Policy Brief: Revised draft of Consumer Protection (e-Commerce) Rules

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Policy Brief: Revised draft of Consumer Protection (e-Commerce) Rules

Garima Prakash

@GarimaP

June 22, 2021

Public Policy

253

On June 21, 2021, the Ministry of Consumer Affairs, Food and Public Distribution notified proposed amendments to Consumer Protection (e-Commerce) Rules, 2020 (The e-Commerce Rules).

Context to the proposed amendments:

The existing e-commerce Rules were notified pursuant to Section 101(1)(zg) of the Consumer Protection Act, 2019, on July 23, 2020. The primary intent of the e-Commerce Rules was protecting consumer interests in the e-commerce space through greater transparency and accountability placed upon e-commerce entities, and creating a uniform set of rules for both e-commerce platforms and sellers.

The first set of amendments to the e-Commerce Rules were issued on May 17, 2021, to clarify that only certain types of e-commerce entities need to appoint a nodal officer, while other forms, such as, sole proprietorship and partnership firms are not obligated to appoint such nodal officer. More information on this amendment can be found here.

Earlier in March 2021, Rajya Sabha Committee on Subordinate Legislation had presented its report on the e-Commerce Rules, 2020. Highlights of the recommendations made by the Committee can be found here. Some of the suggestions included in the Committee’s report, have been included in the present set of proposals from the DoCA.

Key highlights of the revised draft rules include:

1. Amendment in the definition of ‘e-commerce entity’ to include:

Any entity engaged by an e-commerce platform for the purpose of fulfilment of orders placed; and
Any ‘related party’ as defined under Section 2(76) of the Companies Act, 2013, i.e., a director or a key managerial person or their relatives; a firm in which the partner/director/manager or his relative is a partner; or a private/public company in which a director/manager is a director and holds along with his relatives, more than 2% of its paid-up share capital.

2. Inclusion of definition of associated enterprises:

enterprises are related to each other through a common chain of directors/managing partners;
enterprises are related to each other through a common chain of shareholders, where such shareholders hold not less than 5 per cent of the shareholding in the related enterprises.
enterprises having 10 per cent or more common ultimate beneficial ownership;
where one enterprise can exercise a right to veto any decision, appoint one or more director(s) or in any other manner influence other entity’s decision making on any matter either through its shareholding or through an agreement including a shareholders’ agreement;
where one enterprise holds, directly or indirectly, shares carrying the voting power in the related entities;
where any person or enterprise holds, directly or indirectly, shares carrying the voting power in the related entities;
there exists between the enterprises, any relationship of mutual interest, as may be prescribed.

3. Obligation on every e-commerce entity operating in India to register itself with the Department for Promotion of Industry and Internal Trade (DPIIT) and display such registration number prominently to users clearly.

4. Additions in the duties of e-commerce entities include:

To restrict display or promotion of misleading advertisement on its platform.
To appoint a Chief Compliance Officer responsible for ensuring compliance with the Act and rules made thereunder. This is in addition to the appointment of a nodal contact person for coordination with law enforcement agencies and a Resident Grievance Officer.
To publish a grievance redressal mechanism and contact information of the Grievance Officer.
In case the e-commerce entity sells imported goods or services, mention details of the importer, display the origin of goods, suggest domestic alternatives, provide a ranking of goods that does not discriminate against domestic goods and sellers.
To mandatorily converge with the National Consumer Helpline, as opposed to the “best-endeavour” standard under the current rules.
To not indulge in mis-selling of goods or services offered on its platform, where mis-selling means selling goods or services by deliberate misrepresentation of information.
To adequately display to users if an e-commerce entity is engaged in cross-selling of goods or services. Here cross-selling means sale of goods or services which are related, adjacent or complimentary to a purchase made by a consumer from any e-commerce entity with an intent to maximise the revenue of such e-commerce entity.
To distinctly identify sponsored listing of products and services.
To provide information requested by an authorised government agency, within 72 hours of receipt of request for information.
To clearly display the name of the seller on the invoice, in a font size as big as that of the e-commerce entity’s name
Obligation not to mislead users by manipulating search results of a user.
Obligation not to share information about a consumer without express consent.
Obligation not to organise a flash sale of goods or services on its platform, where flash sale refers to such sales organised by an e-commerce entity with an intent to draw large number of consumers and allowing only certain sellers managed by the e-commerce entity to sell goods or services on its platform.
Obligation not to abuse its dominant position in the market.
Additions in the liabilities of e-commerce entities include:
- Prominent display of country of origin and best before or use before date.
- Logistics service provider of a marketplace e-commerce entity to provide a disclaimer of its relationship with the sellers of a marketplace entity and a description of any differentiated treatment which it gives between sellers of the same category.

5. Liabilities of marketplace entities include:

Not use information collected through its platform for unfair advantage of related parties and associated enterprises.
Related parties and associated enterprises to not be enlisted as sellers for sale to consumers directly.
Related parties or associated enterprises to not do anything that e-commerce entity cannot do itself.
Not to sell goods or services to an entity registered as a seller on its platform.
Not to advertise a body of sellers for the purpose of subsidising a sale on its platform.
Be subject to a fall-back liability where a seller registered on its platform fails to deliver the goods or services ordered by a consumer due to negligent conduct, omission, or commission of any act by such seller in fulfilling the duties and liabilities in the prescribed manner which causes loss to the consumer.

6. Additions in the duties of a seller on a marketplace include:

Provision of best before or use before date; information related to return, refund, exchange; expiration date; warranty and guarantee; delivery and shipment cost; return shipping; mode of payments; and any other similar information to enable the consumer to make an informed decision at the pre-purchase stage.

#e-commerce #consumerprotection #ecommerce #ecommercepolicy

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Garima Prakash

Manager, Public Policy and Government Affairs

Reach out to me for all things policy about e-commerce, international trade, export controls, start-ups and fintech