INTRODUCTION
Our earlier post under the AP Law Series, examined the Consumer Protection Act, 2019, which was published in the Official Gazette on August 9, 2020 and may be accessed here – http://aplaw.in/version-2-0-consumer-protection-act-in-india-then-1986-now-2019/ .
Pursuant to the powers under the Consumer Protection Act, 2019 (“Act”), the Central Government, in a first, issued the Consumer Protection (E-Commerce) Rules, 2020 (“Rules”), governing e-commerce in India. In line with the draft National E-Commerce Policy released by the government in early 2019, while elaborating on their scope and applicability, also states the duties and liabilities of the e-commerce entities and even duties of the sellers offering their goods or services on these platforms.
APPLICABILITY
The Rules shall apply to:
- all goods and services bought or sold over digital or electronic network including digital products;
- all models of e-commerce, including marketplace and inventory models of e-commerce;
- all e-commerce retail, including multi-channel single brand retailers and single brand retailers in single or
- multiple formats; and
- all forms of unfair trade practices across all models of e-commerce
These rules shall not apply to any activity of a natural person carried out in a personal capacity not being part of any professional or commercial activity undertaken on a regular or systematic basis.
It is important to note the Rules shall also apply to an e-commerce entity which is not established in India, but systematically offers goods or services to consumers in India.
DUTIES AND LIABILITIES
The Rules provides for the duties and liabilities of e-commerce entities – marketplace e-commerce entities, inventory e-commerce entities and also the duties of sellers on the marketplace.
The Rules define:
“e-commerce entity” as “any person who owns, operates or manages digital or electronic facility or platform for electronic commerce, but does not include a seller offering his goods or services for sale on a marketplace e-commerce entity.”
“marketplace e-commerce entity” as “an e-commerce entity which provides an information technology platform on a digital or electronic network to facilitate transactions between buyers and sellers.”
“inventory e-commerce entity” as “an e-commerce entity which owns the inventory of goods or services and sells such goods or services directly to the consumers and shall include single brand retailers and multi-channel single brand retailers”
The Act defines:
“product seller”, in relation to a product, means a person who, in the course of business, imports, sells, distributes, leases, installs, prepares, packages, labels, markets, repairs, maintains, or otherwise is involved in placing such product for commercial purpose and includes—
(i) a manufacturer who is also a product seller; or
(ii) a service provider,
but does not include—
(a) a seller of immovable property, unless such person is engaged in the sale of constructed house or in the construction of homes or flats;
(b) a provider of professional services in any transaction in which, the sale or use of a product is only incidental thereto, but furnishing of opinion, skill or services being the essence of such transaction;
(c) a person who—
(I) acts only in a financial capacity with respect to the sale of the product;
(II) is not a manufacturer, wholesaler, distributor, retailer, direct seller or an electronic service provider;
(III) leases a product, without having a reasonable opportunity to inspect and discover defects in the product, under a lease arrangement in which the selection, possession, maintenance, and operation of the product are controlled by a person other than the lessor;
DUTIES OF E-COMMERCE ENTITIES
An e-commerce entity shall be a “company’’ under the Indian laws or an office, branch or agency outside India owned or controlled by a person in India. Such entity shall appoint a nodal person of contact or an alternate senior designated functionary who is resident in India, to ensure compliance with the provisions of the Act or the Rules.
Display of information and grievance redressal. In addition to the name, address, contact details of the e-commerce entity being adequately displayed, each e-commerce entity shall establish adequate grievous redressal mechanism and appoint a grievance officer for consumer grievance redressal, and shall display the name, contact details, and designation of such officer on its platform, with the requirement of the grievance officer to acknowledge the receipt of any consumer complaint within forty-eight hours and redresses the complaint within one month from the date of receipt of the complaint.
Country of origin. For imported goods or services offered for sale by an e-commerce entity, it shall mention the name and details of any importer from whom it has purchased such goods or services, or who may be a seller on its platform.
Cancellation charges. Interestingly, the Rules provide that no e-commerce entity shall impose cancellation charges on consumers cancelling after confirming purchase unless similar charges are also borne by the e-commerce entity, if they cancel the purchase order unilaterally for any reason. Further, all accepted refunds requested by the consumer shall be payable, within a reasonable time, in a manner as prescribed by the Reserve Bank of India or any other competent authority.
Explicit and affirmative consent. Every e-commerce entity shall only record the consent of a consumer for the purchase of any good or service offered on its platform where such consent is expressed through an explicit and affirmative action, and no such entity shall record such consent automatically, including in the form of pre-ticked checkboxes.
Price manipulation and consumer discrimination. The Rules prohibit e-commerce entities from price manipulation of the goods and services offered to unreasonable profits including under any marker conditions, extraordinary circumstances etc. They are also prohibited to discriminate between consumers of the same class or make any arbitrary classification of consumers affecting their rights.
LIABILITIES OF MARKETPLACE E-COMMERCE ENTITIES
Undertaking from Sellers. Every marketplace e-commerce entity shall require sellers through an undertaking to ensure that descriptions, images, and other content pertaining to goods or services on their platform is accurate and corresponds directly with the appearance, nature, quality, purpose and other general features of such good or service.
Information to be provided. Every marketplace e-commerce entity is provide on its platform details of sellers offering their goods and services, including name of the business, customer care number, ratings (including its methodology), feedback etc to enable the consumers make an informed choice. Other details such that of ticket number for the complaint lodged, refund, return, exchange, payment modes, grievous redressal details shall also be provided on the platform.
