Consumer Protection (E-Commerce) Rules, 2020 – Proposed Amendments (2021)

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INTRODUCTION

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 has sought views/ comments/ suggestions to be sent within 15 days, ie., by 6th July, 2021 by email to js-ca@nic.in.

In summary the amendments proposed are as follows:

  • Registration of entities with DPIIT shall be mandatory
  • Chief Compliance Officer, Nodal Contact Person and Grievance Officer shall be mandatory
  • Information to be provided within 72 hours of receipt of order from government agency
  • Ban on misleading users by manipulating search results
  • Ban on fraudulent flash sales and mis-selling
  • Mandate to provide details about country of origin and best before or use before date

HIGHLIGHTS OF THE PROPOSED AMENDMENTS

1. Registration

As per Rule 4, every e-commerce entity (any person who owns, operates or manages digital or electronic facility or platform for electronic commerce) intending to operate in India shall have to register itself with the Department for Promotion of Industry and Internal Trade (DPIIT).

2. Duties of the e-commerce entities

  • To not allow any display or promotion of misleading advertisement either in the course of business on its platform or otherwise.
  • To appoint a Chief Compliance Officer responsible for ensuring compliance with the Act.
  • To appoint nodal contact person for 24×7 coordination with law enforcement agencies and officers.
  • To appoint a Resident Grievance Officer.
  • To set up an adequate grievance redressal mechanism and publish name of the Grievance Officer and his contact details on its website, mobile application, or both.
  • The Grievance Officer shall receive and acknowledge any order, notice or direction issued by the Appropriate Government, any competent authority or a court of competent jurisdiction.
  • While offering imported goods and services for sale the e-commerce entity must mention the name and details of any importer, identify goods and provide filter mechanism based on country of origin and provide ranking for goods and ensure whilst ensuring that the ranking mechanism doesn’t discriminate against domestic goods.
  • To not indulge in mis-selling (by deliberate misrepresentation of information suiting the user) of goods and services offered on its platform.
  • E-commerce entities engaged in cross-selling (related, adjacent or complimentary to a purchase made by a consumer), shall provide adequate disclosures to its users in clear and accessible manner on its platform. (refer SNo. 2 and 13 of the table below)
  • To not mislead users by manipulating search results or search indexes having regard to search query of the user.
  • To use the name or brand associated with the e-commerce entity for offer for sales or promotion, suggestive of such association.
  • To not pre-record automatically, including in the form of pre-ticked checkboxes, consent of the consumer to share their information with anyone else. The consent so given must be express and affirmative consent.
  • To not use information collected by market e-commerce entities amounting to unfair trade practices or impinging consumer’s interest.
  • To ensure that sponsored listing of products and services are distinctly identified with clear and prominent disclosures.
  • To not organize a flash sale of goods or services offered on its platform.
  • Any e-commerce entity which holds a dominant position in any market should not abuse its position.
  • To provide any information under its control and possession within 72 hours of the receipt of an order from any competent authority. (Rule 5(16))
  • To display the name of the seller in the invoice prominently in the same size and font as that of the e-commerce entity.

3. Liabilities of marketplace e-commerce entities:

  • To provide information about the country of origin, best before or use before date prominently to its users.
  • The logistics service provider of a marketplace e-commerce entity shall not provide differential treatment to sellers of same category.
  • To ensure that it does not use any information collected through its platform for unfair advantage of its related parties and associated enterprises.
  • To ensure that none of its related parties and associated enterprises are enlisted as sellers for sale to consumers directly. To also ensure that nothing is done by related parties or associated enterprises which the e-commerce entity cannot do itself.
  • To not sell goods or services to any person who is registered as seller on its platform.
  • To not advertise a body of sellers for the purpose of subsidizing a sale on its platform.
  • If 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 manner as prescribed by the marketplace e-commerce entity which causes loss to the consumer, the entity shall be subject to a fall-back liability.

4. Duties of seller in a marketplace

Seller offering goods or services for sale must provide the marketplace e-commerce entity details about best before or use before date, information related to return, refund, exchange, expiration date, details of best before usage, warranty and guarantee, delivery and shipment, cost and return shipping, mode of payments, and any other similar information which are necessary for enabling the consumer to make an informed decision at the pre-purchase stage.

