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Regulating the e-commerce Space

Contributed by: Singh & Associates

The existing regime

In order to protect consumers from unfair trade practices on e-commerce platforms, the Central Government notified the Consumer Protection (E-Commerce) Rules, 2020 (“Rules”) which came into effect from July 23, 2020 and applied to all types of e-commerce (marketplace or inventory model, multi-channel single brand or single brand retailers) and provide a framework to regulate the marketing, sale and purchase of goods and services online.

Specifically, the Rules provides for certain key duties for an e-commerce entity, which includes providing, on its platform, its legal name, principal geographic address of its headquarters and all branches name and details of its website; and contact details like e-mail address, fax, landline, and mobile numbers of customer care as well as of grievance officer. E-commerce entity has to establish a grievance redressal mechanism, appoint a grievance officer specifically for resolving consumer grievances and such grievance officer shall acknowledge the receipt of the complaint within 48 hours. An e-commerce entity is required to register the name and details of the importer while offering any imported goods and services to the consumers in the market. Entity shall not impose unnecessary cancellation charges on the consumers and the consent of the consumer should not be recorded automatically by the e-commerce entity.

For the sellers on marketplace using e-commerce entities, the Rules provides that they shall in no situation falsely present itself as a consumer and generate fake reviews about the goods and services offered by the seller. A seller cannot refuse to refund if the goods and services provided by the seller turn out to be defective. A seller shall not refuse to initiate withdrawal and take back returns from the consumers if the goods and services do not meet the description provided by the Seller. Sellers offering goods or services through those entities which provide an information technology platform to facilitate transactions aka Marketplace Entities, must provide specific information to them, including seller entity details, price and breakup price, relevant details about the goods or services offered for sale by the seller. Sellers must have a prior written contract with the respective e-commerce entity, ensure accurate advertisements, and appoint a grievance officer for timely grievance redressal.

The Rules impose specific requirements on marketplace e-commerce to ensure that descriptions, images, and other content pertaining to goods or services on their platform is precise and relates directly with the appearance, nature, quality and other general features of such good or service. A marketplace entity is required to disclose to the consumers details about the sellers offering goods and services, customer care number, any rating or review or feedback about such seller, return, refund, exchange, warranty and guarantee, delivery and shipment and modes of payment. A marketplace e-commerce entity is required to include in its terms and conditions, a description of any different treatment which it gives to goods or services or sellers of the same category.

The inventory e-commerce entities who own the inventory of goods/services and sell them directly to consumers have to comply with all the duties imposed on marketplace entities as well as sellers. It is to be noted that, like the sellers on marketplace entities, inventory entities are also required to provide specific information such as country of origin of imported goods, price and breakup price, applicable guarantees, delivery details, and all other mandatory notices and information.The inventory e-commerce entity shall provide correct information related to warranty, payment, exchange, refund, return, delivery and shipment, grievance redressal mechanism etc.

Proposed amendment of the E-commerce Rules 2020

The Central Government on June 21, 2021 proposed amendments to the Consumer Protection (E-Commerce) Rules, 2020 (“Draft Rules”) pursuant to recommendations by a Parliamentary Committee. The proposed amendments aim to bring transparency in the e-commerce platforms and further strengthen the regulatory regime to curb the prevalent unfair trade practices. The proposed amendment provides various changes in the e-commerce regime. The Draft Rules provide a new definition of “e-commerce entity” as any person who “owns, operates or manages digital or electronic facility or platform for electronic commerce” as well as “any entity engaged by such person for the purpose of fulfilment of orders placed by a user on its platform. The Draft Rules make registration of e-commerce entities with the Department of Promotion of Industry and Internal Trade mandatory.

The Draft Rules make it mandatory for the e-commerce entities to make “adequate disclosures” with respect to cross-selling on the platform. Such as name of the entity providing data for cross-selling, data of such entity engaged in cross selling. Simultaneously, the Draft Rules provide a ban on the “mis-selling” of goods and services offered on any e-commerce platform to the consumers by deliberate misrepresentation of information by such entities about such goods or services by the sellers. The Draft Rules clarifies that the conventional flash sales by third party sellers are not banned on e-commerce platform. But, certain e-commerce entities are engaging in limiting consumer choice by indulging in “back to back” or “flash” sales wherein one seller selling on platform does not carry any inventory or order fulfilment capability but merely places a “flash or back to back” order with another seller controlled by platform.

The Draft Rules outline a grievance redressal mechanism to provide security to the interests of the consumers. An e-commerce entity is required to appoint a Chief Compliance Officer to ensure compliance of the Consumer Protection Act, 2019 and Rules and a nodal contact person for 24x7 coordination with law enforcement agencies to ensure compliance to their orders and Resident Grievance Officer for redressing of the grievances of the consumers on the e-commerce platform.

To ensure that the domestic manufacturers and suppliers get a fair and equal treatment on the e-commerce platform it has been provided that where an e-commerce entity offers imported goods or services, it shall incorporate a filter mechanism to identify goods based on country of origin and suggest alternatives to ensure fair opportunity to domestic goods. To ensure that consumers are not affected when a seller fails to deliver the goods due to negligent conduct in fulfilling the duties and liabilities in the manner as prescribed by the marketplace e-commerce entity, provisions of fall-back liability for every marketplace e-commerce entity have been provided.

Contributed by Singh & Associates

The above article is authored by Mr. Neeraj Dubey(Partner) and Mr. Rajveer Agri(Associate)

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