Author: Zuba Parvez Bubere, Symbiosis Law School, Pune
E-commerce, an expression, which, until a few years ago seemed to remain an unrecognised notion and was anticipated as a failed concept in the Indian conditions. The grounds for reluctance to participate in the electronic model of commerce could be miscellaneous. Factors namely, the lack of opportunity to physically inspect the product or sharing bank-account details online, have discouraged a good proportion of the masses. Even today, quite many in the country consider the conventional method of shopping a safer alternative to E-commerce. However, with the passage of time, E-commerce has evidenced a rampant unprecedented growth, all over the globe; developing nations posing no exception to the same. India, being a gigantic economy, international manufacturers of brands in all the sectors plan to reach out to the enormous audience and thus, the market is flooded with E-commerce entities and sellers attempting to seebombard their trade in the Indian market. Such enterprises very well recognize the potential to raise heavy profits in a land where the internet has managed to excite even the villages, though citizens remain seldom aware of the ground realities. Besides, due to engrossing life schedules, individuals too prefer and find it convenient to shop essentials and other items at the click of a button, at discounted fares, without the need to visit stores physically.
Bearing this in mind, it was imperative that such a digital platform for the sale and purchase of goods be monitored and regulated by means of government intervention. In the respective context, the Consumer Protection (E-commerce) Rules, 2020 has been brought into action. Nevertheless, it is indispensable to throw some light on The Consumer Protection Act, being the principal Statute for penalizing the violation of the said E-commerce Rules 2020.
Comparative overview of The Consumer Protection Act, 1986 and The Consumer Protection Act, 2019
The Consumer Protection Act, 1986 was formulated for safeguarding the varied interests of consumers; the parent Act in India with the chief objective of focusing on equitability. The former Act of 1986 was repealed and replaced recently by the Consumer Protection Act, 2019. The repealed Act laid the foundation for the establishment of the Central Consumer Protection Authority (CCPA) thereby setting up an advanced grievance redressal machinery in order to promote, protect and enforce the rights of consumers. It proposed a simplified dispute resolution mechanism; in addition to e-filing of complaints as an incentive. It also lays down a more uncompromising and strict approach towards penalizing the manufacturers and sellers guilty of contravening its provisions.
Fierce Competition between E-commerce entities and Individual Enterprises
An extensive research on the subject matter reveals that E-commerce has undoubtedly affected small businesses and individual enterprises. It would be correct to comment that on an average, one in every three persons has once in his/her lifetime purchased something online or offered some service over the internet. This is sufficient enough to warrant the flourishing nature of the E-commerce industry and how far it has come to occupy such a prominent position in the trade environment. Given this scenario, it is immensely significant that the State must ponder over the issue. In a nation with 28% of the population comprising of the middle-class community, out of which, only 3% contributes to the upper-middle-class bunch whereas 14% occupies the lower-middle-class group, conditions need to be regulated periodically. Households holding individual enterprises as also belonging to such an income group, in some way, whether directly or indirectly are strained due to E-commerce.
Small businesses are affected in diverse ways. Such ones lack marketing capacity. Small businesses feel aggravated due to insufficient funds required for marketing and so their businesses are subconsciously painted and considered as less convincing to the prospective customers in contrast with ventures running online. E-commerce entails huge investments contributed by sellers operating through the said plan of actions. Such ones strive to manipulate the minds of the general audience in such a fashion that excites and compels one to finally buy the object/product. It would be prompt and agreeable to pronounce that E-commerce has transformed many into shopaholics due to its persuasive characteristic. In such a framework, winning a customer, for individual enterprises, is a skilful exercise but to transform them into loyal ones and retain is what can be comprehended as worth challenging.
Introduction and Objective of The Consumer Protection (E-commerce) Rules 2020
In order to assist the repealed Act of 2019 and direct special emphasis towards E-commerce transactions, the Ministry of Consumer Affairs, Food and Public Distribution introduced The Consumer Protection (E-commerce) Rules, 2020. As the title suggests, these rules primarily aim at protecting the interests of consumers who engage in digital transactions. It derives its force from the Gazette Notification published by the Department of Consumer Affairs dated 23rd July, 2020. The rules stand in accordance with the Consumer Protection Act, 2019. Any contravention of the said Rules will result in the defaulting manufacturer or seller or enterprise accountable and punishable under The Consumer Protection Act, 2019. It is indeed a wise measure adopted by the State to not only keep a check but also counter unfair trade practices and other malpractices witnessed in online trade. E-commerce players are no longer in a position to clinch a business deal on grounds save absolute merits.
The Consumer Protection (E-commerce) Rules, 2020 apply to:
(a) all goods and services (including digital products) transacted over an electronic/digital network;
(b) all models of E-commerce, including marketplace and inventory models;
(c) all E-commerce retail (including multi-brand and single brand retail trading)
(d) all forms of unfair trade practices across all E-commerce models.
They cover both electronic retailors (e-tailors) registered in India and abroad offering products and services to Indian consumers. In this context, it is mandatory that an E-commerce entity must either be incorporated under the (Indian) Companies Act, 2013 (or its predecessor Companies Act, 1956) or a foreign company or an office, branch or an agency outside India owned or controlled by a person resident in India.
