The Consumer Protection Act, 2019 (CP Act/New Act) was notified and brought into effect by the Ministry of Consumer Affairs, Food and Public Distribution, with effect from 20 July 2020. With the advent of the New Act, the erstwhile legislation on consumer protection i.e. the Consumer Protection Act, 1986, stands repealed. The New Act has a total of 107 provisions and has introduced several changes into the consumer protection regime.
As the market for e-commerce has been ever-growing for the past few years in India, certain specific provisions have been introduced in the CP Act, inter alia, to regulate the functioning of ‘electronic service providers' and to ensure protection of consumer rights on the e-commerce platform.
Provisions for E-commerce under the CP Act
The term ‘e-commerce' has been defined under Section 2(16) of the New Act as ‘buying or selling of goods or services including digital products over digital or electronic network'. A fairly broad definition has been adopted in order to include various types of online retail services within the purview of the New Act.
As e-commerce transactions are frequently conducted through an online intermediary (such as Amazon, Flipkart, etc.), the term 'electronic service providers' has been broadly defined to include such intermediaries.1 The CP Act and associated Rules prescribe the duties of electronic service providers towards the consumers using their platform.
Section 38 of the CP Act grants powers to the District Commission (District Forum under the erstwhile Act) to order any electronic service provider to provide such information, documents or records, as may be required in evidence to decide a pending consumer complaint. The same powers are extended to the State Commission and National Commission, under Sections 49 and 59 of the New Act, respectively, while exercising their original jurisdiction. Hence, in cases pertaining to e-commerce, or otherwise, where an electronic service provider may possess essential information/documents/records which may be material to a dispute, the Commissions established under the CP Act may specifically direct such electronic service provider to furnish the requisite information. Non-compliance with such directions can invite penal sanctions, as the Commissions are granted the powers of a Civil Court under the Code of Civil procedure, 1908, inter alia, for the purposes of collection of evidence.
The Central Government has been empowered under Section 94 of the New Act to take measures as may be prescribed for the purposes of preventing unfair trade practices in e-commerce. Section 101 provides a non-exhaustive list of subjects pertaining to which rules may be framed by the Central Government, and the said list includes measures for prevention of unfair trade practices in e-commerce.
In furtherance of the same, the Central Government has framed the Consumer Protection (E-Commerce) Rules, 2020 (the Rules/E-Commerce Rules).
Provisions under the E-Commerce Rules
The Rules have been framed in furtherance of Section 94 read with Section 101 of the CP Act, inter alia, to prevent unfair trade practices in the e-commerce market. The applicability of the Rules has been kept broad, to include all models and platforms of e-commerce within its ambit, within India as well as abroad (if goods and services are being offered in India).
The Rules broadly define the following kinds of entities and prescribe their duties, as provided below:
- E-Commerce entity – Includes any person operating or managing an online platform for e-commerce, but does not include the sellers operating on a Marketplace E-Commerce entity. Entities defined below would fall within this broad definition.
- Marketplace E-commerce entity – An entity providing a web platform to facilitate transactions between sellers and buyers. Entities like Amazon, Flipkart, etc. would fall within the ambit of this definition. Sellers operating on such platforms are excluded from the definition of E-commerce entity.
- Inventory E-Commerce entity – An entity owning an inventory of goods, which it sells directly through an online platform to its customers. The same would include brands which market and sell products owned by them on their personal web platform. While Marketplace E-Commerce entities provide a platform for sellers and buyers to engage, Inventory E-Commerce entities are themselves the sellers of the products traded on their web platform.
The duties of the abovementioned entities and sellers operating on Marketplace E-Commerce platforms have been prescribed under the Rules. The same are briefly summarised below:
Duties of E-Commerce entities
- Be duly registered as a company and appoint a nodal officer to ensure compliance with the CP Act and Rules framed thereunder.
- Provide information pertaining to it (as prescribed) clearly on its e-commerce platform.
- Not indulge in any unfair trade practices and establish an internal grievance redressal mechanism, which shall resolve consumer grievances within a month from the date of their receipt.
- For imported goods, provide the name and details of the importer and seller, on the platform.
- Endeavour to partner in convergence process of National Consumer Helpline.
- Not impose cancellation charges on consumers, unfairly.
- Take and record express consent of consumers for purchase of any goods or services.
- Refund amounts payable to consumers to be effected as per applicable laws, within a reasonable time frame.
- Not manipulate pricing of goods or services on its platform and/or discriminate between consumers of the same class.
