Amendments to E-Commerce Rules 2020
On 23rd July 2020, the Central government notified the Consumer Protection (E-Commerce) Rules, 2020 in order to regulate all commercial transactions such as sale of goods and services on an electronic or digital network by retailers in India or overseas to consumers in India.
In June 2021, the Ministry of Consumer Affairs, Food and Public Distribution (Department of Consumer Affairs) proposed amendment to the E-Commerce Rules 2020.
This article highlights the proposed amendments:
RULE 3: DEFINITIONS
Amendment to existing definition(s)
3(1)(b): e-commerce entity
The existing definition means any person who manages, 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.
The definition has been amended / expanded to include any entity engaged by such person for the fulfilment of orders placed by the user on its platform and any ‘related party’ as defined u/s 2(76) of the Companies Act 2013.
Interpretation: the amended definition implies that the E- commerce rules will become applicable to entities engaged by e-commerce entities for orders placed by them. For ex: Amazon India’s delivery agents / courier agents will also come under the ambit of the amended E-commerce rules.
Introduction of new definition(s)
Rule 3(1) (c): Cross selling
means sale of goods or services which are related, adjacent or complimentary to a purchase made by a consumer at a time from any ecommerce entity with an intent to maximise the revenue of such e-commerce entity.
Interpretation: The intent of introducing this definition is to ensure there is no cross selling using manipulative tactics. It is intended to establish transparency in transactions.
Rule 3(1)(d): Fall back Liability
Means the liability of a marketplace e- commerce entity where a seller registered with such marketplace e-commerce entity fails to deliver goods or services ordered by a consumer due to negligent conduct or commission or omission of any act of fulfilling duties laid down by the marketplace e- commerce entity which causes loss to the consumer.
Interpretation: the marketplace e-commerce entity say Amazon shall become liable for any acts or omissions of its delivery agents or courier agents for failure to fulfil duties laid down by Amazon which causes loss to the consumer.
Rule 3 (1)(e): Flash Sale
Means a sale organized by an e-commerce entity at significantly reduced prices, high discounts or any other such promotions or attractive offers for a predetermined period of time on selective goods and services or otherwise with an intent to draw large number of consumers, provided such sales are organised by fraudulently intercepting the ordinary course of business using technological means with an intent to enable only a specified seller or group of sellers managed by such entity to sell goods or services on its platform.
Interpretation: Limited period sales, End of season sales, festival day sales, price drop sales etc. are all selling tactics to attract consumers by offering heavy discounts or low prices. Such flash sales will attract consumers to e commerce entities due to their easy accessibility online and at reduced prices. This could prove detrimental to non digital platform / non- E-commerce entity domestic players to carry on ordinary course of business. Such flash sales would benefit sellers or group of sellers associated or managed by e-commerce entities. The objective seems to create a level playing field for all players.
Rule 3(1)(k): Mis-selling
Means an e-commerce entity selling goods or services by deliberate misrepresentation of information by such entity about such goods or services as suitable for the user who is purchasing it. The definition further states that misrepresentation includes;
– positive assertion of information which is not true and warranted by the entity making it;
– display of wrong information with an intent to deceive to gain advantage to the e- commerce entity committing to it or seller claiming it thus misleading the consumer;
– causing the consumer to purchase such goods, to make a mistake as to the substance of thing purchased.
Interpretation: the definition is intended to prevent sale by misrepresentation of information of goods or services by E-commerce entities.
RULE 4: REGISTRATION OF E-COMMERCE ENTITIES
- to operate in India shall register itself with the Department for Promotion of Industry and Internal Trade (DPIIT) within such period as prescribed by DPIIT for allotment of a registration number. Extension for period of registration shall be recorded in writing.
- Such registration number and invoice of everyday order shall be displayed prominently to its users in a clear and accessible manner on its platform by the E-commerce entity.
Interpretation: All E-commerce entities shall have to register with DPIIT and thereby be its scrutiny and regulation. This shall ensure transparency of operations of E-commerce entities especially those who are registered outside India or are foreign E-commerce entities operating in India.
RULE 5: DUTIES OF E-COMMERCE ENTITIES
The E-Commerce Rules 2020 laid down duties to be fulfilled by every E-commerce entity incorporated under the Companies Act 1956 / 2013 or a foreign company u/s 2(42) of the Companies Act or an office, branch or agency outside India or controlled by a person resident in India u/s 2(v)(iii) of FEMA.
The amendment has included an E-commerce entity incorporated as a Partnership under the Indian Partnership Act 1932 or a Limited Liability Partnership (LLP) under the Limited Liability Partnership Act 2008.
In addition to the duties laid down in the existing Rule, the following new amendments have been proposed to be included:
Rule 5(4): No E-Commerce entity shall allow any display or promotion of misleading advertisement either in the ordinary course of its business on its platform or otherwise.
Rule 5(5): Every E-Commerce entity shall
- appoint a Chief Compliance officer (managerial personnel or such other senior employee of an e-commerce entity who is a resident and citizen of India) who shall be responsible for ensuring compliance with the Act and Rules and shall be liable in any proceedings relating to third party data or communication link made available or hosted by that e-commerce entity where he fails to ensure that such entity observes due diligence while discharging its duties under the Act and rules. No liability may be imposed without giving an opportunity of being heard.
- appoint a nodal contact person (employee of an e-commerce entity, other than the Chief Compliance Officer, who is resident in India and a citizen of India for 24×7 coordination with law enforcement agencies and officers to ensure compliance to their orders or requisitions made in accordance with the provisions of law or rules made thereunder.
