Innovation

Highlights of the Consumer Protection (e-Commerce) Rules, 2020

INTRODUCTION

The world has shifted to the internet, and we continue to witness this change for a decade now. India itself has over five-hundred million people who use the internet.[1]  Owing to internet access, ease in operating computing devices, cheaper pricing on online portals, evolution in mindsets, and shopping patterns; e-commerce is taking up an increasingly significant portion of the total retail. The Indian B2C (business to consumer) e-commerce market valued at USD 38.5 billion in 2017 and is expected to rise to USD 200 billion by 2026, while B2B (business to business) e-commerce is estimated to be around USD 300 billion then.[2]

With such growth rates, it becomes quintessential that the electronic and online space is regulated in the same manner as the physical world to ensure the safety and security of the users. From online shopping to online payments to mere surfing on the internet, people fall prey to frauds, scams, misleading and false advertisements, and other unlawful malpractices. The lack of transparency, accountability, and absence of grievance redressal mechanisms, have left consumers wary of the e-space.

In order to make consumers feel safe and secure while online shopping and transacting, the Central Government’s Ministry of Consumer Affairs, Food and Public Distribution (Department of Consumer Affairs), after inputs from the Department for Promotion of Industry and Internal Trade (DPIIT), has issued the  Consumer Protection (E-Commerce) Rules, 2020, [hereinafter ‘the rules’] in the exercise of its powers under Section 101 (1)(zg) of the  Consumer Protection Act (CPA), 2019 [hereinafter ‘the Act’]. This provision of CPA, 2019 provides that the Central Government has the power to make rules for the application of Section 94 of this Act[3] that provides for the prevention of unfair trade practices and direct selling. It also provides for the protection of rights and interests of consumers in e-commerce.[4] The rules fall under the National E-commerce Policy of the Government initiated in the year 2019 as well.[5]

EVOLUTION OF E-COMMERCE RULES IN INDIA

The Consumer Protection Act, 2019 has repealed and replaced the, almost 3 decades old, Consumer Protection Act, 1986. Apart from the CPA, 2019, consumer protection in India revolves around other Acts such as the Sale of Goods Act, 1930, the Agricultural Produce (Grading and Marketing) Act, 1937, the Drugs and Cosmetics Act, 1940, the Indian Standards Institution (Certification Marks) Act, 1952, the Food Safety and Standards Act, 2006, the Essential Commodities Act, 1955, and others.[6]

Initiatives such as ‘Make in India’, ‘Digital India’, ‘Skill India’, and ‘Start-Up India’ are also playing a role in increasing online trade. In fact, due to these initiatives, Indian e-commerce is the fastest growing in the world with a growth rate of 51%[7] and is set to grow eight-fold by 2026.[8] With the overwhelming growth of e-trade in the country, it was realized that regulating it is the need of the hour.

The aspect of regulating electronic or digital commerce has been brought in the CPA, 2019. The strengthening of consumer rights will provide consumers the right to ‘choice’, information, safety, and redressal. The e-commerce rules have availed these rights to consumers.

The Consumer Protection (E-Commerce) Rules, 2020 is the latest addition to the consumer protection regime in India. Simultaneously, the Department for Promotion of Industry and Internal Trade (DPIIT) is to present another draft of the National E-Commerce Policy that shall be put to public debate. The policy shall cover more concepts, rights, and procedures than these rules.

APPLICABILITY OF THE RULES

In order to provide greater security to consumers, the rules apply to a wide spectrum of e-commerce platforms or electronic retailers [also known as ‘e-tailer’] that offer goods and services in India including businesses abroad as well. The rules apply to all e-commerce entities[9] that are established or situated inside or outside India but provide goods and services to consumers in India.[10] They apply to every sale and purchase over electronic networks and all models of e-commerce, including marketplace e-commerce entities[11] and inventory e-commerce entities.[12]

SALIENT FEATURES: WHAT DO THE RULES SAY?

