Draft E-Commerce Rules: Consumer Protection In The Age Of Digital Commerce

E-commerce (electronic commerce) is the buying and selling of goods and services, or the transmitting of funds or data, over an electronic network, primarily the internet.

For the purposes of preventing unfair trade practices in e-commerce, the Central Government had notified the Consumer Protection (E-Commerce) Rules, 2020 with effect from 23 July 2020. However, since the notification of these rules, the Government has received several representations from aggrieved consumers, traders and associations complaining against widespread unfair trade practices being observed in the e-commerce ecosystem. Thus, the Government of India has proposed amendments to the Consumer Protection (E-commerce) Rules, 2020.

Need of Rules

• Absence of Regulatory Oversight: There was an evident lack of regulatory oversight in e-commerce which required some urgent action.
• Increasing Unfair Trade Practices on E-Commerce Platforms: The rapid growth of e-commerce platforms has also brought into the purview the unfair trade practices of the marketplace e-commerce entities engaging in manipulating search result to promote certain sellers, preferential treatment to some sellers, indirectly operating the sellers on their platform, impinging the free choice of consumers, selling goods close to expiration, etc.
• Limiting Consumer Choice: Conventional flash sales by third party sellers are not banned on e-commerce platform. But, certain e-commerce entities areindulging in “back to back” or “flash” sales wherein a sale is organised by fraudulently intercepting the ordinary course of business using technology means, to allow only a specified seller or group of sellers managed by the e-commerce entity to sell highly-discounted goods and services. This prevents a level playing field and ultimately limits customer choice and increases prices.

Key Features

• Definition of e-Commerce Entities: As per the draft rules apart from any person who owns, operates, or manages a digital or electronic facility or platform for e-commerce, the e-commerce entity will also include:
  1. any entity engaged by an e-commerce entity for the fulfilment of orders,
  2. any related party (as defined under the Companies Act, 2013) of an e-commerce entity.
• Fallback Liability: In case of non-delivery of goods or services by a seller on a marketplace platform, which causes loss to the consumer, the marketplace will be subject to a fallback liability.
• Regulation of Associated Enterprises: Marketplace e-commerce entities are prohibited from:
  1. listing associated enterprises as sellers on its platform, and
  2. sharing information for the unfair advantage of its associated enterprises.
• Use of Name or Brand Associated with Marketplace Entity: Marketplaces may not use its name or brand forpromotion or offer for sale of goods or services, to suggest that these offerings are from the marketplace itself.
• Abuse of Dominant Position in a Market: An e-commerce entity is not allowed to abuse its dominant position in any market.
• Grievance Redressal and Compliance : All e-commerce entities are required to appoint:
  1. a Grievance Officer to address consumer grievances,
  2. a nodal person for coordination with law enforcement agencies, and
  3. a Chief Compliance Officer for ensuring compliance with the Consumer Protection Act and Rules thereunder. These persons should be residents in India.
• Information Requests by Law Enforcement: The Draft Rules require e-commerce entities to provide information under their control or possession upon request by a government agency.
• Country of Origin of Goods: 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.
• Flash Sale: The Draft Rules prohibit e-commerce entities from organising flash sales.
• Cross-selling: The e-commerce entity engaging in cross-selling has to provide adequate disclosure to users about:
  1. name of the entity providing data for cross-selling,
  2. data of such entity used for cross-selling.
• Mis-selling: To protect the interests of consumers, mis-selling has been prohibited i.e. selling goods and services entities selling goods or services by deliberate misrepresentation of information by such entities about such goods or services.
• Misleading Advertisements: An e-commerce entity should not allow misleading advertisements on its platform.

Implications

• It will protect the interests of consumers.
• It will prevent the exploitation of consumers.
• It will encourage free and fair competition in the market.
• Consumers will be able to make informed purchase decision.
• It would ensure effective compliance with the provisions of the Consumer Protection Act and Rules and also strengthen the grievance redressal mechanism on e-commerce entities.
• Registration of e-commerce entities would help create a database of genuine e-commerce entities and ensure that the consumers are able to verify the genuineness of an e-commerce entity before transacting through their platform.

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.