E-Commerce – What to Know about Consumer Protection Rules 2020

Ecommerce are commercial transactions conducted electronically on the internet. In other words, it is the activity of electronically buying or selling of products or online services over the Internet.

The Central Government had notified the Consumer Protection (E-Commerce) Rules, 2020 for the purposes of preventing unfair trade practices in e-commerce; and companies that violate these rules shall face action under the Consumer Protection Act, 2019.
E-Commerce - What to Know about Consumer Protection Rules 2020

With all the new changes being proposed, it is very important for an entrepreneur to understand and know the key aspects of the law before starting an E-Commerce venture. 


E-Commerce – What to Know about Consumer Protection Rules 2020

The Consumer Protection (E-Commerce) Rules, 2020 shall 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:

Provided that these rules shall not apply to any activity of a natural person carried out in a personal capacity not being part of any professional or commercial activity undertaken on a regular or systematic basis.

As per the new rule introduced (yet to be published in the Official Gazette of India): 

  • The definition of ‘e-commerce entity’ has been broadened which says  “E-commerce entity” means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce, including any entity engaged by such person for the purpose of fulfilment of orders placed by a user on its platform and any ‘related party’ as defined under Section 2(76) of the Companies Act, 2013, but does not include a seller offering his goods or services for sale on a marketplace e-commerce entity. Also, now any entity having 10 per cent or more common ultimate beneficial ownership will be considered an “associated enterprise” of an e-commerce platform.

  • To create a database of genuine e-commerce entities and ensure that the consumers are able to verify the genuineness of an e-commerce entity, every e-commerce entity which intends to operate in India shall register itself with the Department for Promotion of Industry and Internal Trade (DPIIT) within such period as prescribed by DPIIT for allotment of a registration number and such registration number shall be displayed prominently on website as well as invoice of every order placed by the users of that e-commerce entity.

  • Earlier the Consumer Protection (E-Commerce) Rules 2020 state that for adequate grievance redressal every e-commerce entity had to appoint grievance officer for consumer grievance redressal, and had to display the name, contact details, and designation of such officer on its platform but now under the Consumer Protection (E-Commerce) Rules, 2020, states that to strengthen the grievance redressal mechanism on e-commerce entities and also to ensure effective compliance with the provisions of the Act and Rules, every ecommerce entities shall have to appoint Chief Compliance Officer who shall be liable in any proceedings relating to any relevant third-party information, data or communication, it shall also appoint a nodal contact person for 24×7 coordination with law enforcement agencies, officers to ensure compliance to their orders and Resident Grievance Officer for redressing of the grievances of the consumers on the e-commerce platform.

  • The provisions states e-commerce companies shall have to share information as soon as possible, but not later than seventy two hours of the receipt of an order, with a government agency which is lawfully authorized for investigative or protective or cyber security activities, for the purposes of verification of identity, or for the prevention, detection, investigation, or prosecution, of offences under any law for the time being in force, or for cyber security incidents.

  • Now if an e-commerce entity offers imported goods or services, then it shall incorporate a filter mechanism to identify goods based on country of origin at the time of goods being viewed for purchase and to suggest alternatives to ensure fair opportunity to domestic goods. Also, to ensure that the domestic manufacturers and suppliers get a fair and equal treatment on the e-commerce platform it shall now provide ranking for goods and ensure that the ranking parameters do not discriminate against domestic goods and sellers.

  • Every e-commerce entity shall now ensure that sponsored listing of products and services are distinctly identified with clear and prominent disclosures.

  • As per the rule no e-commerce entity shall organize a flash sale of goods or services offered on its platform which in other word means specific flash sales or back-to-back sales which limit customer choice, increase prices and prevents a level playing field.

  • The rule has introduced the concept of “fall-back liability”, which says that e-commerce firms will be held liable in case a seller on their platform fails to deliver goods or services due to negligent conduct, which causes loss to the customer. In several cases, when problems arise with goods purchased from their marketplaces, e-commerce platforms direct the consumers to the respective sellers to solve any grievance. With ‘fall-back liability’, consumers will be able to reach out to the platform itself.

  • E-commerce companies will be restricted from making available to any person information pertaining to the consumer without express and affirmative consent. No entity shall record consent automatically, including in the form of pre-ticked checkboxes.

  • To protect the interests of consumers, ‘mis-selling’ has been prohibited i.e. e-commerce entities selling goods or services by deliberate misrepresentation of information about such goods or services. Also, to ensure that consumers are aware about the expiry date of the products they are buying on the e-commerce platform, the rule has introduced that all sellers on marketplace e-commerce entities and all inventory e-commerce entities to provide “best before or use before date” to enable consumers to make an informed purchase decision.

 


This article has been co-authored by Tripti Kayal, Consultant at Taxmantra Global. 

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