A new draft of the e-commerce rules was published in June 2021 and feedback is invited. The rules apply to all goods and services purchased or sold over electronic networks, including non-tangible products and services. They govern all e-commerce entities and retailers and affect unfair trade practices found in all models of e-commerce. E-commerce entities that are outside India but provide goods and services to domestic consumers will fall within the ambit of the rules. Companies and commercial interests have paid insufficient regard to how consumers have been exploited in the modern e-world. They may now be paying the price for their indifference.
Founder and managing partner
Hammurabi & Solomon
The draft deals with issues of data protection and the exploitation of user behaviour data and patterns for targeted advertising and product placement. It also addresses the abuse of dominant positions to edge out competition, the speed at which grievances are handled, and the lack of accurate information about products and services on e-commerce platforms. Under the rules, an e-commerce entity includes any person owning or managing digital or electronic platforms for e-commerce. The definition of these entities has been widened to cover service providers such as cab-hailing services, food delivery services and others involved in the fulfilment of transactions initiated by the consumer.
E-commerce entities fall into two categories.
Marketplace e-commerce entities such as Myntra and Amazon provide sellers with information technology platforms to interact with, and sell directly to, consumers. These entities simply facilitate B2C transactions and act as intermediaries. The platforms generally have agreements with multiple sellers to facilitate the sale of their products and services.
Inventory e-commerce entities own the goods made available for sale to the consumers on their platforms and sell the products directly to consumers without any intermediaries. These entities include single-brand retailers and multi-channel single-brand retailers.
The rules impose more stringent duties and compliance on all entities and sellers to protect the consumers’ interests. However, some are specific to particular entities. The rules set out an expansive list of these duties and liabilities, the key aspects of which are that all e-commerce entities are required to appoint a nodal officer, resident in India, to ensure compliance with the rules. Entities and sellers are required to set up robust grievance redress mechanisms and to identify officers who deal with consumers’ issues. Entities and sellers are required to provide reference numbers in order that consumers may track the status of their issues, acknowledge complaints within 48 hours and resolve those grievances within a month.
Sellers and entities are required to tackle the spread of misinformation and provide all relevant information about a product, so as to allow the consumer to make an informed choice. Such information includes the manufacture and best before dates, places of manufacture and cost. The price of goods must be listed clearly and fully itemised. Where the product has been imported, the place of origin and the importer’s details have to be given. The details of any available Indian alternative product must also be provided.
Entities and sellers will be prohibited from engaging in unfair trade practices such as back-to-back flash sales and predatory pricing. Entities are also prohibited from making arbitrary and discriminatory classifications of consumers. No seller or platform may refuse the return of items if they are damaged, delayed or not of the specifications as detailed. Consumers cannot be charged for cancellation. Entities are required to abide by Reserve Bank of India refund regulations. Entities are required to keep a record of listed products that have been flagged as infringing the Copyright Act, Trademark Act or IT Act. The entity at its discretion may delist the sellers of such products. Violations of the rules will be penalised under the Consumer Protection Act, 2019.
The rules exhaustively define e-commerce entities, sellers, e-commerce inventories and marketplace e-commerce entities. However, the lack of clarity in essential terms such as unfair trade practices, on e-commerce platforms and drip pricing, together with the absence of effective remedies against the manipulation of algorithms, and fake product reviews and ratings, harm consumer interests. These deficiencies should be addressed as a matter of urgency.
Manoj Kumar is the founder and managing partner at Hammurabi & Solomon Partners
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