INDIA INTRODUCES NEW CONSUMER PROTECTION LEGISLATION AND E-COMMERCE RULES
The e-commerce industry is one that is growing by leaps and bounds globally. The Indian e-commerce market showed a 17% growth rate[i] in the financial year of 2018-19 which was among the highest numbers in the world. However, the problems faced by online customers could not be resolved on all fronts as per the Consumer Protection Act, 1986[ii] in India. Therefore, the Consumer Protection Act, 2019[iii] which came into force on 20th July 2020 was formulated with the objective of preventing unfair trade practices in e-commerce and for protecting consumer interests. Furthermore, on 24th July 2020, the Central Government notified the Consumer Protection (E-Commerce) Rules, 2020[iv] which have been framed under the broader framework of the Consumer Protection Act 2019. These Rules also come in the backdrop of India’s ambitious National e-Commerce Policy, which would make India one of the few countries in the world, others being countries like USA and China, to have advanced policies and legislations concerning e-commerce.
THE CONSUMER PROTECTION ACT, 2019
The Consumer Protection Bill, 2019 was passed by the Indian Parliament on 6th August 2019 and was published in the official gazette on 9th August 2019 after receiving the President’s assent. The Consumer Protection Act, 2019 has brought forth many changes to deal with the ambiguities posed by the Consumer Protection Act, 1986. The definition of the term consumer under Section 2(7) has been expanded to include individuals transacting on e-commerce platforms. Under Section 2(16) and 2(17), the meaning of the terms e-commerce and electronic services providers have also been clearly laid down. There are other terms like an advertisement, endorsement, product manufacturers, product sellers to name a few which have also been defined under Section 2. A product liability claim was earlier lodged under the purview of various legislations such as the Sale of Goods Act, 1930[v], the Consumer Protection Act, 1986[vi], the Indian Contract Act, 1872[vii], Drugs and Cosmetics Act, 1940[viii] and the Food Safety and Standards Act, 2006[ix]. The legislation did not specifically deal with the issue of product liability and the principles were merely extended to such claims. However, a clear definition of the term has been set out in Section 2(34) of the Consumer Protection Act, 2019 which defines product liability and imposes responsibility on the product manufacturer as well as the product seller in case of any defects or deficiencies. A product liability claim can also be filed in any of the Commissions newly established by the legislation.
Unlike the Consumer Protection Act, 1986 the new legislation has a framework for setting up Consumer Disputes Redressal Commissions and Consumer Councils in the District, State, and National level. While the Consumer Disputes Redressal Commissions primarily deal with dispute resolution, the Consumer Councils have an advisory role which includes the formulation of methods to increase consumer awareness about their rights.
The Central Consumer Protection Authority is a regulatory body newly established by the Act under Chapter III. The Authority comprises of an investigative wing headed by a Director-General. The main role of this Authority is to protect the rights of customers by ensuring that there is no unfair trade practice, the use of misleading advertisements or false endorsements.
The dispute resolution processes have also been simplified by including provisions that allow for e-filing and videoconferencing for hearing. Earlier, the case was to be filed at the place of business or residence of the manufacturer or the seller. However, the new legislation allows for the institution of suits in place of residence of the consumer and provides that post 21 days of filing the claim if there is no response from the requisite authorities the claim would be deemed to be admissible. Alternate dispute resolution mechanisms like Mediation have also been introduced under Chapter V of the Consumer Protection Act, 2019.
CONSUMER PROTECTION ( E-COMMERCE) RULES, 2020
The Department for Promotion of Industry and Internal Trade (DPIIT) released the first Draft National e-Commerce Policy[x] on 23rd February 2019. The Draft Policy is of multi-dimensional nature, covering a multitude of areas with relevance to e-commerce, like data, intellectual property, consumer protection, and competition. A second draft[xi] was shared in the beginning of July 2020, which is yet to be made public. These drafts of the National e-Commerce Policy are particularly impacting data storage practices of companies like Amazon and Facebook which store or mirror the data of Indian users abroad. With the objective of “distancing from data localisation”, these companies will be subject to a periodic audit[xii]. The Central Government has stated that the Rules have been finalised after taking inputs from the DPIIT into consideration[xiii]. How these Rules will fit into and operate within the framework of the yet to be finalised National e-Commerce Policy is a development that merits analysis and emphasis.
