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This article forms Part III of the three-part series of our discussion on Consumer Protection (E-Commerce) Rules, 2020. Part I provides the general overview of the e-commerce business models and discusses the objectives of the Rules. Part II deals with the key highlights of the Rules, 2020 and its limitations. This part deals with the recently introduced Consumer Protection (E-commerce) (Amendment) Rules, 2021.

On 21st June 2021 the Indian Government introduced new draft Rules which are a more stringent version of the previously framed Rules in 2020. The Government in its official release rightly stated that on receiving several complaints against “widespread cheating and unfair trade practices in the e-commerce ecosystem”, it has proposed amendments to the Consumer Protection (E-commerce) Rules, 2020 to protect the interests of consumers and encourage free and fair competition in the market. Although the e-commerce giants like Amazon and Flipkart have denied any wrongdoing, Indian retailers alleged that Amazon and Flipkart utilize their discount units indirectly on their website through selected merchants, bypassing foreign investment limitation that restrict direct deals.

The new draft Rules introduce a move to ban flash sales, increase compliance requirements, fix liability of the platforms for failure of the registered sellers to deliver the promised goods and give a solid swadeshi push to the existing e-commerce regime in the country. It also provides an updated definition of what constitutes an e-commerce entity. The newly drafted Rules state that e-commerce entity “owns, operates or manages digital or electronic facility or platform for electronic commerce” and any “related party”, as defined under the Companies Act, 2013, but “does not include a seller offering his goods or services for sale on a marketplace e-commerce entity”.

Features of the Rules
  • Ban on flash sales
  • Enhanced Liability and introduction of Fallback liability
  • Protection to domestic goods and businesses

Ban on specific flash sales

A flash sale deal is a discount offered by an online business store for a brief timeframe. The short time period and limited availability attracts the customers which results in impulsive buying. The government stated that it intends to not ban e-commerce flash sales organised by third party organisers but only aims at stopping certain e-commerce entities which engage in limiting consumer choice by indulging in “back-to-back” or “flash” sales where one seller selling on platform does not carry any inventory or order fulfilment capability but merely places a “flash sale” order with another seller controlled by the platform.

Enhanced liability and introduction of fallback liability provisions:

  1. A proposal for the appointment of Chief Compliance Officer, for 24x7 with law enforcement agencies, officers to ensure compliance to their orders and Resident Grievance Officer for redressing of the grievances of the consumers on the e-commerce platform has been put forward.
  2. All e-commerce entities are to register with the Department for Promotion of Industry and Internal Trade (DPIIT) to operate in India and in return be provided with a registration number. The registration would ensure creating a genuine database of e-commerce entities and help the consumers to verify the authenticity of an entity before transacting through their websites.
  3. Provisions of Fall-back liability have been introduced by the new draft in case a seller due to his/her negligent conduct fails to deliver the goods and services to the customer.
  4. Protection of consumers to be ensured by prohibiting mis-selling of goods and services by deliberate misrepresentation of information by the e-commerce entities.

Protection to domestic goods and businesses:

The current draft demands the e-commerce entities to make some extra declarations. It requires the entities to distinguish merchandise depending on their country of origin. When showing imported goods for sale the customers must be provided with good choices and alternatives with respect to locally made products to ensure fair opportunity to domestic goods.

The government had sought replies from the companies on the suggested amendments, following which the amendments to the Rules shall be finalised.

Conclusion

The E-Commerce Rules 2020 unquestionably gives the purchaser more capacity, empowering their rights and reinforcing their privileges. The Rules, 2020 have highlighted important points such as disclosure of information, grievance redressal mechanism, false representation and manipulation of prices. The suggested amendments further aim to bring transparency in the e-commerce ecosystem. The e-commerce Rules have benefited the rights to customers immensely and act as an expansion to the customer security system in India.