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The Consumer Protection (E-commerce) Rules, 2020 (“Rules, 2020”), were introduced by the Ministry of Consumer Affairs, Food and Public Distribution (Department of Consumer Affairs) on 23rd July 2020. These Rules have been a subject of interest for a number of stakeholders for a long time. The Government, in 2019, came up with the draft of Consumer Protection (e-commerce) Guidelines, 2018. Further in November 2019, the Central Government issued the Consumer Protection (e-commerce) Rules 2019. While similar to the previously introduced Consumer Protection Act, 2019, Rules, 2020 highlight new duties that e-commerce entities need to comply with.

This article is divided into three parts, Part I provides a general overview about the e-commerce business models and discusses the objectives of the Rules. Part II discusses the key highlights of the Rules, 2020 and its limitations. The recently introduced Consumer Protection (E-Commerce) (Amendment) Rules, 2021 is covered under Part III.

What is an E-commerce Entity, Market place entity and Inventory based entities?

As defined in the Rules, 2020, E-commerce entity under Rule 3(b) is defined as, "any person who 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".

At present, the e-commerce Rules recognise two e-commerce business models, which are -

  1. Marketplace model
  2. Inventory based Model
Marketplace Model Inventory based Model
Meaning Rule 3(g) of the Rules, 2020 explains that Marketplace based model of e-commerce is an information technology platform by an e-commerce entity on a digital & electronic network to act as a facilitator between buyer and seller. Rule. 3(f) of the Rules define Inventory based model of e-commerce as an e-commerce activity where inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly.
  1. Marketplace acts as a medium for the dealer to sell his goods and services to purchasers.
  2. Invoices are given directly from the Seller to purchasers.
  3. Seller is liable for the assortment of duties on the goods and services that it is selling.
  1. In the inventory-based model, the sellers purchase goods and services directly and offer them to the consumers for sale.
  2. Under Inventory based model, sellers issue invoices against the purchase orders.
  3. E-commerce entities also issue invoice directly to customers for the items sold.
Example E-commerce portals, which acts as platforms connecting buyers and sellers and have no inventory of their own. For example- Naaptol, ebay etc. Marketplace owners own the products and also manages the complete end-to-end sales process. The inventory of the goods is owned and sold by the e-commerce entity directly to the customers. For example- Jabong.

Objectives Of The Rules

The e-commerce Rules, 2020 have basically been formulated with the goal to manage the e-commerce sectors in India and protect the customers from unfair trade practices. The purpose of introduction of this framework is to regulate the online marketing regime, sale and purchase of goods along with giving precise data that the purchaser needs while making a purchase when shopping online.

Prevention of unfair trade practices: Rules, 2020 forbid unfair trade practices by entities and sellers on marketplaces and manipulation of price, thus not letting the entities to gain unreasonable profit by charging unjustified prices. There have been situations where the dealers have attempted to acquire money from customer in an arbitrary manner. For instance, in one of the incidents a teacher from Kolkata (West Bengal), placed an order for a couch, from a renowned e-commerce portal. There was a promise of 15-20 day shipping. She had made the whole payment online. The 20-day time period passed and she received neither the couch nor any intimation from the seller. Their website had also disappeared. These Rules aim to end such malpractices.

Prevention of false representation: The Rules also prohibit e-commerce entities from false representation of goods or services and deceptive pricing to gain unreasonable profits from the consumer. It also aims at preventing false advertisements, such as advertisements that might lead the customers to expect free gift or prize offers. For instance, Arun Pushker, from Lucknow, after receiving a cell phone he had ordered from an e-commerce portal priced at Rs.500, realized that it was a refurbished product. The information regarding refurbishment of the product was not clearly and legibly stated in the description of the cell phone. He tried to contact the seller about this issue, but his phone number was only transferred from one person to another without any redressal.

Consumer Protection through the introduction of various significant provisions: Additionally, these Rules focus on protecting the customers' interests by introducing significant provisions. For example, in one of the newly introduced provision, the entities are required to set up a grievance redressal mechanism and appoint a grievance officer for all consumer-related issues. The Rules ensure disclosure of accurate information of name and details of its websites, contact details of seller, grievance officer and customer care, and the country's origin of the goods and services. The introduction of these particular Rules enable simplifying of the adjudication process and provides scope for early disposal of cases.

It has also elucidated details regarding a return, refund, exchange, warranty and guarantee, delivery and shipment of goods and services, payment methods, and price manipulation.

Penalties: The Rules provide strict penalties for non-compliance; the introduction of these strict penalties aims to rebuild the process of administration and permit a fair settlement of consumer disputes. Hence for any violation of the provision of these Rules, the provisions of the Consumer Protection Act, 2019 shall apply, such provisions include penalties for misleading advertisements, penalties for manufacture or sale of products containing adulterated or spurious goods etc.