Consumer Protection (E-Commerce) Rules, 2020

For the purposes of preventing unfair trade practices in e-commerce, the Central Government had notified the Consumer Protection (E-Commerce) Rules, 2020 with effect from 23 July 2020

Major provisions

• To regulate all commercial transactions sold over a digital or electronic network.
• It recognises two e-commerce business models, namely, the marketplace model and the inventory-based model. Separate rules are specified for provisions for the marketplace and inventory-based entities.
• All information on the return, refund, exchange, warranty and guarantee, delivery and shipment of the goods or services being sold, including their country of origin, be provided on the platform. These would enable consumers to make informed decisions.
• A clear-cut definition of what constitutes ‘unfair’ trade practice: The government should offer a more clear-cut definition of what constitutes ‘unfair’ trade practice as well as spell out a practical legal remedy to tackle the issue.
• Predatory pricing by e-commerce firms: Risk that predatory pricing by e-commerce firms may result in competition being wiped out and prove detrimental to consumers in the long run.
• Fixing a cap on delivery charges: It has also recommended fixing a cap on delivery charges levied by e-commerce firms, as well as providing for penal provisions for violation of rules related to misinformation.
• Unfair trade practices: While e-commerce enterprises offer many benefits, the development of the segment has rendered consumers vulnerable to new forms of unfair trade practices, violation of privacy and issues of unattended grievances.
• Issue of drip pricing: It should also clearly define ‘drip pricing ‘wherein the final cost of the product goes up due to additional charges, and provide for protecting consumers against this by including penal provisions for violation.

Issues in the Rules

However, since the notification of these rules, the Government has received several representations from aggrieved consumers, traders and associations complaining against widespread cheating and unfair trade practices being observed in the e-commerce ecosystem.

• It was observed that there was an evident lack of regulatory oversight in e-commerce which required some urgent action.
• Moreover, the rapid growth of e-commerce platforms has also brought into the purview the unfair trade practices of the marketplace e-commerce entities engaging in manipulating search results to promote certain sellers, preferential treatment to some sellers, indirectly operating the sellers on their platform, impinging the free choice of consumers, selling goods close to expiration etc.
• Additionally, conventional flash sales by third-party sellers are not banned on e-commerce platforms.
• But, certain e-commerce entities are engaging in limiting consumer choice by indulging in “back to back” or “flash” sales wherein one seller selling on a platform does not carry any inventory or order fulfilment capability but merely places a “flash or back to back” order with another seller controlled by the platform.
• This prevents a level playing field and ultimately limits customer choice and increases prices.

Proposed amendments to the Rules

To protect the interests of consumers, prevent their exploitation and encourage free and fair competition in the market, the Government of India is sharing a draft of the proposed amendments to the Consumer Protection (E-commerce) Rules, 2020.

The proposed amendments aim to bring transparency in the e-commerce platforms and further strengthen the regulatory regime to curb the prevalent unfair trade practices. The proposed amendments are as follows

• To ensure compliance with the Consumer Protection Act, 2019 and Rules, the appointment of a Chief Compliance Officer, a nodal contact person for 24x7 coordination with law enforcement agencies, officers to ensure compliance to their orders and a Resident Grievance Officer for redressing of the grievances of the consumers on the e-commerce platform, has been proposed.
• This would ensure effective compliance with the provisions of the Act and Rules and also strengthen the grievance redressal mechanism for e-commerce entities.
• Put in place a framework for registration of every e-commerce entity with the Department for Promotion of Industry and Internal Trade (DPIIT) for allotment of a registration number which shall be displayed prominently on the website as well as invoice of every order placed by the e-commerce entity.
• Registration of e-commerce entities would help create a database of genuine e-commerce entities and ensure that the consumers are able to verify the genuineness of an e-commerce entity before transacting through their platform.
• To protect the interests of consumers, mis-selling has been prohibited i.e selling goods and services entities selling goods or services by deliberate misrepresentation of information by such entities about such goods or services.
• To ensure that consumers are aware of the expiry date of the products they are buying on the e-commerce platform all sellers on marketplace e-commerce entities and all inventory e-commerce entities provide the best before or use before the date to enable consumers to make an informed purchase decision.
• To ensure that the domestic manufacturers and suppliers get fair and equal treatment on the e-commerce platform it has been provided that where an e-commerce entity offers imported goods or services, it shall incorporate a filter mechanism to identify goods based on country of origin and suggest alternatives to ensure a fair opportunity to domestic goods.
• To ensure that consumers are not adversely affected in the event where a seller fails to deliver the goods or services due to negligent conduct by such seller in fulfilling the duties and liabilities in the manner as prescribed by the marketplace e-commerce entity, provisions of Fall-back liability for every marketplace e-commerce entity have been provided.