The lay duties for models of e-commerce entities transacting with Indian consumers regardless of being situated or established anywhere around the world. The objective of these rules is to provide accurate information that the consumer requires to make an informed decision. They aim to prevent and prohibit unfair trade practices detrimental to consumer rights. They also forbid any arbitrary and unreasonable classification of consumers. The rules encourage every e-commerce entity to make efforts to facilitate the National Consumer Helpline of the Central Government.[13]

INFORMATION TO BE PROVIDED

Every e-commerce platform must display in an explicit and prominent manner for the consumer:

  • The legal name of the e-commerce entity;
  • Its principal geographical address of headquarters and all branches;
  • Name and details of the website;
  • Ratings and feedback;
  • Information relating to return, refund, exchange, warranty, and guarantee;
  • Delivery and shipment details;
  • Break-up of the total price in terms of compulsory and voluntary charges, such as delivery charges, postage and handling charges, conveyance charges and the applicable tax;[14]
  • Modes of payment and security-related details and contact information of the payment service providers;
  • Details about seller or importer of the products and services, their geographical address, contact information, and ratings and reviews;
  • Details about the product’s country of origin[15], pricing, expiry date, description and features; and
  • Contact details for customer care and the grievance officer.[16]

These measures are crucial for the consumer to make an informed decision and choice.

GRIEVANCE REDRESSAL MECHANISM

The possibility of scams, frauds, and other unfair trade practices cannot be ignored while dealing with e-commerce platforms. A consumer cannot develop direct contact with the e-tailer as he does with a shopkeeper while transacting face-to-face. This puts the e-tailer in a position of power and leads to a lack of accountability on the part of e-commerce websites. In order to fill this void and to provide a quick relief-based grievance redressal against digital platforms:

  • The rules mandate every digital commerce platform to set up a ‘grievance redressal mechanism’ headed by a Nodal Grievance Officer or an alternative senior officer. Every consumer complaint must be issued a ticket number provided to the consumer to track the status of the complaint.
  • The grievance must be acknowledged within 48 hours of the receipt and it must be resolved within a month of receiving it.[17]

This shall provide an additional sense of security to the consumer engaging with e-commerce platforms.

MEASURES AGAINST UNFAIR TRADE PRACTICES

Taking advantage of the absence of stringent regulations, e-commerce websites have opted for deceptive trade practices in order to make greater profits. Lack of transparency and accountability in e-businesses has put consumers in a weak position that they become prey to the unfair practices of the e-tailers.

In order to strengthen consumer rights in this department, the rules have expressly prohibited e-commerce platforms from indulging in unfair trade practices.

  • The e-commerce entity shall not indulge in any unfair trade practices such as selling counterfeit and pirated goods. A marketplace e-commerce entity shall maintain a record for identification of sellers supplying counterfeit goods that are in violation of the Copyright Act, 1957, the Trade Marks Act, 1999 or the Information Technology Act, 2000;[18]
  • The sellers must have a pre-written undertaking about their relationship with the entity and the contractual information must be displayed for the users. The sellers will have to take an undertaking about ensuring accuracy and authenticity in features, images and description to the goods and services provided;[19]
  • The sellers or inventory e-commerce entities shall bear liability with respect to default in the authenticity of goods and services when it is explicitly or implicitly promised;[20]
  • No e-commerce platform shall post fake and false reviews, ratings and feedback to mislead the consumer;
  • They must not indulge in misleading advertisements and the products and services provided to the consumer must correspond to what was displayed and promised;
  • Goods and services shall be taken back and refunds to be provided in case of defective, deficient or false and fake, or not at par with promised or advertised features or when delivered late from the scheduled delivery, unless caused by force majeure;[21]
  • Not to withdraw or stop production and supply of already purchased or promised goods and services;
  • No cancellation fee shall be levied unless the e-commerce entity is also bearing similar charges; and
  • The price shall not be manipulated to gain unreasonable or unjustified profits.[22]

OBTAINING CONSENT

The consent obtained from the consumer must be explicit, voluntary, and informed. Therefore, the e-tailers shall not under any circumstances include pre-ticked or automatically checked boxes in consent forms.

