The Consumer Protection Act:
This act came to effect on August 9, 2019. However, the act only came into force on July 20, 2020. This act protects consumers, from unfair trade practices in eCommerce and to facilitate consumer welfare.
The rules impact:
(a) all goods and services available on either digital or electronic networks, it also includes digital products
(b) all models of eCommerce, such as marketplace eCommerce and inventory eCommerce entity
(c) all eCommerce multi-channels including single-brand retailers and single-brand retailers in single or multiple forms
(d) all forms of unfair trade practices across all models of eCommerce.
(e) all eCommerce entities that are not in India but systematically offer goods and services to consumers in India
- Corporate Entity: The rules set out that an eCommerce entity shall be a corporate entity under the Companies Act 2013 (regardless of the origin) or an office, branch or agency outside India owned or controlled by a person resident in India.
- Nodal Officer: This requires an eCommerce entity to appoint a nodal person or an alternate senior is a resident in India, to ensure compliance with the Act or the Rules.
- Disclosure of Information: An eCommerce entity requires one to provide the following information on its platform:
(i) its legal name
(ii) the principal address of its headquarters and all branches
(iii) name and details of its website
(iv) contact details of customer care as well as of grievance officer
(v) details of the importer or seller of imported goods and services.
This will hence ensure that the customer has all the information required for the eCommerce entity which will reduce the cases of fraud.
- Grievance Redressal: An eCommerce entity required to establish a grievance redressal mechanism and appoint a grievance officer for consumer grievance redressal.
- Unfair Trade Practice: An eCommerce company should not adopt any unfair trade practice. Manipulation of the prices of the goods or services on its platform such that it can gain an unreasonable profit, should additionally not be done.
- Cancellation Charges and Consent: eCommerce entities must not impose cancellation charges on consumers. Additionally, the rules also bar eCommerce entities from automatically recording consent of a consumer for purchase including in the form of pre-ticked checkboxes.
Marketplace eCommerce Entities
The rules suggest that the marketplace eCommerce entities need to ensure that sellers on their platform provide the description pertaining to the goods or services on their platform is accurate and corresponds directly with the actual features of the goods or services. They additionally need to disclose and display information about the sellers offering goods and services on its platform including information about the return, refund, exchange, warranty and guarantee, delivery and shipment, modes of payment, and grievance redressal mechanism, etc. Furthermore, inter alia, terms and condition need to be displayed too.
Sellers on Marketplace eCommerce Entities
The rules also prohibit sellers from adopting any unfair trade practice, including posing as consumers to post product reviews, misrepresenting the quality or features of any goods or services. The sellers additionally, cannot refuse to take back goods or discontinue the services. The rules also impose that the sellers need to appoint a grievance officer for consumer grievance redressal, the advertisements for the goods and services they offer need to be accurate and disclose information the necessary information, the country of origin needs to on the pack, additionally, guarantees of authenticity or genuineness of imported goods, and other guarantees or warranties need to be applicable and valid
Inventory eCommerce Entities
The duties and obligations of the inventory eCommerce entities are similar to that of the sellers. They too need to disclose information, like the country of origin of the goods and services, etc. They further need to deliver the goods on time and have to guarantee the authenticity of the goods.
The grey area of the Act:
Furthermore, eCommerce as said earlier cannot manipulate the price of the goods or services offered on its platform. However, there is no guidance on what is considered as ‘unreasonable profit’. For example, a luxury designer could sell a serum 3 times the price of a regular face mask, but would this be considered as an unreasonable profit?
Any seller in the eCommerce marketplace must disclose all contractual information which must then be displayed on its platform. Similarly, every inventory eCommerce entity is also required to display contractual information required to be disclosed by law. However, it again becomes unclear about which contract information needs to be displayed? Is it the information between the seller and the marketplace eCommerce entity?
Timeline for compliance:
The eCommerce Rules have come to effect from July 23, 2020, and no grace period had been given for compliance especially to the offshore eCommerce companies that systematically offer goods or services to consumers in India. Generally, a grace period for compliance allowed in order for businesses to manage their affairs to become compliant. However, this is not the case under the eCommerce Rules. This thus can affect the functionality of the said entities
These rules aim to bring transparency and accountability in the provision of information disclosed to the consumers. It also reduces the possibilities of unfair trade practices by large sellers. With the increase in eCommerce activity especially in present times, these rules will address consumer grievances and prescribe practices that benefit consumers. Hence, for entities to comply with the rules, they will have to fundamentally overhaul their websites and will have to invest significantly in legal compliance.