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E-commerce Rules in India

The establishment of e-commerce industry has been the new world order since years. With the expansion of technology, the e-commerce industry has evolved manifolds, with requirements for stringent controls increasing day by day owing to loopholes giving rise to unfair trade fair practices, data protection issues and consumer redressal.


Recently, the Consumer Protection Act, 2019 came into effect on 20 July, 2020 replacing the almost three decades old previous Act of 1986. The Ministry of Consumer Affairs, Food and Public Distribution also brought e-commerce companies under the structured umbrella of consumer redressal of the Act. This would ensure the strict scrutiny of the consumer redressal watchdog to review the conduct of e-commerce companies.

Section 2(16) of the Consumer Protection Act, 2019 defines e-commerce as:

“(16) “e-commerce” means buying or selling of goods or services including digital products over digital or electronic network[1]

Section 94 of the Act allows the Central Government to regulate the unfair trade practices of these companies in order to protect and secure the rights of the consumers. On a similar note, Section 101 (2) zg provides the Central Government to formulate rules by notification in furthering the objectives of Section 94. The Consumer Protection (E-commerce) Rules, 2020 have been notified and come into force, and the same focuses specifically on the nuances of regulating the activities of these companies. Rule 3(1) b defines economic entity as:

““e-commerce entity” means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce, but does not include a seller offering his goods or services for sale on a marketplace e-commerce entity[2]

The Rules focus on duties, liabilities and grievance redressal involving e-commerce entities.

Duties of e-commerce entity (Under Rule 4) are as under:

  1. The e-commerce company should be a company incorporated under

    • the Companies Act, 1956 (1 of 1956) or

    • the Companies Act, 2013 (18 of 2013) or

    • a foreign company covered under clause (42) of section 2 of the Companies Act, 2013 (18 of 2013) or

    • an office, branch or agency outside India owned or controlled by a person resident in India as provided in sub-clause (iii) of clause (v) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999).


Accordingly, it has become mandatory for an Indian entity to be a company incorporated in India under the old or new Companies Act.

  1. Appointment of nodal officer resident in India to ensure compliance with the provisions of the Act or the rules made thereunder.

  2. It has become mandatory to provide details of

    • legal name of the company,

    • principal geographic addresses of the headquarters and offices,

    • name and details of the website,

    • all contact details like e-mail address, fax, landline, and mobile numbers of customer care, and

    • contact details like e-mail address, fax, landline, and mobile numbers of grievance officer.


The above clearly implies that a grievance officer has to be mandatorily appointed. The primary idea behind the above is that full disclosure should be made to the customer.

  1. Prohibition on engaging in unfair trade practices in any form.

  2. Establishment of proper grievance redressal system along with displaying contact details of the officer appointed for the same on its platform.

  3. Consumer complaints to be acknowledged by the grievance office within 48 hours, and to be redressed within a month from the date of receipt of the complaint.

  4. In case of imported goods, name and details of the importer or the seller shall be mentioned on the platform.

  5. Efforts to become a partner in the convergence process of National Consumer Helpline.

  6. No imposition of cancellation charges if similar charges are not borne by the e-commerce entity.

  7. Consent of the consumer for the purchase of any good or service offered on the platform should be explicit, clear and recorded. The same shall not be recorded through any pre-ticked check boxes.

  8. Payments of accepted refund requests should be carried through methods decided by the Reserve Bank of India or any other competent authority under law.

  9. Manipulation of the prices of goods and services offered on the platform for gaining unreasonable profit and discrimination between consumers of same class or arbitrary classification is not allowed.

  10. No discriminate shall be made between consumers of the same class or make any arbitrary classification of consumers affecting their rights under the Act.

LIABILITIES OF MARKETPLACE E-COMMERCE ENTITIES (Rule 5):

Rule 3(1) g defines marketplace e-commerce entity as “an e-commerce entity which provides an information technology platform on a digital or electronic network to facilitate transactions between buyers and sellers[3]

  • In order to avail exemption under Section 79 of the Information Technology Act, 2002, a marketplace e-commerce entity will have to ensure compliance with sub sections 2 and 3 of the same as well as the provisions of Information Technology (Intermediary Guidelines) Rules, 2011.