It is worth contemplating that the Consumer Protection (E-commerce) Rules, 2020 defines the term “user”, an expression, which is more comprehensive than the term “consumer” as defined in The Consumer Protection Act, 2019. Reiteration of the above mentioned terms would help one acknowledge the same:
User: “user” means any person who accesses or avails any computer resource of an E-commerce entity.
Consumer:"consumer" means any person who—
(a) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment, when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or
(b) hires or avails of any service for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such service other than the person who hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person, but does not include a person who avails of such service for any commercial purpose.
Explanation.—For the purposes of this clause,— (a) the expression "commercial purpose" does not include use by a person of goods bought and used by him exclusively for the purpose of earning his livelihood, by means of self-employment; (b) the expressions "buys any goods" and "hires or avails any services" includes offline or online transactions through electronic means or by teleshopping or direct selling or multi-level marketing
Thus, one could infer from the above definitions that The Consumer Protection (E-commerce) Rules, 2020 target a wider coverage in comparison to The Consumer Protection Act, 2019.
The Consumer Protection (E-commerce) Rules, 2020 focuses on bringing about a high level of transparency in order to ensure that consumers are not allured in a manner that leads to their detriment. For instance, product-related information such as the return policy, warranty/guarantee, delivery and shipment, grievance redressal, modes of payment etc. are to be displayed clearly and precisely. According to the new rules, the price of the goods and services are to be displayed along with clear specification of the breakup of other charges levied by the E-commerce players. With respect to the cancellation policy, no charges are to be recovered from the consumers post placing of an order unless the seller too agrees to pay similar charges on cancellations from their end. E-commerce entities must also provide a reliable payment service provider in order to ensure the safety of bank-account details of consumers. In case of a refund, there is a provision that it must be processed within a reasonable time, bearing in mind the guidelines laid down by the Reserve Bank of India in this respect. The Rules also provides for the appointment of a nodal person of contact or a senior designated functionary who is resident in India, for ensuring compliance with the Consumer Protection Act, 2019 and the Rules.
The Rules set out in detail the duties and liabilities of marketplace E-commerce entities, sellers in the market place and inventory E-commerce entities, the purpose of which is to ensure greater protection of consumers who shop electronically. Advertisements are one of the most powerful weapons of the E-commerce industry and so provisions also focus on the same by asserting that products must stand in conformity with the displayed standards. Authenticity of products cannot and will not be compromised upon. A careful reading and understanding of the Rules leads to the perception that the provisions aim at compelling both marketplace E-commerce entities, sellers on the market place as also the inventory E-commerce entities to comply with all the duties and liabilities stated therein. Whether it relates to the furnishing of complete details about their identity or trade-policy, the Enactment aims to spot them in a manner which will not lead to an escape on their part from the fulfilment of business responsibilities.
It is pertinent to ponder over the increasing interest of colossal foreign undertakings with huge capital investments that tend to stiffen the existing competition and impact the working of small domestic set-ups and other in-house enterprises. This calls for an even more updated system to ensure fair competition. E-commerce entities are subject to other multitudinous regulations such as (a) The Information Technology Act,2000 which applies to electronic transactions and communications, (b) Legal Metrology (Packaged Commodities) (Amendment) Rules, 2017 which mandates E-commerce entities to display certain information on their websites, (c) Information Technology Guidelines Rules, 2007 (IG Rules) which regulates intermediaries and so on.
With respect to the binding power of the same, it states that E-commerce entities, sellers on the market place and inventory E-commerce entities must adhere to strict compliance with such Rules; the non-compliance of which attracts penal action in the form of heavy fines and/or levying of a sentence of imprisonment under the Consumer Protection Act, 2019.
In light of the pros and cons, it can be commented that two-faced implication could be a better alternative. Today, neither can we completely eradicate the functioning of such a platform nor can we ignore the benefits of its fruits. The underlying rationale behind the sanctioning of the Rules remain to confirm and enhance consumer welfare. Provisions for instance commanding the disclosure of certain information have compelled sellers and E-commerce entities to have a re-look at the contractual agreements drafted between them. The extensive framework indeed focuses on protection and safeguarding of the innocent consumers as against the E-commerce players. Perhaps, one cannot deny the unintended damage and losses suffered by individual enterprises and the consent of the masses in the form of their deviant behaviour. Nonetheless, the State in such a scenario has to play the most important role in bringing about an equilibrium. In case, the need of the hour demands stringent compliances to be imposed on foreign investments in comparison with the domestic players, the State may decisively proceed with the same. There is a constant need on part of the concerned authorities to monitor and regulate E-commerce activities to ensure that the disadvantages do not outweigh the benefits. After all, the effort is attractive, consistency is the key while follow-through is everything!
• Consumer Protection E-Commerce Rules 2020. Department of Consumer Affairs. Government of India-Ministry of Consumer Affairs, Food and Public Distribution.
• Ramanpreet Singh and Rudradakshi Deo. 14th August 2020. Consumer Protection E-Commerce Rules 2020. India Legal.
• Trilegal. 8th September 2020. India: Consumer Protection E-Commerce Rules 2020. Mondaq.
• Government notifies new rules for e-commerce entities: Here’s what’s changed. 24th July 2020.The Economic Times.
• AKS Partners. Consumer Protection E-Commerce Rules 2020: a compliance framework in the digital market. Lexology