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Understanding the scope and ambit of Consumer Protection (E-Commerce) Rules, 2020

Introduction

As per Section 101 (2) (zg) of the Consumer Protection Act, 2019 (hereinafter ‘CPA’), the Central Government has the power to make rules to prevent unfair trade practices in e-commerce space. The Central Government has recently exercised its power and has notified the Consumer Protection (E-Commerce) Rules, 2020 on 23rd July, 2020. Thus, the object of these rules is to prevent unfair trade practices in e-commerce.

Through this piece we try to briefly understand the scope and ambit of the said rules. As transactions online and across e-commerce platforms are at an all time high, these rules are need of the hour and intended to protect the consumer in the all pervasive virtual world. It is clear that through these rules the law is trying to keep up with the technology and is evolving with changing times.

Applicability

As per Rule 2, unless stated by Central Government otherwise, these rules apply to all transactions over internet including for digital products[1] across all models of e-commerce[2] (marketplace or inventory) across all e-commerce retail as long as that entity systematically offers goods or services to consumers in India. However, there is one exception. These rules are not to apply to a natural person who has carried out an activity in his or her personal capacity which is not part of any professional or commercial activity undertaken on a regular or systematic basis.

Definitions

Importantly, the rules provide definition for: (i) e-commerce entity[3]; (ii) inventory e-commerce entity[4]; and (iii) marketplace e-commerce entity[5].  The rules differentiate between a ‘market place e-commerce entity’ (hereinafter ‘MECE’) and an ‘inventory e-commerce entity’ (hereinafter ‘IECE’).  Where the ‘MECE’ is one which acts as a medium between buyers and sellers to facilitate transactions, ‘IECE’ is the one which owns the inventory and sells directly to the consumer. A perusal of the definitions also demonstrates that a seller offering his goods or services on a ‘MECE’ is not an e-commerce entity.

To simplify, we can understand that ‘Amazon’ will fall in either of the categories depending upon the nature of product purchased. If a buyer buys a product which belongs to ‘Amazon’ (Solimo branded products), in that case Amazon will be an ‘IECE’. However, if a buyer buys a ‘Samsung’ mobile, ‘Amazon’ will be treated as ‘MECE’.

Duties of E-Commerce Entities[6] (Whether ‘MECE’ or ‘IECE’)

All E-commerce entities have to: (i) be a registered Company; (ii) appoint a Nodal Officer, a resident of India, to ensure compliance with the CPA and these rules, (iii)  provide the information relating to its legal name, all addresses on its platform, e-mail address, fax, landline and mobile numbers of customer care as well as of grievance officer; and have an adequate grievance redressal mechanism; (iv) ensure consumer complaint to be acknowledged within forty eight hours and resolved within one month; (v) in case of imported products, mention the name of the importer or the seller on the platform; and (vi) process refund requests within a reasonable time.

Apart from the above positive duties, all e-commerce entities have to desist from: (i) manipulating prices to gain unreasonable profit from customers having regard to the market conditions and the nature of goods or service; (ii) impose cancellation charges on consumers unless similar charges are also borne by the e- commerce entity, if they cancel the purchase order unilaterally for any reason; and (iii) discriminate between consumers of the same class or make any arbitrary classification of consumers.

Additional Liabilities of ‘MECE’[7]

Apart from the above general duties applicable to all e-commerce entities, the rules provide for certain specific duties to be followed by ‘MECE’. All ‘MECE’ have to take an undertaking from sellers that they assure the image and content of the goods or service is accurate and correct.

Further, ‘MECE’ are required to display the following information clearly and in accessible manner on its platform: (i) details of seller such as name, whether registered or not and their address, customer care number, ratings, feedbacks or any other information so that a consumer can make an informed decision; (ii) information relating to return, exchange, warranty and guarantee, delivery and shipment, modes of payment, and grievance redressal mechanism; and (iii) explanation of main parameters which are most significant in determining the ranking of goods or sellers on its platform.

An interesting aspect that has been added in the rules is that all MECE have to take reasonable efforts to maintain information for identification of sellers who are repeatedly offered goods that in the past were removed or access was disabled under Copyright Act, 1957, Trade Marks Act, 1999 or Information Technology Act, 2000.[8] However, the duty is only to maintain records. There is no mandatory requirement of removing such entities. However, the larger purpose seems to be is to remove these entities or disable access to their products. This is evident from the fact that the rules state that it is open for MECE to terminate the access of such sellers voluntarily.

Duties of Sellers on Marketplace[9]

The Rules even provide for duties of sellers. Though they are not e-commerce entities, they have been made to have a full responsibility to ensure consumer rights are not prejudiced.

Under the rules, such sellers are prohibited from adopting any unfair trade practice including but not limited to posting misleading reviews of the goods/services.

They are also barred from refusing to take back goods and give refunds in case of (i) defective or spurious goods or services; (ii) goods or services not in line with the characteristics or features as advertised; and (iii) late deliveries[10].