Intermediary Liability and Safe Harbour Protection:

In order to ascertain the applicability of this rule, it is pertinent to refer to the definition of “intermediary” under Section 2(w) of the Information Technology Act, 2002 which defines it as,

“any person who on behalf of another person receives, stores or transmits that record or provides any service with respect to that record and includes telecom service providers, network service providers, internet service providers, web-hosting service providers, search engines, online payment sites, online-auction sites, online-market places and cyber cafes[4]

Section 79 of the Act immunises an intermediary from all the laws provided,

  • it has neither taken any part in the commission of an unlawful act, nor

  • it has failed to expeditiously remove or disable the access to one of its computer resources for the commission of an unlawful act.

Section 81 of the Act furthers this immunity (otherwise known as Safe Harbour Protection) containing an overriding provision, whereby it has an overriding effect over other laws except rights enshrined under the Copyright Act, 1957 and Patent Act, 1970. This safeguard is essentially dependent on Section 79 of the Act, Section 81 of the Act and the provisions of Information Technology (Intermediary Guidelines) Rules, 2011.

Though the provisions are clear on this, the applicability of the same has seen its fair share of turbulence. The jurisprudence of the same dates back to Supreme Court’s landmark judgment in Shreya Singhal v. Union of India[5], where the Court observed that

Section 79 is valid subject to Section 79(3)(b) being read down to mean that an intermediary upon receiving actual knowledge from a court order or on being notified by the appropriate government or its agency that unlawful acts relatable to Article 19(2) are going to be committed then fails to expeditiously remove or disable access to such material…. Similarly, the Information Technology “Intermediary Guidelines” Rules, 2011 are valid subject to Rule 3 sub-rule (4) being read down in the same manner as indicated in the judgment”[6].

In My Space Inc. v. Super Cassettes Industries Ltd[7], the Delhi High Court in furtherance of accrual of liability over intermediaries, observed that

“ Under Section 79(3) read with Rule 3(4) of the Rules posit an intermediary on receiving “actual knowledge” or upon obtaining knowledge from the affected person in writing or through email to act within 36 hours of receiving such information disable access to such information. If copyright owners, such as SCIL inform MySpace specifically about infringing works and despite such notice it does not take down the content, then alone is safe harbour denied.

……………Section 81 does not preclude the affirmative defence of safe harbour for an intermediary in case of copyright actions.[8]

The Court also noted that on observing or noticing the commission of any unlawful act, the removal of the same doesn’t require a court order and the same should be carried out without any delay.

In the landmark judgment of Google France SARL, Google Inc. v. Louis Vuitton Malletier SA & Ors[9], the European Court clarified the position of intermediary liability by laying down the following principles:

“a. Exemptions from liability of intermediaries are limited to the technical process of operating and giving access to a communication network. Such an exemption is needed for the purposes of making the transmission more efficient.

  • The activity of the intermediary is merely technical, automatic and passive – meaning thereby that the intermediary does not have any knowledge or control over the information which is transmitted or stored.

  • The intermediary gets the benefit of the exemption for being a “mere conduit” and for “caching”, when it is not involved in the information which is transmitted/translated.

  • If any service provider deliberately collaborates with the recipient of a service, the exemption no longer applies. e. In order for the service provider to continue to enjoy the exemption, upon obtaining knowledge of any illegal activity, the service provider has to remove or disable access to the information.

  • In order to constitute a mere conduit, the service provider should not initiate the transmission, select the receiver of the transmission, or select or modify the information contained in the transmission.

  • The storage of the information has to be automatic, intermediate and transient.

  • The provider should not obtain any data based on the use of the information.

  • For claiming exemption from damages, the service provider should not have any knowledge of the illegal activity, and upon acquiring knowledge, should expeditiously remove or disable the information.

  • Under Article 15 of the Directive 2000/31, the service providers do not have a general obligation to monitor the information which is transmitted or stored, nor a general obligation to seek facts indicating the illegal activity.

  • Member states of the European Union, however, have the freedom as per their own legal systems of requiring a service provider to terminate or prevent an infringement.[10]

With regard to the eligibility of e-commerce platforms to use the immunity, the Delhi High Court in Christian Louboutin SAS v. Nakul Bajaj & Ors,[11] observed:

“So long as they are mere conduits or passive transmitters of the records or of the information, they continue to be intermediaries, but merely calling themselves as intermediaries does not qualify all e-commerce platforms or online market places as one[12].”