Provided below is a table summarizing the amendments proposed to the Consumer Protection (E-Commerce) Rules, 2020

 

SNO. RULE EARLIER RULE PROPOSED AMENDMENT
1. 3. Definitions:

(b) e-commerce entity

(b) “e-commerce entity” means 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. (b) “e-commerce entity” means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce including any entity engaged by such person for the purpose of fulfilment of orders placed by a user on its platform and any ‘related party’ as defined under Section 2(76) of the Companies Act, 2013, but does not include a seller offering his goods or services for sale on a marketplace e-commerce entity
2. 3(c) defined cross-selling Newly added subrule (c) “Cross-selling” means sale of goods or services which are related, adjacent or complimentary to a purchase made by a consumer at a time from any ecommerce entity with an intent to maximise the revenue of such e-commerce entity;
3. 3(d) defined fall back liability Newly added subrule (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;
4. 3(e) defined flash sale Newly added subrule

(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.

5. 3(k) defined mis-selling Newly added subrule

(k) “mis-selling” means an e-commerce entity selling goods or services by deliberate misrepresentation of information by such entity about such goods or services as suitable for the user who is purchasing it.

Explanation: Misrepresentation here means:–

(i) the positive assertion, in a manner not warranted by the information of any entity making it, of that which is not true;

(ii) any display of wrong information, with an intent to deceive, gain an advantage to the e-commerce entity committing it, or any seller claiming under it; by misleading consumer to the prejudice of e-commerce entity, or to the prejudice of anyone claiming under it;

(iii) causing, however innocently, a consumer to purchase such goods or services, to make a mistake as to the substance of the thing which is the subject of the purchase

6. 4. Registration of e-commerce entities.:

 

e-commerce entity operating in India shall mandatorily register with DPIIT

Newly added section

4. Registration of e-commerce entities. —

(1) Every e-commerce entity which intends to operate in India shall register itself with the Department for Promotion of Industry and Internal Trade (DPIIT) within such period as prescribed by DPIIT for allotment of a registration number. Provided that the DPIIT may extend the period for registration of such ecommerce entity for sufficient reason, to be recorded in writing.

(2) Every e-commerce entity shall ensure that such registration number and invoice of everyday order is displayed prominently to its users in a clear and accessible manner on its platform.

7.

5. Duties of e-commerce entities:

Sub rule (1)

(1) Where an e-commerce entity is a company incorporated under the Companies Act, 1956 (1 of 1956) or the Companies Act, 2013 (18 of 2013) or a foreign company covered under clause (42) of section 2 of the Companies Act, 2013 (18 of 2013) an office, branch or agency outside India owned or controlled by a person resident in India as provided in sub-clause (iii) of clause (v) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999), it shall appoint a nodal person of contact or an alternate senior designated functionary who is resident in India, to ensure compliance with the provisions of the Act or the rules made there under.

(1) Where an e-commerce entity is a company incorporated under the Companies Act, 1956 (1 of 1956) or the Companies Act, 2013 (18 of 2013) or a foreign company covered under clause (42) of section 2 of the Companies Act, 2013 (18 of 2013) or Partnership incorporated under the Indian Partnership Act, 1932 (9 of 1932) or a Limited Liability Partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) an office, branch or agency outside India owned or controlled by a person resident in India as provided in sub-clause (iii) of clause (v) of Section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999), it shall appoint a nodal person of contact or an alternate senior designated functionary who is resident in India, to ensure compliance with the provisions of the Act or the rules made there under.

8.

5. Duties of e-commerce entities:

New sub rule (4)

Newly added sub-rule

(4) No e-commerce entity shall allow any display or promotion of misleading advertisement whether in the course of business on its platform or otherwise.

9.

5. Duties of e-commerce entities:

Old sub rule (4)

(4) Every e-commerce entity shall establish an adequate grievance redressal mechanism having regard to the number of grievances ordinarily received by such entity from India, and shall appoint :a grievance officer for consumer grievance redressal, and shall display the name, contact details, and designation of such officer on its platform.

(5) Every e-commerce entity shall establish an adequate grievance redressal mechanism having regard to the number of grievances ordinarily received by such entity from India, and shall:

(a) appoint a Chief Compliance Officer who shall be responsible for ensuring compliance with the Act and rules made thereunder and shall be liable in any proceedings relating to any relevant third-party information, data or communication link made available or hosted by that e-commerce entity where he fails to ensure that such entity observes due diligence while discharging its duties under the Act and rules made there under:

Provided that no liability under the Act or rules made thereunder may be imposed on such e-commerce entity without being given an opportunity of being heard.

