Stricter Rules for E-Commerce – The Consumer Protection (E-Commerce) Rules, 2020 – Dodd-Frank, Consumer Protection Act

background

The Department of Consumer Affairs, Grocery and Public Distribution of the Government of India has notified the provisions of the Consumer Protection (E-Commerce) Rules 2020 (E-Commerce Rules) under the Consumer Protection Act 2019 (Act) and came into effect on 24 July 2020.

The e-commerce rules have been discussed for some time. In August 2019, the government had published the draft Consumer Protection (E-Commerce) Directives 2018 under the former Consumer Protection Act 1986. Later, in November 2019, the government published the same guidelines as the Consumer Protection (e-Commerce) draft. Rules, 2019, inviting public comments. While the E-Commerce Rules are similar in structure to their predecessors, some obligations differ; For example, e-commerce companies are no longer required to submit a self-declaration to a government agency confirming compliance.

applicability

The general subject matter of the E-Commerce Rules is an “e-commerce entity”, which is broadly defined as any person who owns, operates or manages digital or electronic facilities or platforms for e-commerce. Other important definitions in the e-commerce rules include “inventory e-commerce business,” which is an e-commerce business that owns inventory of goods or services and sells those goods or services directly to consumers; and “marketplace e-commerce entity,” which is defined as an e-commerce entity that provides an information technology platform on a digital or electronic network to facilitate transactions between buyers and sellers.

The E-Commerce Rules apply to all e-commerce transactions involving goods or services, including e-commerce entities that are not based in India but systematically offer goods or services to consumers in India, with the sole exception that individuals in certain limited circumstances.

The e-commerce rules generally prescribe the duties of e-commerce companies, which apply to all e-commerce companies, regardless of the type of business they do.

In addition, the E-Commerce Rules also prescribe the following: (a) Liabilities of Marketplace E-Commerce Businesses; (b) Obligations of Sellers in the Marketplace; and (c) duties and liabilities of inventory e-commerce entities (which also include single-brand and multi-channel single-brand retailers) that are specific and apply only to certain individuals, depending on the manner in which they conduct their business.

Main tasks of e-commerce companies

• Use in India. Pursuant to Rule 4(1)(a) of the E-Commerce Rules, E-Commerce Entities should: (a) be registered as a company in India; or (b) incorporated as an office, branch or agency outside India owned or controlled by Indian residents. For this purpose Rule 4(1)(a) refers to a provision of the Indian Exchange Control Regulations which is worded differently than Rule 4(1)(a) and this different wording may give rise to conflicting interpretations.




• Compliance Officer. E-commerce entities must appoint a node person or senior designated officer to ensure compliance with the law and e-commerce rules.




• disclosure. E-commerce businesses are required to disclose the following information: (a) themselves, including their legal name, location of offices, website details and contact details for customer care and a complaints officer; and (b) place from which goods are imported, the details of the importer or seller.




• Complaint Resolution. E-commerce businesses must set up a proper grievance mechanism. A period of 48 hours for information and one month for remedy is provided for consumer complaints.




• Other Obligations. E-commerce businesses are prohibited from engaging in unfair trading practices. Specifically, the E-Commerce Rules state that e-commerce businesses cannot: (a) levy cancellation fees on consumers, unless similar fees are also charged by the e-commerce businesses for unilaterally canceling orders without reason carried; (b) automatically record consent to purchase (e.g., pre-checked checkboxes) and record explicit consent for each purchase; (c) manipulate the price of the goods or services offered on their platforms in order to make an improper profit by imposing an unfair price on consumers; and (d) discriminate between consumers of the same class or make an arbitrary classification of consumers that affects their rights under the law.

Main liabilities of marketplace ecommerce companies

• mediator. The E-Commerce Rules recognize that marketplace e-commerce businesses can take advantage of being considered intermediaries by complying with the Information Technology (Intermediary Guidelines) Rules, 2011. However, the law imposes other obligations on electronic service providers, including marketplace e-commerce entities.




• disclosure. Marketplace e-commerce businesses are required to disclose on their platforms: (a) information about sellers; (b) information on returns, refunds, exchanges, warranties and guarantees, delivery and shipping, payment methods and complaints procedures; (c) explanation of the ranking algorithm that determines the ranking of Goods or Sellers on the Platform; (d) general terms and conditions governing their relationship with sellers; and (e) information provided to them by Sellers, including mandatory notices and information required to be provided by Sellers under applicable law, details of goods and services offered for sale (including country of origin, complaints officer details and warranty). related to the authenticity of products). Marketplace e-commerce businesses are required to obtain a commitment from each seller to certify that the information provided by that seller is accurate.




• Complaint Resolution. Marketplace eCommerce businesses must provide a dispute resolution mechanism on their platforms for consumers to contact the sellers.




• Records. Marketplace e-commerce businesses are also required to record seller details if they repeatedly offer goods or services that have previously been removed under the Copyright Act 1957, the Trade Marks Act 1999, or the Information Technology Act 2000.

Main obligations of sellers in the marketplace

Sellers offering goods and services through a marketplace e-commerce business must, among other things, (a) ensure that the advertisements are consistent with the goods or services, (b) do not misrepresent facts, and (c) do so Refuse to accept returns where such goods or services are defective, defective or delivered late (except as a result of
Force majeure), (d) enter into a written contract with the Marketplace E-Commerce Entity; and (e) appoint a complaints officer.

Main Duties and Liabilities of Inventory Ecommerce Businesses

Inventory ecommerce businesses have similar duties and liabilities as sellers and marketplace ecommerce businesses. They must, among other things: (a) make the necessary disclosures about their policies (including returns, refunds, exchanges, warranties and guarantees, delivery, payments, and complaint resolution); (b) providing mandatory notices and information in accordance with applicable law; (c) display the total price of the product; (d) ensure that the advertisement is consistent with the goods or services, (e) there is no misrepresentation of fact, and (f) they will not refuse to accept returns where, among other things, such goods or services are defective, defective or delivered late (except because Force majeure).

Conclusion

The recognition of marketplace e-commerce companies as intermediaries and the obligation for sellers to provide the marketplace with proper information, which must then be disclosed on the platform, strikes a delicate balance between the obligations of marketplace e-commerce companies and the Seller here on the platform.

However, e-commerce rules occasionally appear to address consumer issues based on precedent, rather than providing a broader guideline that can be adopted for changes in market practice and technology.

The difference between the wording of Rule 4(1)(a) and the relevant provision of Indian Exchange Control Regulations cited therein requires further clarification. The lack of such clarification can have a significant adverse impact on foreign e-commerce platforms accessible to Indian consumers.

The omission of limited liability partnerships from the definition of “e-commerce entities” is also striking, and leaves open the question of whether e-commerce operations can be conducted by a limited liability partnership that is wholly owned by Indian and is controlled by Indian residents. This omission appears to be due to the alignment of the definition of ‘e-commerce entities’ with that of India’s exchange control regulations. Given that the rationale for the definition under the Indian Exchange Control Regulations is fundamentally different from that under the E-Commerce Rules, the inclusion of limited liability partnerships wholly owned and controlled by Indian residents , deserve a reconsideration.

Finally, the e-commerce rules came into effect on July 23, 2020 and there are several penalties for non-compliance. Given the number of changes existing players may need to make to their operations, a compliance window would have been fair and appropriate.

Originally published July 27, 2020.

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