- appoint a Resident grievance officer (the employee of an e-commerce entity, who is resident and a citizen of India) who shall subject to clause (b) be responsible for functions as contained in the Rules.
- Grievance redressal mechanism of E-commerce entity: the E-commerce entity shall prominently display on its website, mobile based App or both, details of the name and contact details of the grievance officer as well as the mechanism to make a complaint against the violation of provisions of these Rules or any resources made available on the platform. The grievance officer shall receive and acknowledge any order, notice or direction issued by the appropriate government, any competent authority or court of competent jurisdiction.
Rule 5 (7): When an E-commerce entity offers imported goods or services for sale, it shall
- mention the name and details of any importer from whom it has purchased such goods or service or who may be the seller on its platform;
- identify goods based on their country of origin, provide a filter mechanism on their e-commerce website and display notification regarding the origin of goods at the pre-purchase stage, at the time of goods being viewed for purchase, suggestions of alternatives to ensure a fair opportunity for domestic goods;
- provide ranking for goods and ensure that the ranking parameters do not discriminate against domestic goods and sellers.
Rule 5 (11) No e-commerce entity shall indulge in mis-selling of goods or services on its platform.
Rule 5 (12) An E-commerce entity which is engaged in cross selling of goods or services shall adequately disclose in clear and accessible manner to its users – Name of the entity providing data for cross selling and data used for cross selling.
Rule 5 (14): No E- Commerce entity shall
- mislead users by manipulating search results or search indexes;
- permit usage of name or brand of the marketplace E-commerce entity in offer or promotion of sale of goods or services on its platform to suggest that such goods or services are associated with the marketplace E-commerce entity;
- make available any consumer related information to any person without the express and affirmative consent of the consumer. Consumer consent cannot be automatically recorded in pre ticked boxes.
- Use information collected by marketplace E-commerce entities for sale of goods bearing brand / name which is common with that of the marketplace E commerce entity, if such practices amount to unfair trade practices and affects consumer interests.
Rule 5 (15): Every e-commerce entity shall ensure that sponsored listing of products and services are distinctly identified with clear and prominent disclosures.
Rule 5(16): No E-commerce entity shall organize a flash sale of goods or services on its platform.
Rule 5(17): No E-commerce entity holding a dominant position shall abuse its position as defined u/s 4 of the Competition Act 2002.
Rule 5(18): On receipt of a written order that contains the purpose of seeking information or assistance, every E-commerce entity shall not later than 72 hours either provide the required information or assist government or authorized investigative, cyber security agencies for verification of identity, or prevention, detection, investigation or prosecution of offences including cyber security incidents.
Rule 5(19): Every e-commerce entity shall display clearly and prominently in its invoice the name of the seller in the same font size as that of the e-commerce entity’s name.
RULE 6: LIABILITIES OF MARKETPLACE E-COMMERCE ENTITIES
Rule 6(3)(a): Every marketplace entity shall provide certain information in a clear and accessible manner, displayed prominently on its platform. In addition to details such as name, ratings, customer care number etc, the country of origin should also be stated along with other information to enable consumers make informed decisions at pre purchase stage.
Rule 6(3)(c): In addition to displaying information relating to return, refund, exchange, warranty, guarantee, delivery, shipment, modes of payment and grievance redressal mechanism, details of best before or use before date should be displayed to enable consumers make informed decisions.
Rule 6 (5): Logistics service providers of marketplace E-commerce entity shall not provide differentiated serviced between sellers of the same category, provided such logistics service providers give a terms and conditions regulating relationship with seller and a disclaimer on the marketplace E-commerce entity platform of such differentiated treatment.
Rule 6 (6): Every marketplace e-commerce entity shall ensure that
- it does not use any information collected through its platform for unfair advantage of its related parties (u/s 2(76) of the Companies Act 2013) and associated enterprises;
- ensure that none of its related parties and associated enterprises are enlisted as sellers for sale to consumers directly;
- ensure that nothing is done by related parties or associated enterprises which the e-¬ commerce entity cannot do itself;
Rule 6(7): Marketplace E-commerce entity shall not sell goods or services to any person who is registered as seller on its platform.
Rule 6(8): Marketplace E-commerce entity shall not advertise a body of sellers for subsidizing sale on its platform.
Rule 6(9): Marketplace entity shall be subject to fall back liability for failure of a seller registered on its platform to fulfil obligations in a manner that causes loss to the consumer.
RULE 7: DUTIES OF SELLERS ON MARKETPLACE
Rule 7(5)(d): In addition to the information required to be provided by sellers offering goods or services om the marketplace E-commerce entity, they shall provide information on best before or use before date, information related to return, refund, exchange, expiration date, details of best before usage, warranty and guarantee, delivery and shipment, cost and return shipping, mode of payments, and any other similar information.
Flash in the pan?
By seeking to ban flash sales and limited period discount offers, the objective of the amendments is to create a level playing field for commercial transactions. Enhanced disclosure requirements not only by marketplace Ecommerce entities, but also their associates and related parties such as logistic service providers ensure accountability and transparency in dealings. This enables consumers to know all requisite information before purchase. As a result, unfair trade practices, manipulative transactions can be completely kept out of the system.
However, a section of stakeholders is of the view that enhanced disclosure and compliance requirements may be counter productive as not all e-commerce players are of the same size. MSME / smaller players will be heavily burdened by time and cost in such compliance. The larger and more dominant players may buy time for compliance by initiating legal action in interpreting the Rules / Laws.
The government had given time to stake holders to submit their review/ comments till the first week of July 2021. However, a representation has been made to the government seeking more time to review and give feedback. Until then, one can hope this legislation is not just a flash in the pan.