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E-COMMERCE ENTITIES IN INDIA – APPLICABLE REGULATIONS

The Ministry of Consumer Affairs, Food and Public Distribution through the Department of Consumer Affairs has issued the Consumer Protection (E-Commerce) Rules, 2020 under the Consumer Protection Act, 2019 vide notification bearing number G.S.R. 462(E) on July 23, 2020 (“E-Commerce Rules”) to regulate the operations of e-commerce entities in India in a fair and transparent manner and to protect the rights and interest of consumers. The gazette copy of the E-Commerce Rules can be accessed here [http://egazette.nic.in/WriteReadData/2020/220661.pdf].

The E-Commerce Rules require the e-commerce entities to adhere to the strict guidelines contained therein inter-alia to regulate price manipulation; to ensure compulsory display of details related to country of origin of the product, return, refund, exchange, warranty, delivery and shipment; to ensure quality control to enable the consumers make an informed decision at a pre-purchase stage. The clear intent of the E-Commerce Rules is to protect the rights and interest of the consumers and prevent unfair trade practices, fraudulent transactions, and control sale of counterfeits. Non-compliance with the E-Commerce Rules by any e-commerce entity will be construed as violation of the Consumer Protection Act, 2019 and will attract penal provisions contained therein.

Some of important provisions of the E-Commerce Rules are discussed herein below:

1.         Definition of E-Commerce Entities:

The E-Commerce Rules defines “e-commerce entities” as any person who owns, operates, or manages a digital or electronic facility or platform (i.e., an online interface in the form of any software including a website or mobile applications) for electronic commerce. A seller who offers his goods or services for sale in a marketplace e-commerce entity is however excluded from the above definition. Therefore, only entities operating or managing a digital or electronic platform would be included in the definition of “e-commerce entities” and not the sellers offering their goods and services from a marketplace platform.

E-Commerce entities are classified into two categories (i) “inventory e-commerce entity” which is an e-commerce entity, owning the inventory of goods or services and sells such goods and services directly to the consumers and includes single brand retailers as well as multi-channel single brand retailers; and (ii) “marketplace e-commerce entity” which is an e-commerce entity which provides an information technology platform on a digital or electronic network to facilitate transactions between buyers and sellers such as Amazon, Flipkart, etc. Effectively, the E-Commerce Rules cover both marketplaces working as well as aggregators and inventory-led models where the e-retailer owns the stocks.

2.         Scope and Applicability:

The E-Commerce Rules apply to: (a) all goods and services bought or sold over digital or electronic network including digital products; (b) all models of e-commerce, including marketplace and inventory models of e-commerce; (c) all e-commerce retail, including multi-channel single brand retailers and single brand retailers in single or multiple formats; and (d) all forms of unfair trade practices across all models of e-commerce.

Activities undertaken by a natural person carried out in a personal capacity, not being part of any professional or commercial activity carried on a regular or systematic basis, will however not be covered by these Rules.

3.         Duties of E-Commerce Entities:

 The E-Commerce Rules require the e-commerce entity to either be a company incorporated under the Companies Act, 1956 or the Companies Act, 2013, or a foreign company as per the provisions of Companies Act, 2013, or an office, branch or agency outside India owned or controlled by a person resident in India as per the provisions of the Foreign Exchange Management Act, 1999.

Some of the obligations that an e-commerce entity would need to comply include:

(i)            displaying prominently to its users, its (a) legal name, (ii) principal geographic address of its headquarter and all branches, (c) name and details of website, and (d) contact details like e-mail address, fax, landline and mobile numbers of customer care as well as grievance officer.

(ii)           establishing an adequate grievance redressal mechanism having regard to the number of grievances ordinarily received by it from India and appointing a grievance officer for consumer grievance redressal, and displaying the name, contact details and designation of such grievance officer on its platform. Such grievance officer is required to acknowledge the receipt of any consumer complaint within 48 (forty-eight) hours and redress the said complaint within 1 (one) month from the date of receipt of the complaint.

(iii)          mentioning the name and details of the importer in case of imported goods or services.

(iv)          not imposing any cancellation charges on any consumer unless similar charges are also borne by such entity, if they cancel the purchase order unilaterally for any reason.

(v)           effecting all payments towards accepted refund requests of the consumers as per the guidelines prescribed by Reserve Bank of India.

(vi)          not manipulating the price of the goods or services offered on its platform to gain unreasonable profit or discriminating between consumers of the same class or making any arbitrary classification of consumers affecting their rights.

4.         Liabilities of Marketplace E-Commerce Entities:

A marketplace e-commerce entity is required to ensure that the sellers on its platform through an undertaking confirm that the descriptions, images and other content pertaining to goods or services sold by them on the platform are accurate and corresponds directly with the appearance, nature, quality, purpose and other general features of such good or service.

A marketplace e-commerce entity will need  to provide certain information to its users on its platform including the (a) details about the sellers offering goods and services, (b) information relating to return, refund, exchange, warranty and guarantee, delivery and shipment, modes of payment, and grievance redressal mechanism, etc. (d) information on available payment methods, the security of those payment methods, etc.

Considering that the goods and services belong to the sellers, a marketplace e-commerce entity is obligated to ensure that the sellers on its platform comply with their duties provisioned under the E-Commerce Rules. A marketplace e-commerce entity will however not be liable for any information, data or communication link made available on its platform by a seller provided it complies with the provisions of sub-section 2 and 3 of Section 79 of the Information Technology Act, 2000 including the Information Technology (Intermediary Guidelines) Rules, 2011.

5.         Duties and liabilities of Inventory E-Commerce Entities:

Under an inventory e-commerce platform, the inventory of goods or services are owned by the entity operating the platform and it is liable for the goods or services available therein. Therefore, every inventory e-commerce entity, is required to provide information on its platform relating to return policy, delivery and shipment, payment methods, mandatory notices under applicable laws, total price of the goods or services offered along with their break-up, consumer grievance redressal mechanism, etc. to enable the consumer to make an informed decision before purchasing the goods or services.

An inventory e-commerce entity is also required (i) not to falsely represent as a consumer and post reviews about goods and services or misrepresent quality, (ii) ensure that the advertisements for marketing of goods or services are consistent with the actual characteristics, access and usage, (iii) not 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, etc.

6.         Duties of Sellers on Marketplace:

Some of the important duties of the sellers offering their goods or services on the platforms of the marketplace e-commerce entities include:

(i)            not to adopt unfair trade practices whether during the offer on the e-commerce entity’s platform or otherwise.

(ii)           not to 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 such goods or services are delivered late from the stated delivery schedule, other than late delivery due to force majeure event.

(iii)          to have a written contract with the respective marketplace e-commerce entity on whose platform they propose to undertake or solicit sale or offer their goods or services.

(iv)          to ensure that the advertisements for marketing of their goods or services are consistent with the actual characteristics, access and usage conditions of such goods or services.

(v)           to provide e-commerce entity with their legal name, geographic address of its headquarter and branches, the name and details of its website, e-mail address, customer care contact details, its GSTIN and PAN details.

(vi)          to provide all relevant details with respect to the goods or services offered by them such as total price of such goods or services along with its break-up, mandatory notices and information required under applicable laws, details of grievance officer, details with respect to country of origin, details of importer, accurate information related to terms of exchange, returns and refund, etc.

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