligations that have been imposed on Platforms that extend beyond the consumer and seller relationship, whether these Rules are applicable on B2B Platforms and what kinds of digital product offerings fall within its purview.

Also, as the origin of these Rules can be tracked to Section – 94 of the Act, it has to be seen that whether any breach of these Rules will have to satisfy the condition or test of being an "unfair practice" before they are held liable and whether a breach by a seller can also result in the Platform being held liable.

Hence, even though these Rules are a welcome step in ensuring the interest of the Consumers, the Rules still leave some ambiguity regarding certain factors. Therefore, these Rules are a boon for all the consumers that were affected by a lack of these regulations and a bane for the Platforms scrambling to implement them. In order to answer some of the questions that were raised in accordance to these Rules, the Ministry released a Notification dated May 17, 2021, introducing the Consumer Protection (E-Commerce) (Amendment) Rules, 2021 which introduced the requirement for a company outside India or company having an office, branch or agency outside India, controlled by a person resident in India, it shall appoint a nodal officer or an alternate senior designated functionary who is an Indian resident to ensure that the provisions of the act and the Rules are being followed and abided by.

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