Explanation. — For the purpose of this clause “Chief Compliance Officer” means managerial personnel or such other senior employee of an e-commerce entity who is a resident and citizen of India

(b) appoint a nodal contact person for 24×7 coordination with law enforcement agencies and officers to ensure compliance to their orders or requisitions made in accordance with the provisions of law or rules made thereunder.

Explanation. — For the purpose of this clause “nodal contact person” means employee of an e-commerce entity, other than the Chief Compliance Officer, who is resident in India and a citizen of India;

(c) appoint a “Resident Grievance Officer”, who shall, subject to clause (b), be responsible for the functions referred to in sub-rule (2) of rule 3.

Explanation. — For the purpose of this clause, “Resident Grievance Officer”means the employee of an e-commerce entity, who is resident and a citizen of India;

(d) Grievance redressal mechanism of e-commerce entity:

(a)The e-commerce entity shall prominently publish on its website, mobile based application or both, as the case may be, the name of the Grievance Officer and his contact details as well as mechanism by which a user may make complaint against violation of the provisions of this rule or any other matters pertaining to the resources and services made available by it on its platform , and the Grievance Officer shall –

(i) receive and acknowledge any order, notice or direction issued by the Appropriate Government, any competent authority or a court of competent jurisdiction.

10.

5. Duties of e-commerce entities:

Old sub rule (6)

(6)Where an e-commerce entity offers imported goods or services for sale, it shall 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.

This sub-rule has been deleted
11.

5. Duties of e-commerce entities:

New sub rule (7)

Newly added sub-rules

(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.

12.

5. Duties of e-commerce entities:

Old sub rule (7)

(7) Every e-commerce entity shall become a partner in the convergence process of the National Consumer Helpline of the Central Government. (8) Every e-commerce entity shall endeavour on a best effort basis to become a partner in the convergence process of the National Consumer Helpline of the Central Government.
13.

5. Duties of e-commerce entities:

New sub rules (11) & (12)

Newly added sub-rule

(11) No e-commerce entity shall indulge in mis-selling of goods or services offered on its platform.

(12) An e-commerce entity which is engaged in cross-selling of goods or services shall provide adequate disclosure to its users displayed prominently in a clear and accessible manner on its platform:

(a) Name of the entity providing data for cross-selling,

(b) Data of such entity used for cross-selling

14.

5. Duties of e-commerce entities:

Old sub rule (11)

(11) No e-commerce entity shall-

(a) manipulate the price of the goods or services offered on its platform in such a manner as to gain unreasonable profit by imposing on consumers any unjustified price having regard to the prevailing market conditions, the essential nature of the good or service, any extraordinary circumstances under which the good or service is offered, and any other relevant consideration in determining whether the price charged is justified;

(b) discriminate between consumers of the same class or make any arbitrary classification of consumers affecting their rights under the Act;

(14) No e-commerce entity shall-

(a) manipulate the price of the goods or services offered on its platform in such a manner as to gain unreasonable profit by imposing on consumers any unjustified price having regard to the prevailing market conditions, the essential nature of the good or service, any extraordinary circumstances under which the good or service is offered, and any other relevant consideration in determining whether the price charged is justified;

(b) discriminate between consumers of the same class or make any arbitrary classification of consumers affecting their rights under the Act;

(c) mislead users by manipulating search result or search indexes having regard to the search query of the user;

(d) permit usage of the name or brand associated with that of the marketplace e-commerce entity for promotion or offer for sale of goods or services on its platform in a manner so as to suggest that such goods or services are associated with the marketplace e-commerce entity;

(e) make available any information pertaining to the consumer to any person other than the consumer without the express and affirmative consent of such consumer, no such entity shall record such consent automatically, including in the form of pre-ticked checkboxes;

(f) use information collected by marketplace e-commerce entities, for sale of goods bearing a brand or name which is common with that of the marketplace e-commerce entity or promote or advertise as being associated with the marketplace e-commerce entity, if such practices amount to unfair trade practice and impinges on the interests of consumers.

15.

5. Duties of e-commerce entities:

New sub rules (15), (16), (17), (18) & (19)

Newly added sub-rules

(15) Every e-commerce entity shall ensure that sponsored listing of products and services are distinctly identified with clear and prominent disclosures.

(16) No e-commerce entity shall organize a flash sale of goods or services offered on its platform.

(17) No e-commerce entity which holds a dominant position in any market shall be allowed to abuse its position.

Explanation – For the purpose of this clause “abuse of dominant position” shall have the same meaning as prescribed under Section 4 of the Competition Act, 2002.

