ARTICLE
27 July 2020

"Caveat Venditor" – Re-Calibrating Consumer Rights In E-Commerce Through New Legislation.

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Upscale Legal

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The Consumer Protection Act, 2019 ("CPA 2019" or "the Act") enacted by the Parliament of India will bring in force the much needed legal regime change...
India Consumer Protection

Pradyun1

The Consumer Protection Act, 2019 (“CPA 2019” or “the Act”) enacted by the Parliament of India will bring in force the much needed legal regime change which in addition to comprehensively modernizing the trade system to keep pace with the current times also revamps the legal structure by replacing the three-decade-old Consumer Protection Act, 1986 (“CPA 1986”).

The CPA 1986 which had undergone three amendments in 1991, 1993 and 2002, was still found to be needing empowering provisions to tackle challenges posed by online transactions, and tele and multi-level, and digital marketing.

One of the major changes brought forth by CPA 2019, is to provide provisions to check subversive trade practices, both offline and online. The consumer law now in addition to providing safeguards and accountability against the traditional bricks and mortar outlets also now covers e-commerce within its ambit. The necessary changes to law plugs the gaping holes that emergent technology brings in a digitized India wherein certain businesses could benefit while precipitating and floundering consumer rights in the bargain.

In effect, the new provisions principally cautions the sellers, whether a manufacturer or a service provider, to be responsible for any problem that the consumer may encounter with their products or services.

E-COMMERCE.

The CPA 1986 in its present form is an ineffective piece of legislation, not keeping pace with the new market conditions, technologies, and processes for instituting accountability of sellers on online platforms.

As a result of which, consumer complaints in e-commerce have continued to grow by each passing year, most of which have been for non-delivery of product, defective products, delivery of wrong product, deficiency in services etc.   

The CPA 2019, has started by first broadening the definition of a Consumer. As per which, a Consumer is a person who “buys any goods” and “hires or avails any services” which includes offline or online transactions through electronic means or by teleshopping or direct selling or multi-level marketing2.

Along with the above the Act provides for the definition of "e-commerce" to mean buying or selling of goods or services including digital products over digital or electronic network3 and an “electronic service provider” to mean a person who provides technologies or processes to enable a product seller to engage in advertising or selling goods or services to a consumer including any online market place or online auction sites4.

Further, the Consumer Protection (e-Commerce) Rules, 2019 (“the Rules”) have brought in the corollary rules to fill the vacuum,

  • An E-Commerce entity5 “means a company incorporated under the Companies Act, 1956 or the Companies Act, 2013 or a foreign company covered under section 2 (42) of the Companies Act, 2013 or an office, branch or agency in India as provided in Section 2 (v) (iii) of FEMA 1999, owned or controlled by a person resident outside India and includes an electronic service provider or a partnership or proprietary firm, whether inventory or market place model or both and conducting the e-Commerce business..
  • For an E-commerce entity, there are numerous reasonable restrictions provided by the Rules6 such as to not to:
  1. influence the price of the goods or services and to maintain a level playing field;
  2. adopt any trade practice which for promoting the sale, use or supply of any goods adopts any unfair methods or practice that influence transactional decisions of consumers
  • The Rules7 also mandates for E commerce entities to:
  1. display the terms of contract between the E-commerce entity and the seller w.r.t. return, refund, exchange, warranty / guarantees;
  2. ensuring that advertisements for marketing of goods or services are consistent with the actual characteristics, access and usage conditions of such of goods or services;
  3. mentioning safety and health care information of the goods and service advertised for sale;
  4. providing information on available payment methods; the security of those payment methods, how to use those methods; how to cancel regular payments under those methods; charge back options and any costs applicable to those payment methods;
  5. ensuring that personally identifiable information of customers are protected, and that such data collection and storage and use  comply with provisions of the Information Technology (Amendment) Act, 2008.
  6. accepting the return of goods if delivered late from the stated delivery schedule or delivery of defective, wrong or spurious products, and/or not of the characteristics/features as advertised;
  7. effecting all payments towards accepted refund requests of the customers within a period of maximum of 14 days.
  8. if the ecommerce entity is informed by the consumer or comes to know by itself or through another source about any counterfeit product being sold on its platform and is satisfied after due diligence, it shall notify the seller and if the seller is unable to provide any evidence that the product is genuine, it shall take down the said listing and notify the consumers of the same
  9. be held guilty of contributory or secondary liability if it makes an assurance vouching for the authenticity of the goods sold on its market place – or if it guarantees that goods are auth
  • The Rules also provides the Liabilities of Sellers8 and states that any seller selling or advertising his products or services through an e-Commerce platform to:
  1. have a prior written contract with the e-Commerce entity for undertaking sale or offer;
  2. provide all information which is required by law or for disclosing contractual information and compliance;
  3. display single-figure total and break up price for the goods or service, which should include all the compulsory charges such as delivery, postage, taxes etc;
  4. comply with the display requirements as per Legal Metrology (amendment) rules 2017 for pre-packaged commodities;
  5. provide safety and health care warnings and shelf life that a consumer would get at any physical point of sale;
  6. Provide fair and reasonable, delivery terms;
  7. Be responsible for any warranty/guarantee obligation of goods and services sold.
  8. Be upfront about how exchange, returns and refund process works.
  • The E-commerce entity is to also undertakes the following w.r.t. Consumer grievance redress procedure9.
  1. Publish on its website the name of the Grievance Officer and his contact details as well as mechanism by which users can notify their complaints about products and services availed through their web site.
  2. The Grievance Officer shall redress the complaints within one month from the date of receipt of complaint
  3. provide facility to consumers to register their complaints over phone, email or website and shall provide complaint number for tracking the complaint;
  4. Provide consumers with transparent and effective consumer protection etc.

OTHER CHANGES

CPA 2019 in addition to the above, provides enhanced penal liabilities in the form of prohibitively high fines which may also lead to imprisonment for errant manufacturers and service providers.

The Act also provides creation of a new authority in the form of Central Consumer Protection Authority (“CCPA”) to promote, protect and enforce consumer rights as a class and protect them from unfair trade practices. This will effectively fill the institutional void for a regulatory regime that had been missing in the previous legal regime.

Furthermore, the Act introduces the concept of Product Liability against sellers for any harm caused to the complainant-consumer due to a defect in their product or services.

CONCLUSION

In an era of technological revolution, the aspirations of a digital India and the potentials of e-commerce can be achieved to the fullest only when online consumers are brought at par and provided the same level of protection as conventional bricks and mortar consumers enjoy.

The CPA 2019 which will bring sweeping modifications and transformations as mentioned above, will effectively plug the loopholes that were being exploited due to the absence of clear policy guidelines and legal mechanisms for accountability. As and when the Act along with the Rules are notified in the Official Gazette, the new legal regime shall bring about a comprehensive change that upholds a consumer's interests better and puts their rights in the deserved position of primacy.

Footnotes

1 The Author is an Associate with Upscale Legal

2 Section 2 (7) Explanation b) of The Consumer Protection Act, 2019

3 Section 2 (16) of The Consumer Protection Act, 2019

4 Section 2 (17) of The Consumer Protection Act, 2019

5 Rule 2 (c) of the Consumer Protection (e-Commerce) Rules, 2019

6 Rule 4 (1) of the Consumer Protection (e-Commerce) Rules, 2019

7 Rule 4 (2) of the Consumer Protection (e-Commerce) Rules, 2019

8 Rule 5 of the Consumer Protection (e-Commerce) Rules, 2019

9 Rule 6 of the Consumer Protection (e-Commerce) Rules, 2019

Originally published 09 July, 2020

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.

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