The latest case of Amazon Seller Services vs. Amway India in which the Delhi High Court directed that the e-commerce platform can sell and advertise the product from direct selling entities (DSE) without their consent thereby reversing its judgement in Amway India Enterprises Pvt. Ltd. v. 1Mg Technologies Pvt. Ltd. in July 2019 restraining various e-Commerce platforms including Amazon, 1MG, Flipkart, Healthkart, Snapdeal and independent sellers from selling, offering to sell, advertising, or displaying products in breach of third party agreements. The concept of DSE is different. They do not sell the product through the retail market and neither have any such designated place. They take the help of various direct sellers who work for them at the local level by selling their product thereby earning commission from the sale they do. They generally involve various individuals to work with them thereby creating a multi-level system and following an arrangement of DSE and direct sellers. This system works in this manner which ultimately leads to having no need of intermediaries. On the other hand, the e-commerce industry works in a manner that connects the seller and customer creating a virtual marketplace.
Amway acts as a DSE while Amazon is an e-commerce giant. The products of Amway were found to be sold at Amazon by the direct seller of Amway, tampering and selling the fake product as well. Amway reputation was at stake since the product being sold was fake and tampered. Amway contended that Amazon was selling its product without any permission as given under Clause 7(6) of the Direct Selling Guidelines (DSG), 2016. Clause 7(6) of the Guidelines recommends that any e-Commerce platform or marketplace should obtain prior written consent before selling products of direct sellers. Amazon contended that the guidelines were not binding in law and also they were exempted from any liability by virtue of Section 79 of the Information Technology Act, 2000 as they were merely intermediaries.
Various such issues were raised in the case. The first one questions the nature of the Direct Selling Guidelines 2016, being binding upon the defendant and if it is binding then to what extent. The second question was based upon the trademark infringement done while selling the product of the plaintiff on e-commerce. The third question was regarding the contention put up by the defendant on seeking exemption through Section 79 of IT Act, 2000. The last issue was raised concerning e-commerce platforms such as Amazon, Snapdeal, Flipkart, 1MG, and Healthkart being guilty of tortious interference with the contractual relationship of the Plaintiffs with their distributors/direct sellers.
All these issues were addressed by the court. The court observed that the title of the document explains its nature: "Advisory to State Government/Union Territories" which itself proves that they are merely advisory and do not have any such statutory nature and cannot be enforced. Therefore, the Division Bench clarified that mere notification in the Gazette does not confer the status of "law" on the Guidelines and that they remained only advisory.
The second issue invites the understanding of the Principle of Exhaustion in the trademark. The Principle of Exhaustion states that as and when the sale of the product is being made the trademark owner losses the right over the trademark. Reiterating the same fundamental proposition the court observed no such trademark infringement in this case. It also relied upon Kapil Wadhwa vs. Samsung Industries which said that India follows the principle of International Exhaustion. The case does not amount to any such infringement.
The third issue was decided in favour of Amazon stating that they don't have any liability for third party information, complying with Section 79(2) and (3) of the IT Act. it relied upon Shreya Singhal vs. UOI where it was held that the obligation of an online platform to remove content arises only if there is a court order or a notification from a government agency on the grounds mentioned in Article 19(2) of the Constitution.
In the fourth issue, the court addresses that there was no such contract in the first place to claim the contractual infringement. The contract imposed by the DSE over their direct seller does not, in any case, arises any such contractual obligation between Amway and Amazon, of which there will be any infringement. The court validly tries to answer all the issue and finally observes that there is no such infringement being intended by Amazon while selling goods of Amway and the e-commerce industries are free to sell the DSE's product.
Topic- Amazon vs. Amway: Giving an upper hand to E-commerce
Description- The case of Amazon vs. Amway allowed the e-commerce industries to sell the products of DSE without any such contractual agreement.
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