PENALTIES AND PROCEDURE

Any violation of these rules is punishable under the provisions of the Consumer Protection Act, 2019, provided in Chapter VII of the Act[23]. The new ‘Central Consumer Protection Authority (CCPA)’ has been provided powers to take cognizance for violation of these rights.[24]

The rules are consumer sensitive and have provisions to increase transparency, accountability, and safety in e-commerce transactions. From ensuring returns, exchanges, refunds to details about pricing and authenticity, the plight of customers is being preserved. However, this cannot be the finish line as there is still a long way to go as jurisdictions across the world are raising the bar by strengthening consumer rights in all facets and disciplines of life.

E-COMMERCE AND STANDARDS SET ACROSS THE WORLD

The European Union’s (EU) rules for e-commerce are wider in their approach. The EU rules empower member states to ban the websites and platforms where any fraud or scam is identified.[25]  The European Commission is also deliberating on providing consumers ‘digital contractual rights’ when the business is online. These regulations provide rights such as being treated equally regardless of where you shop from, to have control over data provided to the e-tailer, to receive promised and expected goods and services. The consumers should be informed about the supplier and the seller of products, about using cookies and what information is being collected, and to be aware when a search result is a paid promotion. It is an obligation for the e-tailer to inform the consumer about his right to cancel the order within 14 days.

E-COMMERCE AND DATA PROTECTION

The State of California, in the ‘California Consumer Privacy Act, 2020’[26] has implemented provisions safeguarding consumer’s personal information that the e-tailers collect and sell for that matter. This legislation entitles the consumers to choose what information they want to provide and how it can be used or sold by the e-tailers. The consumer can get any such information deleted or can withdraw consent and they shall not be bothered in this regard thereafter.[27] The e-commerce entity shall also be fined in case of a data breach. These provisions have set the bar up high for the rest of the world in protecting consumer privacy.

Moreover, the Federal Trade Commission (FTC) of the USA also recommends regulating online profiling and the collection of consumer data by online commerce sites.[28]

The European Commission asks the online platforms to comply with data protection obligations under the General Data Protection Regulation (GDPR). Every e-commerce website shall notify the user of the data protection policy, about where the personal data is being registered and how it can be used for future access and modifications.[29] The EU has also decided to remove geo-blocking i.e. restrictions on cross-border shopping and higher delivery payments in order to liberalize e-trade.[30]

The Consumer Protection (E-Commerce) Rules, 2020 has not touched upon the protection of the data and personal information provided by the consumer, especially when that information is also being accessed out of the country. However, the aspect of data protection is covered by the National E-Commerce Policy that was set to be tabled again after being redrafted by the Department for Promotion of Industry and Internal Trade (DPIIT). The policy could not be presented before a group of secretaries (a panel of secretaries from different departments and ministries set up by the Central Government) due to the inconvenient circumstances caused by COVID-19, intends to enhance digital trade and regulate the cross-border flow of data. The policy shall also be presented for public comments once the situation permits. Under this policy, data shall be divided into individual, national and sensitive information. The international flow of information shall be restricted along with strict provisions regarding payments for the use and storage of data abroad.[31] Sensitive information includes data about defense, biotechnology and medicinal records, borders and boundaries related data, genome mapping information and it cannot be shared without authorization. The policy shall empower the government to check and take cognizance of all e-commerce activities endangering the security and peace of the country.

Though the draft is not very descriptive in procedural aspects, it reflects the government’s intention to force companies to share information, to innovate, and prevent the creation of monopolies.[32] The government also aims to promote domestic and small-scale industries by checking monopolies and antitrust activities. We also have the ‘Competition Commission of India’ (CCI) which is a statutory body to check on anti-competitive practices and restrict monopolization in the country. Moreover, the establishment of the post of ‘E-Regulator’ for protection of data under this policy, entirely overlaps the ‘Data Protection Authority’ to be set up under the ‘Personal Data Protection Bill, 2019’. The presence of too many regulators for a single purpose creates overlap that can blur the objective.