Further, all sellers selling through ‘MECE’, are required to: (i) have a written contract with ‘MECE’; (ii) appoint a grievance officer who has to acknowledge receipt of complaint within 48 hours and redress the same within a month; (iii) ensure advertising for goods/service is consistent with the actual characteristics and usage conditions of the same; and (iv) provide to ‘MECE’ their legal name, all addresses, e-mail, customer care no., GSTIN and PAN.

Sellers are also obliged to provide to ‘MECE’ for display on ‘MECE’: (i) price in single figure along with all break ups including delivery charges, postage, handling, etc.; (ii) expiry date of the product; (iii) country of origin (iv) details of grievance office; (v) details of imported products with guarantees related to authenticity or genuineness of the imported products; (vi) information related to terms of exchange, returns, and refund in a clear and accessible manner; and (vii) any relevant guarantees or warranties.

Duties and liabilities additionally to be complied by ‘IECE’[11]

Every ‘IECE’ has to ensure that that they provide with clarity to users: (i) information relating to return, refund, exchange, warranty, guarantee, delivery, shipment , mode of payment, grievance redressal mechanism; and (ii) price in single figure along with all break ups including delivery charges, postage, handling, etc;

Further, ‘IECE’ is barred from posting reviews of products and misrepresenting the quality of features of goods or services. In fact, they also have to ensure that the characteristic of usage conditions of goods or services are in line with their advertisements. Similarly like ‘MECE’, they cannot refuse to take back goods and give refunds for defective goods.

A unique liability of ‘’IECE’ (though necessary) is that if the ‘IECE’, explicitly or implicitly, vouches for the authenticity of the goods or services sold by it, or guarantees that such goods or services are authentic it is liable to bear liability in any action related to the authenticity of such goods or service.[12]

Contravention of Rules[13]

Non-compliance of these rules by any e-commerce entity will be remedied and punished by the provisions in the CPA. They may be categorised as unfair trade practices and false or misleading advertisement which are dealt with in the Consumer Protection Act, 2019.

Further if the e-commerce entities fail to address the grievances of the consumers, the consumers may file a complaint with the District Commission, State Commission or the National Commission depending on the case.

The CPA proposes the establishment of a Central Consumer Protection Authority through Section 10 of the Act, which would exercise powers including, according to Section 18, the power to investigate into violations of consumer rights or unfair trade practices either suo motu or on complaint or on the direction from the Central Government. If, on the basis of the investigation, it is satisfied that there has been such a violation, the Authority may pass an order to: (i) recall the goods or withdraw the services; (ii) reimburse the purchaser, or (iii) to discontinue the practices which are unfair or prejudicial to consumers’ interest.[14]

Under Section 21 of CPA, with respect to false or misleading advertisement, the Authority may: (i) direct the discontinuation or modification of such advertisement; (ii) impose on manufacturer or endorser a penalty upto Rupees 10 lakh, or upto Rupees 50 lakh for every subsequent contravention; (iii) prohibit such endorser from making any endorsement for upto one year, or upto three years for every subsequent contravention; and (iv) if it finds that any person has published or is party to such publication, it may impose on such person a penalty of upto Rupees 10 lakh.

Conclusion

To sum up, these rules provide for the requirement of making a disclosure with respect to the identity of the manufacturer and the specification of the goods or services sold. The idea is to make consumer aware and put its rights on the highest of pedestal while also ensuring a backdoor for vocal for local. It requires e-commerce entities to take necessary steps to allow for the addressal of consumer grievances as soon as possible. Yet, if a consumer is aggrieved, they may avail the remedies provided by the CPA, which also penalises certain acts of such entities.  The Rules, being an extension of the CPA, are intended to prevent unfair trade practices and ensure the protection of the interests and rights of the consumers in e-commerce. It comes at a time of necessity when most people have resorted to e-commerce entities for most of their needs (especially post lockdown) and provides the consumer with necessary protection against dishonest persons looking to benefit from such platforms. It, therefore, necessitates sellers and e-commerce entities to revisit their relationship by mending their contracts where need be.


[1] Mobile games, upgrades, in-app purchases, premium plans in applications, paid filters etc.

[2] E-commerce has been defined under Section 2 (16), Consumer Protection Act, 2019 to be buying or selling of goods or services including digital products over digital or electronic network;

[3] “e-commerce entity” means 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; [Rule 3 (b)]

[4] “inventory e-commerce entity” means 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; [Rule 3 (f)]

[5] “marketplace e-commerce entity” means an e-commerce entity which provides an information technology platform on a digital or electronic network to facilitate transactions between buyers and sellers; [Rule 3 (g)]

[6] Rule 4

[7]Rule 5

[8] Rule 5 (5)

[9] Rule 6

[10] Exception – Force Majuere, proviso to Rule 6 (3)

[11] Rule 7

[12] Rule 7 (5)

[13] Rule 8

[14] Section 20, Consumer Protection Act, 2019

Contribution from: Ms. Nidhe Sushrutha, M.S. Ramaiah College of Law, Bangalore

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