Comments & Suggestions on the Proposed E-Commerce Rules (2021)

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Background

On 23rd July, 2020 the Central Government had notified the Consumer Protection (E-Commerce) Rules, 2020. The Department of Consumer Affairs on 21st June, 2021 published the proposed amendments to Consumer Protection (E-Commerce) Rules, 2020 and had sought views/ comments/ suggestions to be sent within 15 days, i.e., by 6th July, 2021 by email to js-ca@nic.in. Later the last date was extended to 21st July, 2021.

Structure

The comments, suggestions and inputs have been provided in two parts. The first part relates to general comments pertaining to the rules as a whole, and the second part provides specific comments/inputs with respect to specific provisions that have been proposed.

Part I – General Comments and Suggestions

We at BananaIP believe that several provisions of the proposed rule changes may not suit all eCommerce entities in the context of the objectives of Consumer Protection Law to promote competition, encourage formation of new entities, protect consumer interests, and prevent unfair trade practices. Based on our experience and work in the field, we believe that if the proposed rules are applied to all eCommerce entities irrespective of their nature and size, they may have a detrimental effect on business, competition, consumer protection and economic growth. Also, compliance may become too burdensome and the field, over regulated, which may have negative consequences for business progress. In the said context, our general comments/suggestions are as follows:
  1. The proposed amendments require all e-commerce entities irrespective of their size, number of subscribers, revenue, etc. to comply with the proposed rules, which include several compliances that might be burdensome to small entities and startups. Like the differentiation provided in the recently notified intermediary guidelines (Information Technology [Intermediary Guidelines (Amendment) Rules] 2018), the Government may consider differentiating compliance requirements based on the nature, size and status of the e-commerce entity. This may be considered specifically for:
    • Registration under DPIIT (Rule 4), and
    • Appointment of Chief Compliance Officer, Nodal Officer and Grievance Officer (Rule 5).
  2. The proposed amendments focus only on sellers while also covering both goods and services within their scope. The Government may consider including service providers wherever relevant.

Part II – Specific Comments and Suggestions

This section includes specific comments and suggested changes to particular rules. We have made comments with respect to applicability, clarity and scope of a rule wherever relevant. Also, we have proposed specific language changes for consideration of the Department of Consumer Affairs.

Rule 3(d)

(d) “Fall back liability” means the liability of a marketplace e-commerce entity where a seller registered with such entity 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 manner as prescribed by the marketplace e-commerce entity which causes loss to the consumer;

Comment:

The Government may consider including “breach of terms or contract” along with omission and commission as a part of the definition because breach of terms or contract forms an important part of consumer disputes pertaining to e-commerce entities, and fall back liability may be extended to such disputes as well.

Suggested Rule:

“Fall back liability” means the liability of a marketplace e-commerce entity where a seller registered with such entity fails to deliver the goods or services ordered by a consumer due to negligent conduct, breach of terms or contract, omission or commission of any act by such seller in fulfilling the duties and liabilities in the manner as prescribed by the marketplace e-commerce entity which causes loss to the consumer;

Rule 3(e)

(e) “Flash sale” means a sale organized by an e-commerce entity at significantly reduced prices, high discounts or any other such promotions or attractive offers for a predetermined period of time on selective goods and services or otherwise with an intent to draw large number of consumers.
Provided such sales are organised by fraudulently intercepting the ordinary course of business using technological means with an intent to enable only a specified seller or group of sellers managed by such entity to sell goods or services on its platform.

Comment:

This definition may give rise to ambiguity with respect to what exactly amounts to a flash sale, and different terms may be used to make it clear and easy to implement.

Suggested Rule:

“Flash sale” means a sale organized by an e-commerce entity at significantly reduced prices, high discounts or any other means of giving consumers the impression that goods or services are being offered at a highly reduced price or discount for a predetermined period of time on selective goods or services or otherwise with an intent to draw large number of consumers.
Provided such sales are organised by fraudulent or wrongful means in the ordinary course of business using technological measures with an intent to enable only a specified seller or service providers or group of sellers managed by such entity to sell goods or services on its platform.