The direct effect of these restrictions, lack of concessions, and excessive monitoring would lie on India’s Atmanirbhar Bharat’ idea. However, it presents an anti-FDI (Foreign Direct Investment) character that is detrimental to the quality and choices available to consumers.

CONCLUSION

Everyday advancement in information technology and biotechnology is raising alarms for better regulation. However, any regulation that is brought in place should not hamper the growth. It needs to be understood that the e-space is still in gestation in spite of its overwhelming advancement. Therefore, better governance is required. The E-Commerce rules intend to create a better place for consumers in the online marketplace that is free from manipulations and compromises. The rules strengthen consumer rights in many ways.

There are a few aspects where these rules fall short such as not dealing with consumer data protection and not being procedurally detailed. Another is the absence of specific provisions about the applicability of these rules to the foreign business’ retailing in India. Handling a dispute involving a foreign entity has territorial and jurisdictional constraints, thereby it is even more important to pre-decide upon the procedure for resolving these disputes. If not these rules, the parent Act i.e. the Consumer Protection Act, 2019 should specifically devise provisions to prevent conflict of laws that arise when a foreign entity is involved in a consumer dispute.

The world is deliberating on using Alternative Dispute Resolution (ADR) mechanisms for the resolution of e-commerce disputes internationally. ADR mechanisms can be more efficient than any legal action as ADR is not based on territory or jurisdiction and is a quick, confidential, and party-driven process.[33] This can be helpful in preventing a conflict of laws and resolving cross-border disputes. Though the Consumer Protection Act, 2019 has touched upon developing ADR mechanisms for resolving e-commerce disputes[34], the Act should also provide for the resolution of disputes involving a foreign element.

Overall, a few limitations are only natural and there is always a scope of improvement. The Consumer Protection (E-Commerce) Rules along with the National E-Commerce Policy can prove to be a great milestone in India’s path towards progress.

This article can be cited as:

Bluebook, 20th edn.: “Tanveer Kaur, Highlights of the Consumer Protection (e-Commerce) Rules, 2020, Metacept – InfoTech and IPR, accessible at https://metacept.com/highlights-of-the-consumer-protection-e-commerce-rules-2020/ .”

References:


[1]Sandhya Keelery, ‘Number of internet users in India 2015-2023’, Statista (Jul. 7, 2020) https://www.statista.com/statistics/255146/number-of-internet-users-in-india/.

[2]Draft National e-Commerce Policy’,(Feb. 23, 2020), https://dipp.gov.in/sites/default/files/DraftNational_e-commerce_Policy_23February2019.pdf

[3]Section 94, The Consumer Protection Act, 2019, http://egazette.nic.in/WriteReadData/2019/210422.pdf.

[4]Section 101 (1) (zg), The Consumer Protection Act, 2019, http://egazette.nic.in/WriteReadData/2019/210422.pdf.

[5]Lakshmikumaran & Sridharan, ‘E-Commerce – Consumer Protection (E-Commerce) Rules, 2020 notified’, Lexology (Jul. 28, 2020), https://www.lexology.com/library/detail.aspx?g=ea0f67cd-3c27-48e3-bd0b-e8216f9219c8.

[6]Vinay Vaish, ‘The Consumer Protection Law In India’, Mondaq (Aug. 31, 2017), https://www.mondaq.com/india/consumer-trading-unfair-trading/624830/the-consumer-protection-law-in-india.

[7]E-commerce Industry in India’, India Brand Equity Foundation (June, 2020), https://www.ibef.org/industry/ecommerce.aspx.

[8] Prachi Gupta, ‘Modi’s four initiatives make Indian e-commerce world’s fastest growing; set to grow 8-fold by 2026’,The Financial Express (Aug. 9, 2019), https://www.financialexpress.com/industry/sme/modis-four-initiatives-make-indian-e-commerce-worlds-fastest-growing-set-to-grow-8-fold-by-2026/1670912/#:~:text=While%20Indian%20e%2Dcommerce%20is,growth%20of%20the%20online%20trade.&text=Several%20of%20Narendra%20Modi%2Dled,the%20Indian%20e%2Dcommerce%20industry.

