The rules seek to regulate any office/branch/agency ‘outside India’ owned or controlled ‘by a person residing in India’
LLPs have not been included as identified corporate structures for ecommerce entities under the rules
The rules set out a level playing field for all ecommerce players and are a significant step towards better digital governance
The Consumer Protection (Ecommerce) Rules 2020 attempts to combine the teeth of the Consumer Protection Act 2019, Indian exchange control laws (IEC Regulations) and the Information Technology Act 2000, to ensure fair play in technology and data-driven ecommerce environment.
The rules regulate every person involved in a transaction of buying and selling goods and services over the digital or electronic networks including marketplace ecommerce entities, inventory-based ecommerce entities and single brand or multi-brand etailers (except individual sellers).
Beyond Territorial Limits
The rules seek to regulate any office/branch/agency ‘outside India’ owned or controlled ‘by a person residing in India’. This means any Indian entity operating an ecommerce platform outside India will also have to comply with these Rules (in addition to the laws of the country from where it operates such eplatform).
Also, the Rules apply to ecommerce entities systematically offering goods and services to consumers in India without having any formal presence in India. This would bring any overseas-based ecommerce entity regularly catering to consumers in India within the purview of these Rules.
Limited Liability Partnerships (LLPs) have not been included as identified corporate structures for ecommerce entities under the rules. As such, this does not clarify the fate of ecommerce entities structured as LLPs.
Until now, only the IEC Regulations had notable conditionalities which were to be complied with by ecommerce entities having foreign direct investments. These conditionalities primarily related to the creation of a level playing field for sellers, limited role of marketplace entities, customer satisfaction and post-sales obligations of sellers. However, with the advent of these Rules, the game plan for all ecommerce entities (and not only those having foreign investments) will have to change. Set out below are the key obligations of marketplace and inventory-based ecommerce entities:
- Customer consent: To explicitly record customer consent through affirmative action.
- No manipulation: To not manipulate the price of the goods or services offered on the platform, to not adopt unfair trade practices and to not discriminate between consumers of the same class.
- Grievance redressal: To appoint an officer (and display their contact details) to acknowledge grievances and promptly dispose of them within the prescribed timelines. Also, to establish a ticketing mechanism for tracking of complaints.
- Displaying important information on the platform: To display: (i) its legal name, headquarters, branch addresses, contact details and website details on the e-platform; (ii) the name and details of the seller including entity status, address and customer care number; and (iii) details relating to return, refund, exchange, warranty and guarantee, delivery and shipment, available payment methods, the security of payment methods, any fees or charges payable by users, the procedure to cancel regular payments, charge-back options, etc. This also includes explaining the parameters which are significant in the ranking of goods or sellers on its platform, and their importance.
- Seller undertakings: To obtain an undertaking affirming the accuracy of descriptions, images and other content of the goods or services on the platform, including that they correspond directly with its appearance, nature, quality and purpose.
- Levy of cancellation charges: To not impose cancellation charges on customers post order, unless the ecommerce entity is willing to bear similar charges for cancellation by them.
- Records: To identify sellers who sell counterfeit goods and who have violated intellectual property laws and information technology regulations and maintain records thereof.
- Disclosure of special treatment: Marketplace e-commerce entities to include in its terms and conditions, the terms generally governing its relationship with sellers on its platform and a description of any differentiated treatment which it gives or might give between goods or services or sellers of the same category.
- No false reviews: Inventory based e-commerce entities to not falsely represent themselves as consumers and post reviews about goods and services or misrepresent the quality or the features of any goods or services.
- Others for Inventory based model: Inventory based ecommerce entities to (i) display the total price along with breakup price of compulsory and voluntary charges; (ii) ensure honest advertisements consistent with actual characteristics, access and usage conditions; and (iii) implement fair conditions for return and refund.
For completeness, set out below are the key corresponding obligations of sellers on a marketplace ecommerce platform:
- Prior written contract: To execute a written contract with the marketplace e-commerce entity before undertaking any sale or offer to sell on the platform.
- Grievance officer: To appoint an officer (and display their contact details) to acknowledge grievances to and promptly dispose of them within the prescribed timelines.
- Furnishing details to marketplace ecommerce entity: To furnish information such as breakup price of the good or service, legally mandated information (including expiry date), information of the product (including the county of origin), details of importer and guarantees relating to the authenticity of imported products (as applicable), information of shipment, guarantee, warranty, exchange, return, refund, etc. to enable the marketplace ecommerce entity to display the same.
Any breach of these Rules attracts penalties under the Consumer Protection Act 2019 which have been enhanced significantly including imprisonment and a monetary penalty of up to fifty lakh rupees.
The rules set out a level playing field for all ecommerce players and are a significant step towards better digital governance. However, its implementation would increase operational expenses for all ecommerce stakeholders including small sellers – the operational detailing would need significant man-hours in addition to costs for platform maintenance and uploading of data on the platform.
[The article is co-authored by Kumar Kartikeya Prakash, Rohan Shrivastava and Akash Srinivasan at Khaitan & Co.]