Rule 5(7)

Where an e-commerce entity offers imported goods or services for sale, it shall:-
(a) mention the name and details of any importer from whom it has purchased such goods or services, or who may be a seller on its platform;
(b) identify goods based on their country of origin, provide a filter mechanism on their e-commerce website and display notification regarding the origin of goods at the pre-purchase stage, at the time of goods being viewed for purchase, suggestions of alternatives to ensure a fair opportunity for domestic goods;
(c) provide ranking for goods and ensure that the ranking parameters do not discriminate against domestic goods and sellers.

Comment:

E-Commerce entities may not be required to suggest any alternatives to goods or services displayed on their platform, as the consumer has a choice to search for multiple products and on multiple platforms before making a choice. Also, this may require certain technological capabilities that all e-commerce entities may not have.

Suggested Rule:

Where an e-commerce entity offers imported goods or services for sale, it shall:-
(a) mention the name and details of any importer from whom it has purchased such goods or services, or who may be a seller on its platform;
(b) identify goods based on their country of origin, provide a filter mechanism on their e-commerce website and display notification regarding the origin of goods at the pre-purchase stage, at the time of goods being viewed for purchase, suggestions of alternatives to ensure a fair opportunity for domestic goods;
(b) provide ranking for goods and ensure that the ranking parameters do not discriminate against domestic goods and sellers.

Rule 6(5)

(5)No logistics service provider of a marketplace e-commerce entity shall provide differentiated treatment between sellers of the same category.
Provided that each logistics service provider of a marketplace e-commerce entity shall provide a disclaimer including terms and conditions governing its relationship with sellers on the marketplace e-commerce entity platform, a description of any differentiated treatment which it gives or might give between sellers of the same category.
Explanation-
Logistics service provider for all extent and purposes of this rule shall be a company engaged in business of providing any one or more services, which include rail/road/sea/air transportation, air cargo, cargo consolidation, ware housing, Inland Container depot, cold chain services, port terminal services or any other such services for the goods and services sold on any marketplace ecommerce entity platform.

Comment:

Though the proviso to the prohibition against differentiation carves out an exception, the prohibition does not include a specific reference to the exception. A change has been proposed to clarify the language.

Suggested Rule:

(5) No logistics service provider of a marketplace e-commerce entity shall provide differentiated treatment between sellers of the same category without a valid basis for such differentiation.
Provided that each logistics service provider of a marketplace e-commerce entity shall provide a disclaimer including terms and conditions governing its relationship with sellers on the marketplace e-commerce entity platform, a description of any differentiated treatment which it gives or might give between sellers of the same category.
Explanation-
Logistics service provider for all extent and purposes of this rule shall be a company engaged in business of providing any one or more services, which include rail/road/sea/air transportation, air cargo, cargo consolidation, ware housing, Inland Container depot, cold chain services, port terminal services or any other such services for the goods and services sold on any marketplace ecommerce entity platform.

Disclaimer

The views, opinions, comments and inputs provided in this document are based on the understanding of, and information available to attorneys and experts at BananaIP Counsels working on eCommerce law matters. It may be noted that opinions of other legal experts may differ from those of BananaIP’s attorneys and experts. The comments, inputs and suggestions are legal research and policy contributions of attorneys and experts of BananaIP Counsels, and the firm is not representing any client or a third party with respect to the comments/inputs provided in this document. Also, it may be noted that views of other attorneys at BananaIP may vary from the opinions of those submitting this document.
About the Author(s):

This post is brought to you by the E-Commerce Law and Consulting/Strategy Divisions of BananaIP Counsels, a Top ranked IP Firm in India. If you have any questions, or need any clarifications, please write to contact@bananaip.com with the subject: eCommerce Post.

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