[9] Section 3(b), ‘The Consumer Protection (E-Commerce) Rules, 2020’.

[10]Section 2, ‘The Consumer Protection (E-Commerce) Rules, 2020’.

[11]Section 3 (g), ‘The Consumer Protection (E-Commerce) Rules, 2020’.

[12]Section 3 (f), ‘The Consumer Protection (E-Commerce) Rules, 2020’.

[13] Section 4 (7), ‘The Consumer Protection (E-Commerce) Rules, 2020’.

[14] Section 7 (1) (e), ‘The Consumer Protection (E-Commerce) Rules, 2020’.

[15] Section 5 (5) (d), ‘The Consumer Protection (E-Commerce) Rules, 2020’.

[16] Section 4(3), ‘The Consumer Protection (E-Commerce) Rules, 2020’.

[17] Section 4 (5), ‘The Consumer Protection (E-Commerce) Rules, 2020’.

[18] Section 5 (5), ‘The Consumer Protection (E-Commerce) Rules, 2020’.

[19] Section 5 (2), ‘The Consumer Protection (E-Commerce) Rules, 2020’.

[20] Section 7 (5), ‘The Consumer Protection (E-Commerce) Rules, 2020’.

[21] Section 5 (3), ‘The Consumer Protection (E-Commerce) Rules, 2020’.

[22] Section 4 (11)(a), ‘The Consumer Protection (E-Commerce) Rules, 2020’.

[23] Chapter 7, ‘The Consumer Protection Act, 2019’

[24] Section 8, ‘The Consumer Protection (E-Commerce) Rules, 2020’.

[25]New EU rules on e-commerce’, The European Commission, https://ec.europa.eu/digital-single-market/en/new-eu-rules-ecommerce#:~:text=The%20rules%20ensure%20that%20we,they%20choose%20to%20shop%20from..

[26]California Consumer Privacy Act, 2018’,

https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180SB1121.

[27]Armando Roggio, ‘California Consumer Privacy Act’ Impacts Ecommerce Businesses’, (August 13, 2019), https://www.practicalecommerce.com/california-consumer-privacy-act-impacts-ecommerce-businesses.

[28]‘E-Commerce’,Justia, https://www.justia.com/business-operations/managing-your-business/e-commerce/.

[29]‘Legal regulations for e-commerce’, The European Commission, https://ec.europa.eu/growth/sectors/tourism/business-portal/understanding-legislation/legal-regulations-e-commerce_en.

[30] Néstor Duch-Brown & Bertin Martens, ‘The Economic Impact of Removing Geo-blocking Restrictions in the EU Digital Single Market’, The European Commission, https://ec.europa.eu/jrc/sites/jrcsh/files/JRC101100.pdf

[31]Kirtika Suneja,‘Draft e commerce policy seeks to set up regulator, restrict data storage’, The Economic Times (Jul. 03, 2020), https://economictimes.indiatimes.com/news/economy/policy/draft-ecomm-policy-seeks-to-set-up-regulator-restrict-data-storage/articleshow/76760134.cms.

[32]‘India’s e-commerce policy: Adding uncertainty to the cart’, Financial Express (Jul. 22, 2020), https://www.financialexpress.com/opinion/indias-e-commerce-policy-adding-uncertainty-to-the-cart/2031256/.

[33]‘Resolving E-commerce Disputes Online’, Organisation for Economic Co-operation and Development, https://www.oecd-ilibrary.org/docserver/233468177136.pdf?expires=1596964702&id=id&accname=guest&checksum=0C4CC27936D6942979403E96578BB413.

[34] Alden D’Souza, ‘The Consumer Protection Act, 2019: Mediation in consumer issues’, 5th Voice News (Apr. 21, 2020),https://5thvoice.news/legalnews/NzE3NQ==/The-Consumer-Protection-Act-2019-Mediation-in-consumer-issues#.

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