IP violations. The Rules also obligates the marketplace e-commerce entities take reasonable efforts to maintain a record of relevant information allowing for the identification of all sellers who have repeatedly offered goods or services that have previously been removed or access to which has previously been disabled under the Copyright Act, 1957, the Trade Marks Act, 1999 or the Information Technology Act, 2000.
DUTIES OF SELLERS ON MARKETPLACE
Unfair trade practice and misrepresentation. The Rules provide that no Seller offering goods or services through a marketplace e-commerce entity shall adopt any unfair trade practice and shall not falsely represent itself as a consumer and post reviews about goods or services or misrepresent the quality or the features of any goods or services
Defective or spurious goods. The Sellers cannot refuse to take back goods or withdraw or discontinue services purchased or agreed to be purchased, or refuse to refund consideration, if paid, if such goods or services are defective, deficient or spurious, or if the goods or services are not of the characteristics or features as advertised or as agreed to, or if such goods or services are delivered late from the stated delivery schedule, unless due to force majeure.
Other requirements. The Seller is required to have a prior written contract with the respective e-commerce entity in order to undertake or solicit such sale or offer; appoint a grievance redressal mechanism as mentioned above as well; avoid mis-leading / incorrect advertisements, and provide to its e-commerce entity its legal name, address of headquarters and branches, website details, email address, customer care contacts details etc.
Furthermore, the Seller is required provide various information to the e-commerce entity to be displayed on the platform, such as, price details of the goods or service, with breakup of allied charges, such as handling, postage charges etc.; all contractual information required to be disclosed by law; all relevant details such country of origin; details of the consumer grievance officer, details of the importer; exchange, returns, shipment details; relevant warranties / guarantees applicable to such goods or services.
DUTIES AND LIABILITIES OF INVENTORY E-COMMERCE ENTITIES
The obligation of every inventory e-commerce entity is similar to the obligations provided above. Every inventory e-commerce entity is required to provide various information in a clear and accessible manner displayed on the platform, such as, details of the exchange, returns, shipment details, relevant warranties / guarantees applicable to such goods or services; grievance redressal mechanism, payments methods, including details pertaining to cancellation of such payments; total price of products with break up of allied charges; ticket number for complaint lodged; all contractual information required to be disclosed by law.
Additionally, every inventory e-commerce entity shall not falsely represent itself as a consumer and post reviews about goods or services or misrepresent the quality or the features of any goods or services; refuse to take back defective or spurious goods as mentioned above. Further, any inventory e-commerce entity which explicitly or implicitly vouches for the authenticity of the goods or services sold by it, or guarantees that such goods or services are authentic, shall bear appropriate liability in any action related to the authenticity of such good or service.
The Rules, which was notified on July 23, 2020, with the primary mandate of consumer protection and to this effect numerous steps have been incorporated in the Rules and are well intended.
Rules provide for transparency in terms of the price of the goods and products being sold on the platform, with the requirement to unambiguously state the break-up of the various costs involved in addition to the cost of the product, such as handling charged, postage charges. Further, information pertaining to the refund / cancellation of the order need to specifically provided in a clear manner.
Further, to protect the interest of the consumers, the e-commerce entities are required to have a grievance redressal mechanism in place, and timelines have also been prescribed under the Rules for the resolution on the grievance. While the intent is noble, there may be difficulties for the smaller retailers on such e-commerce, particularly the ones operating from smaller towns and villages.
The Rules also provide the Sellers cannot refuse to take back goods or withdraw or discontinue services purchased or agreed to be purchased, or refuse to refund consideration, if paid, if such goods or services are defective, deficient or spurious. Price manipulation of the goods and services offered to unreasonable profits including under any marker conditions, extraordinary circumstances etc. is prohibited
Further, some of the other compliance requirements prescribed under the Rules, such as the need to all contractual information required to be disclosed by law, to be displayed prominently by the e-commerce entities including the Sellers on such platform, should be specific, unless the intent is to reflect the agreements that the stakeholders have entered into, to be displayed, which may seem a stretch, due to issues such as confidentiality obligations, proprietary information that may form part of such agreements, which the stakeholders may not like to have them displayed on a public domain.
The Rules made pertaining to the cancellation charges appears rather confusion on its implementation and to treat the stakeholders in a similar manner appears misplaced. The Rules provide that no e-commerce entity shall impose cancellation charges on consumers cancelling after confirming purchase unless similar charges are also borne by the e-commerce entity, if they cancel the purchase order unilaterally for any reason.
Under the Rules, an e-commerce entity is defined to be a “company’’ under the Indian laws or an office, branch or agency outside India owned or controlled by a person in India. Therefore, does that mean that other form of entities existing, such as a sole proprietorship, partnership, LLPs etc, are not bound by the Rules? This needs to clarified by the authorities. If the answer to the foregoing question is in affirmative, then that may be in conflict with the applicability rules above (Para 2.1 above).
Also, as a last comment, attention is required to be paid on the drafting of the Rules as well, in order to avoid, perhaps unwarranted potential litigation/s in the future. For example, the Act does not define the term “Seller” but defines “Product Seller”. However, under the Rules the term “Seller” is used and under its definition the reference is made to Section 2 (37) of the Act, wherein the term defined is “Product Seller”!
– Anupam Prasad
anupam@aplawchambers.in