Further, the Draft Policy and the Rules serve as a foundation for various Government programmes like Digital India, Skill India, Startup India and Make in India.[xiv] The Rules are applicable to all e-Commerce retailers having their operations in India, irrespective of whether they are registered in India or abroad. Flouting these Rules will attract penal action.
E-commerce entity is defined as 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. These e-commerce entities have to set up an effective complaint redressal mechanism which responds to consumer complaints within a period of 48 hours. E-retailers also have to compulsorily display information relating to refund, return, exchange, warranty, guarantee, modes of shipment and delivery, and grievance redressal mechanism.
One pertinent requirement that has been introduced is for the e-retailer to specify the Country of Origin (COO) of the products they sell online. This has been demanded for long by domestic traders’ association. This requirement has been formulated to provide impetus to the Indian Government’s policies like “Atmanirbhar Bharat” and “Make in India”.[xv]
With respect to the pricing of goods online, the e-retailers are not permitted to “manipulate the price” of the goods and services they offer to make unreasonable amounts of profit or engage in price discrimination by offering differential prices to different classes of consumer created arbitrarily.[xvi] They also have to publish information about the third-party sellers using their online platform to sell their products.
Any disputes that arise due to the non-compliance of these Rules will be taken up before the Central Consumer Protection Authority, newly established under the Consumer Protection Act 2019.
In furtherance of India’s ambitious plan to evolve a comprehensive e-commerce policy, and for India to keep up with the demands of an everchanging virtual marketplace, the changes that have been brought about by the Consumer Protection Act, 2019 and the Consumer Protection (E-Commerce) Rules, 2020. Especially now, during the ongoing coronavirus pandemic, immense reliance has been placed upon e-commerce based businesses to provide essential products and services to consumers. It has resulted in a vast majority of the transactions taking on a virtual nature. The robust consumer redressal mechanisms have placed a higher responsibility on sellers and e-commerce platforms.
[i] Ministry of Consumer Affairs, Food & Public Distribution, E-Commerce Business, PRESS INFORMATION BUREAU, GOVERNMENT OF INDIA (Feb. 05, 2019, 4:44 PM) https://pib.gov.in/Pressreleaseshare.aspx?PRID=1562698
[ii] The Consumer Protection Act, 1986, No. 68, Acts of Parliament, 1986 (India).
[iii] The Consumer Protection Act, 2019, No. 35, Acts of Parliament, 2019 (India).[iv] The Consumer Protection (E-Commerce) Rules, 2020 (India). [v] The Sale of Goods Act, 1930, No. 30, Acts of Parliament, 1930 (India). [vi] Supra note 2 [vii] The Indian Contract Act, 1872, No. 9, Acts of Parliament, 1872. [viii] The Drugs and Cosmetics Act, 1940, No. 23, Acts of Parliament, 1940 (India). [ix] Food Safety and Standards Act, 2006, No. 34, Acts of Parliament, 2006 (India). [x] Draft National E-Commerce Policy, 2019, Department for Promotion of Industry and Internal Trade, https://dipp.gov.in/sites/default/files/DraftNational_e-commerce_Policy_23February2019.pdf
[xi] Aditi Agrawal, India’s new draft e-commerce policy focuses on data, competition, counterfeiting, consumer protection, MEDIANAMA (July 3, 2020) https://www.medianama.com/2020/07/223-second-draft-ecommerce-policy-india/ [xii] Kirtika Suneja, Draft e-commerce policy seeks to set up regulator, restrict data storage, THE ECONOMIC TIMES (Jul. 3, 2020, 8:35 AM) https://economictimes.indiatimes.com/news/economy/policy/draft-ecomm-policy-seeks-to-set-up-regulator-restrict-data-storage/articleshow/76760134.cms [xiii] PTI, Government notifies new rules for e-commerce entities: Here’s what’s changed, THE ECONOMIC TIMES (Jul 24, 2020, 9:46 PM) https://economictimes.indiatimes.com/news/economy/policy/government-notifies-new-rules-for-e-commerce-entities-heres-what-changed/articleshow/77153077.cms [xiv] Ambika Khanna, A Critique of India’s Draft National E-Commerce Policy, GATEWAY HOUSE, (Apr. 4, 2019) https://www.gatewayhouse.in/india-e-commerce-policy/ [xv] Vibhuti Vasisth & Nishtha Das, Country of origin to be specified on e-commerce websites for product listings, LEXOLOGY ( Jul. 21, 2020) https://www.lexology.com/library/detail.aspx?g=c28d53c6-7b99-41d1-bb02-47a987727459 [xvi] Supra note 13.