“……. When an e-commerce website is involved in or conducts its business in such a manner, which would see the presence of a large number of elements enumerated above, it could be said to cross the line from being an intermediary to an active participant. In such a case, the platform or online marketplace could be liable for infringement in view of its active participation. Needless to add, e-commerce websites and online marketplaces ought to operate with caution if they wish to enjoy the immunity provided to intermediaries. The question, however, would have to be determined after reviewing the practices of various websites under the facts and circumstances of a particular case.[13]

Recently, a Division Bench of the Delhi High Court in Amazon Seller Services Pvt. Ltd. v. Amway India Enterprises Pvt. Ltd. & Ors.[14],laid down the criteria for determination of an “intermediary”.

“In terms of Section 79 of the IT Act, there does not appear to be any distinction between passive and active intermediaries so far as the availability of the safe harbour provisions are concerned. In terms of Section 79, an intermediary shall not be liable for any third-party information, data or communication link made available or posted by it, as long as it complies with Sections 79 (2) or (3) of the IT Act.

The exemption under Section 79 (1) of the IT Act from liability applies when the intermediaries fulfil the criteria laid down in either Section 79 (2) (a) or Section 79 (2) (b), and Section 79 (2) (c) of the IT Act. Where the intermediary merely provides access, it has to comply with Section 79 (2) (a), whereas in instances where it provides services in addition to access, it has to comply with Section 79 (2) (b) of the IT Act.

In Amazon’s case, as indeed in Cloudtail’s and Snapdeal’s, since they provide services in addition to access, they have to show compliance with Section 79 (2) (b) of the IT Act. In other words, they have to show that they (i) do not initiate the transmission (ii) do not select the receiver of the transmission and (iii) do not select or modify the information contained in the transmission.[15]

Lastly, in the recent judgment of Delhi High Court in Google India Pvt. Ltd. v. Vishakha Industries and Anr[16], the applicability of Section 79 of the Act prior to the amendment was clarified. The Court observed that prior to the 2009 amendment; the intermediaries did not enjoy any protection from other acts under the provision since the extended only to the provisions of the Information Technology Act, 2002. Hence, any cause of action arising prior to the amendment would entail liability.

  • Undertaking has to be issued by such entities to ensure descriptions and images of the goods are services are accurate.

  • Following information has to be provided

  • All the information and details about the seller and information provided to it by such seller, including the country of origin[17] of the seller so as to enable the customer to make a decision at the pre-purchase stage.

  • Information regarding refund, return, exchange, warranty, delivery, mode of payment, types and security of available payment methods, fees and charges, grievance redressal process and other similar important information.

  • Ticket number should be assigned to each consumer complaint in order to enable tracking the same.

  • Clear explanation of main parameters for determining the ranking of goods or services on its platform.

  • Inclusion of terms and conditions governing its relationship with the seller and description of any differentiated treatment which it gives or may give to any good, service or seller.

  • Maintenance of record of all sellers of goods and services who have been previously removed or who’s access has been disabled under Copyright Act, 1957,the Trade Marks Act, 1999 or the Information Technology Act, 2000.

LIABILITIES OF INVENTORY E-COMMERCE ENTITIES (RULE 7):

Rule 3 (1) f defines an inventory e-commerce entity as “an e-commerce entity which owns the inventory of goods or services and sells such goods or services directly to the consumers and shall include single brand retailers and multi-channel single brand retailers.[18]

Following information has to be provided:

  • Information regarding refund, return, exchange, warranty, delivery, mode of payment, types and security of available payment methods, fees and charges, grievance redressal process and other similar important information.

  • All contractual information, mandatory notices and information as required by applicable laws.

  • Total single price as well as break up price of any good or service mentioning all charges involved.

  • Ticket number should be assigned to each consumer complaint in order to enable tracking the same.

  • Shouldn’t engage in misrepresentation of the quality of the goods or services or false post reviews about the same by posing as a consumer.

  • Advertisements should be consistent with the actual characteristics, usage and access conditions of the goods or services.

  • No refusal of refund consideration or take back goods or discontinue services purchased, can be undertaken if the same is defective or doesn’t adhere to the description or has been delivered late. Only in cases of late delivery due to force majeure, the rule won’t apply.

  • Appropriate liability in case of authenticity issues shall be borne by such entity provided; it has vouched for the authenticity of the goods or services sold by it.

CONCLUSION

The e-commerce currents of change have necessitated a series of evolving laws. With regulatory bodies tightening the regulatory rope, many e-commerce companies might face the wrath of troubled waters. Even though the jurisprudence of the exemption or exercise of immunity is clear and strengthened, it remains a tricky matter of applicability based on facts and circumstances of each case. Hence, in such uncertain times, it remains to be seen how the application of the new act and the rules will play out for the e-commerce players.

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