(18) Every e-commerce entity shall, as soon as possible, but not later than seventy two hours of the receipt of an order, provide information under its control or possession, or assistance to the Government agency which is lawfully authorised for investigative or protective or cyber security activities, for the purposes of verification of identity, or for the prevention, detection, investigation, or prosecution, of offences under any law for the time being in force, or for cyber security incidents:

Provided that any such order shall be in writing clearly stating the purpose of seeking information or assistance, as the case may be.

(19) Every e-commerce entity shall display clearly and prominently in its invoice the name of the seller in the same font size as that of the e-commerce entity’s name

16.

(old rule 5)

6. Liabilities of marketplace e-commerce entities

5.(3)(a) details about the sellers offering goods and services, including the name of their business, whether registered or not, their geographic address, customer care number, any rating or other aggregated feedback about such seller, and any other information necessary for enabling consumers to make informed decisions at the pre-purchase stage; 6.(3)(a) details about the sellers offering goods and services, including the name of their business, whether registered or not, country of origin, their geographic address, customer care number, any rating or other aggregated feedback about such seller, and any other information necessary for enabling consumers to make informed decisions at the pre-purchase stage;
17.

(Old 5(3)(c))

New 6(3)(c)

(c) information relating to return, refund, exchange warranty and guarantee delivery and shipment, modes of payment, and grievance redressal mechanism, and any other similar information which may be required by consumers to make informed decisions;

(c) information relating to return, refund, exchange warranty and guarantee, best before or use before date delivery and shipment, modes of payment, and grievance redressal mechanism, and any other similar information which may be required by consumers to make informed decisions;
18. New sub-rules (5), (6), (7), (8) & (9) added to rule 6 Newly added sub-rules

(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.

(6) Every marketplace e-commerce entity shall—

(a) ensure that it does not use any information collected through its platform for unfair advantage of its related parties and associated enterprises;

(b) ensure that none of its related parties and associated enterprises are enlisted as sellers for sale to consumers directly;

(c) ensure that nothing is done by related parties or associated enterprises which the e-commerce entity cannot do itself;

Explanation:-

(i) Related parties shall have the same meaning as assigned to it in section 2(76) of the Companies Act, 2013;

(ii) Two enterprises shall be deemed to be associated enterprises, if-

(a) enterprises are related to each other through a common chain of directors or managing partners;

(b) 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;

(c) enterprises having 10 per cent or more common ultimate beneficial ownership;

(d) 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;

(e) where one enterprise holds, directly or indirectly, shares carrying the voting power in the related entities;

(f) where any person or enterprise holds, directly or indirectly, shares carrying the voting power in the related entities;

(g) there exists between the enterprises, any relationship of mutual interest, as may be prescribed.

(7) No marketplace e-commerce entity shall sell goods or services to any person who is registered as seller on its platform;

(8) No marketplace e-commerce entity shall advertise a body of sellers for the purpose of subsidizing a sale on its platform;

(9) A marketplace e-commerce entity shall 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 manner as prescribed by the marketplace e-commerce entity which causes loss to the consumer.

19.

(Old rule 6)

New rule 7

6.(5)(d) all relevant details about the goods and services offered for sale by the seller including country of origin which are necessary for enabling the consumer to make an informed decision at the pre-purchase stage;

7.(5)(d) all relevant details about the goods and services offered for sale by the seller including country of origin best before or use before date, information related to return, refund, exchange, expiration date, details of best before usage, warranty and guarantee, delivery and shipment, cost and return shipping, mode of payments, and any other similar information which are necessary for enabling the consumer to make an informed decision at the pre-purchase stage;
20.

(Old Rule 7)

New Rule 8

(1) Every inventory e-commerce entity shall provide the following information in a clear and accessible manner, displayed prominently to its users:

(a) accurate information related to return, refund, exchange, warranty and guarantee, delivery and shipment, cost of return shipping, mode of payments, grievance redressal mechanism, and any other similar information which may be required by consumers to make informed decisions;

(1) Every inventory e-commerce entity shall provide the following information in a clear and accessible manner, displayed prominently to its users:

(a) accurate information related to return, refund, exchange, best before or use before date, warranty and guarantee, delivery and shipment, cost of return shipping, mode of payments, grievance redressal mechanism, and any other similar information which may be required by consumers to make informed decisions;

 

 

Read our Comments and  Suggestions here

Read Obligations of Marketplace E-commerce entities and Inventory E-commerce entities here


About the Author

Authored and compiled by Kavya Sadashivan (Junior IP Associate, BananaIP Counsels)

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

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