India: E-Commerce Rules, 2020

Introduction

The Consumer Protection (E-Commerce) Rules, 2020 ("Rules") were notified in accordance with the Consumer Protection Act, 2019 ("COPRA") on July 23, 2020.

Certain provisions of the Rules such as the disclosure requirement in relation to the "country of origin" of the product or service offered by any e-commerce entity appear to be a reaction to the recent Indo-China conflicts and are similar to certain other measures adopted by the Central Government to control, curb and regulate Chinese investment and products into India. Such measures include (i) government route approval requirement for investments in India from a country sharing land border with India or where the beneficial owner of an investment into India is situated in or a citizen of such country^1]; (ii) mandatory 'made in India' filter on Government e-Marketplace; (iii) banning of certain mobile applications by the Ministry of Information Technology under Section 69A of the Information Technology Act, 2000; and (iv) introduction of restrictions by the Ministry of Finance on the procurement policy from countries on grounds of defence of India, under General Financial Rules, 2017².

Key Highlights

The Rules apply to, inter alia, all goods and services sold over digital or electronic network; all models of e-commerce; and all forms of e-commerce retail. The Rules have created a distinction between the obligations of e-commerce entities and sellers selling products or services through platforms of such e-commerce entities.³ The Rules have also identified and categorized e-commerce entities into two types - marketplace e-commerce entities and inventory e-commerce entities. A marketplace e-commerce entity provides information technology platform on a digital and electronic network to facilitate transactions between buyers and sellers whereas an inventory based e-commerce entity owns the inventory of goods and services and sells directly to the consumers. Further, the violation of the Rules will attract penal action under the COPRA.

Duties of E-Commerce Entities:

Pursuant to the Rules, e-commerce entities are, inter alia,:

(i) required to provide in a clear and accessible manner on its platform details of the grievance officer, details of the importer or seller of imported goods and services, principal geographic address of its headquarters and all branches;

(ii) prohibited from adopting any unfair trade practice including, manipulation of price of goods or services or discriminate between consumers of the same class;

(iii) required to establish a fastback grievance redressal mechanism and appoint a grievance officer; and

(iv) required to appoint a nodal person of contact or an alternate senior designated functionary resident in India;

(v) prohibited from imposing cancellation charges on consumers unless such charges are also borne by the e-commerce entities upon unilateral cancellations; and

(vi) prohibited from automatically recording consent for purchase in ways such as pre-ticked checkboxes instead of recording explicit consent for each purchase.

Duties and Obligations of Marketplace E-Commerce Entities:

In addition to the duties relating to e-commerce entities, the Rules prescribe the marketplace e-ecommerce entities to ensure that sellers on their platform undertake that the information pertaining to the goods and services corresponds directly with the general features of such goods or service. Marketplace e-commerce entities are also required to display, inter alia, terms and conditions generally governing its relationship with sellers on its platform including description of any differentiated treatment; modes of payment methods, and details (including address and contact information) of the sellers.

Marketplace e-commerce entities cannot claim immunity under the safe harbor provision of Section 79(1) of the Information Technology Act, 2000 ("IT Act") in relation to any liability for any third party information, made available on its platform unless they observe due diligence while providing such information to the consumers on their platforms in accordance with Section 79(2) and (3) of the IT Act.

Duties and Obligations of Sellers on Marketplace E-Commerce Entities and Inventory E-Commerce Entities:

The Rules restrict the sellers on marketplace e-commerce entities and the inventory e-commerce entities from adopting any unfair trade practice, posting reviews by falsely representing itself as a consumer, advertisement of the goods or services that represent an inaccurate picture. Further, such entities can not refuse to take back goods or discontinue the services purchased or agreed to be purchased, if such goods or services were defective or delivered late. We note that as the "inventory e-commerce entities" are direct sellers their compliance requirements are on similar lines to those applicable to the sellers on "marketplace e-commerce entities".

Conclusion

The Rules provide stringent disclosure and compliance requirements and strict penalties for non-compliance. Given that the Rules are in force from the date of its notification and do not contemplate a window for compliance, it will be interesting to assess the manner in which e-commerce entities comply with, and the Government enforces, the Rules. This is particularly relevant in view of the scrutiny the Rules have attracted on account of the ongoing geopolitical conflict between India and China.

Footnotes