Duties of Marketplace E-Commerce entities
- A Marketplace E-Commerce entity can claim exemption from liability for any content published by third parties and sellers on its platform, only if it has complied with the requirements of Section 79 of the Information Technology Act, 2000 (IT Act) and the Information Technology (Intermediary Guidelines) Rules, 2011.
- Take undertakings from sellers operating on its platform regarding authenticity of the description and pictures of goods and services being retailed by such sellers.
- Provide information regarding sellers and the goods and services being retailed by such sellers, on its platform (as prescribed). Such information shall include details regarding warranty/guarantee on products, available payment methods, any fee/charges payable by the customers on payment, etc.
- Make specific inclusion for any differential treatment which may be given to goods, services or sellers of a particular category, in the terms and conditions generally governing its relationship with sellers operating on its platform.
- Maintain a record for easy identification of sellers whose goods and services have been previously removed from the platform, for violating provisions of the Copyright Act, 1957, the Trade Marks Act, 1999 or the Information Technology Act, 2000.
Duties of inventory e-commerce entities
- Provide relevant information required, inter alia, under applicable laws and pertaining to the products (as prescribed).
- Ensure that advertisements for goods or services are consistent with actual characteristics of the said goods or services.
- Not refuse to take back goods and refund any amounts paid by customers, if such goods are defective, spurious, having characteristics different from what was advertised, or if the same were delivered late.
In addition to the above, certain duties have also been prescribed for ‘sellers' operating on Marketplace E-Commerce platforms, which can be briefly summarised as under:
- Not adopt any unfair trade practices.
- Not falsely pose as a customer and post reviews on the platform.
- Follow the same duties for return and refund, as prescribed for Inventory E-Commerce entities.
- Have a prior written agreement with the Marketplace E-Commerce entity through whose platform the seller seeks to operate, share its necessary details with such entity (as prescribed), appoint a grievance redressal officer, and not publish misleading advertisements.
- Provide relevant information required, inter alia, under applicable laws and pertaining to the products (as prescribed) to the E-Commerce Marketplace entity on whose platform the seller operates, for publication on its platform.
The provisions of the CP Act apply qua any violation of the E-Commerce Rules. Therefore, in the event of any violation, the consumers can take the same steps for redressal as prescribed under the CP Act.
The introduction of provisions pertaining to e-commerce are welcome changes to the old consumer protection regime, and would extend the ambit of the same to new-age disputes that frequently arise between consumers and e-commerce entities/sellers on web platforms. The specific compliances required of e-commerce players in the market would ensure transparency in the e-commerce process and ensure expeditious disposal of customers' grievances.
However, while the CP Act and E Commerce Rules bring forth necessary changes, the following important areas may require reconsideration:
- The duties prescribed for Marketplace E-Commerce entities specify that such entities must comply with Section 79 of the IT Act and the Intermediaries Guidelines of 2011, in order to claim exemption from liability for any third-party content published on their platform. However, all E-Commerce Entities (including but not limited to Marketplace E-Commerce entities) by the mode and manner of their operation fall within the definition of ‘intermediary', as defined under the IT Act, and would by default, have to satisfy the conditions of Section 79, in order to claim the aforementioned exemption. Hence, there did not exist a requirement to make a specific reference only qua Marketplace E-Commerce entities. Such an erroneous inclusion may provide a ground for other kinds of e-commerce platforms to argue that they have been specifically excluded from the definition of ‘intermediaries', in order to avoid requisite compliances and liability pertaining to intermediaries under the IT Act.
- A specific time period for effecting refunds or returns for defective/spurious products ought to be specified in the Rules in order to prevent unnecessary delays on part of the e-commerce entities or sellers.
- A schedule or template of a proposed grievance redressal system may be added to the Rules to provide direction to e-commerce entities on the general structure which may be appointed for their internal grievance redressal mechanisms. The same would assist in streamlining such internal mechanisms and improving their effectiveness.
- Appointment of a nodal officer, who shall ensure compliance with provisions of the CP Act and Rules, has been mandated for all E-Commerce Entities. However, no provisions have been introduced for personal liability of the nodal officer, in the event of any breach of compliance. The appointment of a nodal officer for ensuring compliance on part of the E-Commerce Entity may not provide its due benefit, unless some personal liability is attached to such appointment.
The CP Act and its provisions will certainly boost the drive for increased protection of consumer rights, especially on the e-commerce platform. As jurisprudence develops on the New Act and its associated Rules, the Parliament may consider future amendments to introduce improvements to the New Act.
1. Section 2(17) – electronic service provider means a person who provides technologies or processes to enable a product seller to engage in advertising or selling of goods or services to a consumer and includes any online market place or online auction sites.
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