[This blog has been co-authored with Komal Gupta and Indrajeet Sircar]
Recently, Nasscom submitted its inputs to Department of Consumer Affairs on the draft e-Commerce Guidelines for Consumer Protection 2019 (‘draft Guidelines’). The original deadline (16th September) for submitting comments on the draft Guidelines has now been extended to 31st October, 2019.
While the draft Guidelines are aimed at stronger consumer protection measures in e-Commerce, an extensive analysis of the draft Guidelines reveals some problematic issues.
The draft Guidelines do not appear to be on sound legal basis
The draft Guidelines do not specify the provision in the Consumer Protection Act, 1986 (‘1986 Act’) or the Consumer Protection Act, 2019 (‘2019 Act’) under which they have been passed, or any legislative provision which empowers the Central Government to pass the draft Guidelines. To preclude any challenge to the vires of the draft Guidelines, we recommend that the draft Guidelines be enacted as Model Rules under sections 94 & 102 (1) of the 2019 Act.
Definition of e-Commerce entity needs a sharper focus (draft Guideline 2(1)(c))
An e-Commerce entity is defined ambiguously to the extent that the definition of an e-Commerce entity expressly refers to ‘electronic service providers’. We have recommended that electronic service providers should not be expressly covered under the definition of e-Commerce entity in the draft Guidelines, and suggested modifications to draft Guideline 2(1)(c) so that the draft Guidelines apply to only those entities which are conducting e-Commerce business.
Requirement of local registration requirement for e-Commerce entities (draft Guideline 3(a)(i)) is inconsistent with the definition of e-Commerce entity and is likely to be onerous
We have recommended deletion of the requirement that an e-Commerce entity carrying out e-Commerce business in India “shall be a registered legal entity under the laws of India”. This is for the reason that the definition of an e-Commerce entity already includes a foreign company or an office, branch or agency in India which is owned or controlled by a person resident outside India.
The requirement to display complete seller details on the e-Commerce entity’s website needs to be context based (draft Guideline 3(a)(vi))
We have recommended whittling down of the requirement to publish complete seller details (including identity of their business, legal name, principal geographic address, name of website, email address, contact details, including clarification of their business entity, the products they sell and how they can be contacted by customers) in draft Guideline 3(a)(vi). We believe that requiring all these details to be published by the e-Commerce entity may pose risk to the business model of e-Commerce entities and prevent them from guaranteeing a seamless shopping experience to consumers. Therefore, we have recommended that at the product listing stage, the e-Commerce entity should only be required to publish the legal name of the seller, name of website and the email address.
Prohibition on e-Commerce entities against directly or indirectly influencing the price of goods or services should be limited to the marketplace e-Commerce entities (draft Guideline 4(i))
The prohibition against directly or indirectly influencing the price of goods or services interferes with the freedom of inventory-based e-Commerce entities to carry on their business and undermines their fundamental business models, based on offering discounts. Therefore, we have recommended that the prohibition against directly or indirectly influencing the price of goods or services should only be applicable to marketplace e-Commerce entities.
The rationale for the obligation on e-Commerce entities to display terms of contract between e-Commerce entity and the seller is not clear (draft Guideline 4(i))
The reasons for publicly displaying the contractual terms between the seller and the e-commerce entities are not clear, given that these terms do not concern the customers and there is no privity of contract with the customer.
We recommend that instead of an e-commerce entity being mandated to disclose terms with the seller, the e-Commerce entity should be required to display the customer facing and governing policies of return, refund, exchange, warranty / guarantee, delivery / shipment, mode of payments, grievance redressal mechanism etc. This will ensure that the consumer interest is adequately protected.
Responsibility for delisting counterfeit goods needs to be defined keeping in view the obligations expected from an intermediary (draft Guideline 4(ix))
The draft Guideline 4(ix) imposes obligation on an e-Commerce entity to delist counterfeit goods on its platform on being informed about the counterfeit product “by the consumer” or if it “comes to know by itself or through another source”. Further, after delisting the counterfeit product, the e-Commerce entity “must notify the consumers of the same”.
We have recommended that the phrase, “comes to know by itself or through another source”, should be deleted. According to the decision of the Supreme Court in Shreya Singhal, actual knowledge of unlawful content by an intermediary could only be formed on the basis of a court or government (executive) order. As an e-Commerce entity may also be an ‘intermediary’ under section 79 of the Information Technology Act, 2000 (‘IT Act’), it is recommended that knowledge on the part of an e-Commerce entity under the Model Rules should have the same meaning as knowledge under the intermediary guidelines, in order to harmonise the obligations of an e-Commerce entity under both the Model Rules and the IT Act and the rules made thereunder. Further, the requirement to inform consumers about delisted counterfeit products should only extend to the complainant consumers and those consumers whose orders have not been fulfilled as on the date of obtaining such knowledge.
Contributory or secondary liability of an e-Commerce entity should be linked to its claims on assurance or guarantee regarding authenticity of goods sold on its platform (draft Guideline 4(x))
We have recommended that the contributory or secondary liability of an e-Commerce entity with respect to authenticity of goods sold on its platform should arise only where the e-Commerce entity has expressly vouched for or guaranteed that goods sold on its platform are authentic.
The attachment below contains our complete submission to Department of Consumer Affairs. As the date for submitting comments has been extended to 31st October, 2019 we request members to send any additional inputs to Nasscom at the following email IDs by 20th October, 2019: