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Nasscom’s Revised Submission on Draft e-Commerce Guidelines

Nasscom recently submitted its revised inputs on the Draft e-Commerce Guidelines for Consumer Protection 2019 (‘draft e-Commerce Guidelines’) to Department of Consumer Affairs. The salient points of our recommendations are summarised below:

  • Definition of e-Commerce entity needs to be better formulated (draft e-Commerce Guideline 2(1)(c))

We have recommended the following definition of ‘e-Commerce entity’:

“E-Commerce entity” means a product seller conducting e-Commerce business whether through inventory based model of e-Commerce, or market place based model of e-Commerce, or both.

 

We have modified the definition of ‘e-Commerce entity’ to refer to the definitions used in the 2019 Act and the draft e-Commerce Guidelines.

 

The term, ‘product seller’, used in our recommended definition refers to a ‘person’ (defined in the 2019 Act and covers individuals as well as juristic persons). Therefore, there is no need for the definition of an e-Commerce entity to separately specify all the possible juristic persons (“a company incorporated under the Companies Act, 1956 or the Companies Act, 2013, a foreign company as defined under Section 2(42) of the Companies Act, 2013, or an office, branch or agency in India” etc.)

Further, since under Section 2(37)(c)(II) “electronic service provider” is included within the definition of a “product seller”, we have deleted the reference to electronic service providers from the definition of e-commerce entity.

 

We have however, retained references to the phrases “inventory based model of e-commerce” and “marketplace based model of e-commerce”, both of which are defined under the draft Guidelines.

 

Accordingly, our recommended definition tries to capture the intent of the current definition by covering all domestic and foreign businesses (whether inventory based model of e-Commerce or market place based model of e-Commerce) which are conducting e-Commerce in India.

  • Requirement of local registration for e-Commerce entities is likely to be onerous and does not by itself ensure consumer protection

Section 1(2) of the 2019 Act covers the entire jurisdiction of India. This means that any e-Commerce entity operating in India will be covered under the draft e-Commerce Guidelines. Hence, the requirement to be a registered legal entity under the laws of India is disproportionate and not justified.

 

If the intent behind the draft e-Commerce Guidelines is to require local incorporation of all e-Commerce entities, this would need to be by way of a legislative enactment and not through the draft e-Commerce Guidelines or an advisory. The requirement of local incorporation by itself does not ensure consumer protection or prevent unfair trade practices. The requirement to be a registered legal entity exceeds the delegated legislation making power.

 

  • The requirement to display complete seller details on the e-Commerce entity’s website will cause serious injury to the business interests of all e-commerce entities

Contact details, such as phone numbers and email IDs of sellers, are treated as business confidential information, since disclosure of the same will lead to diminution of the commercial value of such information and cause serious injury to the business interests of all e-commerce entities. Furthermore, not all sellers utilising the services of an e-Commerce entity will necessarily have a dedicated website.

 

We have suggested limiting the extent of information disclosure to the legal name, address and GST number of the seller on the sales invoice to harmonize the same with existing rules in this regard under the CGST Rules, 2017, the Legal Metrology (Packaged Commodities) Rules, 2011 and FDI Press Note 2(2018).

 

  • 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 e-Commerce 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 e-Commerce 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 privacy 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 e-Commerce Guideline 4(ix))

The draft e-Commerce 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 e-Commerce 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.

Attached below is our revised submission to Department of Consumer Affairs. In case of any additional comments or queries, please write to dagarwal@nasscom.in.

[Update: In a later development, the Department of Consumer Affairs released draft Consumer Protection (e-Commerce) Rules, 2019 (‘draft e-Commerce Rules’) for public comment. The draft e-Commerce Rules are identical to the draft e-Commerce Guidelines in the rights and obligations that they seek to impose on e-Commerce entities. Therefore, Nasscom’s position on the draft e-Commerce Rules remains the same as our comments on the draft e-Commerce Guidelines.]


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