Authored by Hammurabi & Solomon Partners

The convergence of trade and technology has enabled rapid growth in e-commerce and fintech transactions, throwing up new legal and regulatory challenges including those of product liability involving consumers. There is also the problem of illicit trade-related transactions. There is now a product liability framework to protect the interests of consumers, initially under the Consumer Protection Act, 1986, and now under the Consumer Protection Act, 2019 (act). The draft Consumer Protection (E-Commerce) Rules, 2019 (rules), recently circulated by the government sets out the emerging compliance regime in the e-commerce space. The following are primary objectives of the draft rules.

Mandatory registration. Every e-commerce entity carrying out or intending to carry out e-commerce will need to register and comply with conditions for carrying out such business.

Transparency and obligations. Sellers will need to disclose details of their e-commerce entities on their portals in a clear and transparent manner, including their legal names, main addresses, contact details, website names, products sold and so on. E-commerce entities will need to display the terms of their return, refund and exchange policies, warranty and guarantee policies, shipment and delivery terms, payment terms, grievance redress mechanisms and so on. In addition, e-commerce entities must ensure that they do not display false or misleading advertising regarding product characteristics, and that they clearly set out other relevant details including health and safety information, the security of payment methods, the shelf life of products, and the breakdown of prices showing all included charges. They will need to protect, use and store personal identification information of its consumers in compliance with the law. E-commerce entities will need to unconditionally accept the return of goods that are delivered late or are defective, a term that includes counterfeit and wrongly advertised products, and provide refunds within 14 days.

Unfair contracts. The concept of unfair contracts under the act enables consumers to file complaints and challenge contracts that are unfair or arbitrary. E-commerce websites depend on contractual terms to mitigate risk exposure and safeguard their interests against third-party liabilities. These terms and conditions are generally in the form of a clickwrap agreement and become binding on consumers at the time they register on the platform or purchase goods or services. These standard terms and conditions are now required to satisfy the provisions of the rules.

Sale of spurious products. The act sets out penalties for the manufacture, sale, storage, distribution or import of such products, including imprisonment and the suspension or cancellation of trading licences. This is to ensure that e-commerce entities do not allow their platforms to facilitate counterfeiters and to ensure the authenticity of the goods sold on their platforms. They must accept the return of spurious or counterfeit goods and refund the purchase amount within 14 days.

Level playing field. To maintain parity between bricks-and-mortar stores and e-commerce platforms, and to ensure that smaller players are not disadvantaged by predatory pricing and deep discounting, e-commerce entities are to refrain, directly or indirectly, from influencing the price of goods or services sold through their portals.

Redress procedures. The draft rules oblige e-commerce entities to appoint grievance officers and to publish their contact details while explaining the procedure through which consumers can make complaints. The draft rules require grievance officers to resolve the complaint within one month from the date of receipt of the complaint. The draft rules also identify other means by which complaints can be filed such as phone, email or website.

The draft rules also require sellers on e-commerce platforms to comply with such requirements as entering into written contracts with entities before soliciting sales on their platforms, ensuring that mandatory information relating to sales such as unit price, taxes, fees, delivery charges and display requirements under legal metrology rules is provided, providing fair and reasonable delivery terms and accepting responsibility for warranties.

The draft rules, read with the act, mark a shift from the principle of caveat emptor (let the buyer beware) to caveat vendor (let the seller beware). The draft rules seek to protect consumers from misinformation and misrepresentation on e-commerce platforms, to address issues of consumer rights, unfair trade practices and misleading advertisements. They impose penalties for faulty and fake products by ensuring that the entities and sellers will be subject to clear legal standards.

This article was originally published in Indian Business Law Journal