Recently on June 21, 2021, the Government has proposed amendments to the Consumer Protection (E-Commerce) Rules, 2020 (“E-Commerce Rules, 2020”). Notification states that since July, 2020,[1] the Government has received several representations from aggrieved consumers, traders and associations complaining against widespread cheating and unfair trade practices being observed in e-commerce ecosystem. Hence, certain amendments have been proposed to bring transparency in the e-commerce platforms and further strengthen the regulatory regime to curb the prevalent unfair trade practices.
E-Commerce Rules, 2020 regulate all goods and services bought and/or sold over a digital / electronic network, and applies to all models of e-commerce, including marketplace and inventory models of e-commerce, retail e-commerce. Non-compliance with the E-Commerce Rules, 2020 is construed as violation of the Consumer Protection Act, 2019 and attracts penal provisions contained therein. It contains strict guidelines inter alia to regulate price manipulation, ensure compulsory display of details related to country of origin of the product, return, refund, exchange, warranty, delivery and shipment, quality control to enable the consumers make an informed decision at a pre-purchase stage.
In the above background, I have discussed the proposed amendments under the following heads.
Widening the definition of ‘e-commerce entity’
Proposed amendment includes entities via which the platforms undertake the last mile delivery of goods and services to their customers. This may warrant e-commerce companies to ensure that the vendors undertaking last mile delivery of goods and services are compliant with the E-Commerce Rules, 2020 as well. Also, requirement of appointment of nodal officers have been extended to e-commerce entities which are limited liability partnerships and partnership firms.
Concept of ‘cross selling’ introduced
‘Cross selling’ implies sale of goods or services which are related / complimentary to a purchase made by a consumer from an e- commerce entity, and the same is indicated or advertised therein with an intent to maximise the revenue of such e-commerce entity. Proposed amendment intends to prevent dissemination of manipulative advertisement / information by such entities, and aims to promote domestic goods.
Ban on ‘Flash Sales’
‘Flash sale’ has been defined to mean a sale at significantly reduced prices, high discounts or any other such promotions or attractive offers for a predetermined time on selective goods and services or otherwise with an intent to attract large number of consumers. Proposed amendment intends to prevent instant / unannounced sales that maybe manipulated to give advantage or preferential treatment to a particular seller or a group of sellers. Initially, the proposal indicated a blanket ban on all flash sales but a clarification was issued subsequently to exempt ‘conventional’ flash sales. However, what constitutes ‘conventional flash sales’ have not been specified.
Ban on misleading advertisements
Proposal provides that no e-commerce entity shall allow any display or promotion of misleading advertisement whether in the course of business on its platform or otherwise. This may include any advertisements on price, quality and guarantee of goods and services, and potentially impact the online advertising by such entities.
Requirement of country of origin
Proposal to mandate the e-commerce entities to display the country of origin in respect of goods being imported into India. This requirement is in line with the declarations mandated for imported products under the Packaged Commodity Rules, 2011[2]. However, this may be challenging for entities given that products displayed on the e-commerce / website are manufactured at multiple locations across the globe. Hence, it may not be possible to pre-empt the ‘country of origin’ for such products while displaying such products on the e-commerce platform / website.
Fall-back liability introduced
A marketplace e-commerce entity shall be subject to a fall-back liability where a seller registered on its platform fails to deliver the goods or services due to their negligent conduct, omission or commission of any act by such seller.
Ban on sale by related entities
Related entities of marketplace e-commerce entities have been proposed to be banned from selling on such platform. This may impact the business model of various such entities having stake in sellers registered on their platforms.
Strict compliance timeline
Proposed amendment requires every e-commerce entity to provide information under its control or possession, or assistance to the government agency for investigative or protective or cyber security purposes within seventy-two hours of the receipt of an order. This may increase the cost towards meeting this compliance of maintaining and sharing requisite data with govt. agencies.
Department of Consumer Affairs has invited views and comments on the aforesaid amendments proposed to E-Commerce Rules, 2020 by July 21, 2021.
Contributed by Manish Parmar. Manish can be reached at manish.parmar@aureuslaw.com.
Views are personal.
[1] E-Commerce Rules, 2020 were introduced with effect from July 23, 2020
[2] This requirement was introduced in 2018