Obligations of Marketplace E-commerce entities and Inventory E-commerce entities.

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The Center has extended the deadline for seeking suggestions on the proposed e-commerce rules till July 21, 2021 according to a notification issued by Center on July 5, 2021. Earlier the Ministry of Consumer Affairs had sought feedback on the proposed amendments to the Consumer Protection (E-Commerce) Rules, 2020, till July 6, 2021.

Highlights of Duties and Liabilities of Marketplace E-commerce and Inventory E-commerce entities:

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 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.

Liabilities of Inventory E-commerce entities:

• To provide information regarding to best use before, contractual information, payment methods, refund and exchange, total price     including other charges and ticket number to track the order and lodge complain.
• Not to misrepresent itself as consumer and post false reviews for the product.
• Not to provide any misleading advertisement
• No inventory e-commerce entity shall refuse to take back goods except for the force majeure conditions.
• To bear the liability of authenticity of a product if vouched explicitly by entity.

The table below showcases bifurcation of duties of Marketplace E-commerce and Inventory E-commerce entities as per the proposed amendments in detail:

Marketplace E-commerce EntityInventory E-commerce Entity
(1) A marketplace e-commerce entity which seeks to avail the exemption from liability
under sub-section (1) of section 79 of the Information Technology Act, 2000 (21
of 2000) shall comply with sub-sections (2) and (3) of that section, including the provisions of the Information Technology (Intermediary Guidelines) Rules,
2011.
(1) Every inventory e-commerce entity shall provide the following information in a clear and accessible manner, displayed prominently to its users:
• Best before use
• Mandatory information and notices
• Payment method
• Contractual information
• Total price
• Ticket number for tracking and complain
(2) Every marketplace e-commerce entity shall require sellers through an undertaking to ensure that descriptions, images, and other content pertaining to goods or services on their platform is accurate and corresponds directly with the appearance, nature, quality, purpose and other general features of such good or service.(2) No inventory e-commerce entity shall falsely represent itself as a consumer and post reviews about goods and services or misrepresent the quality or the features of any goods or services.
(3) Every marketplace e-commerce entity shall provide the following
information in a clear and accessible manner, displayed prominently to its users
at the appropriate place on its platform:
• Country of origin
• Ticket number to track or complain
• Best use before date
• Payment methods
• Ranking of goods
(3) Every inventory e-commerce entity shall ensure that the advertisements for marketing of goods or services are consistent with the actual characteristics, access and usage conditions of such goods or services
(4) Every marketplace e-commerce entity shall include in its terms and conditions generally governing its relationship with sellers on its platform, a description of any differentiated treatment which it gives or might give between goods or services or sellers of the same category.(4) No inventory e-commerce entity shall refuse to take back goods, or withdraw or discontinue services purchased or agreed to be purchased, or refuse to refund consideration, if paid, if such goods or services are defective, deficient spurious, or if the goods or services are not of the characteristics or features as advertised or as agreed to, or if such goods or services are delivered late from the stated delivery schedule:
Provided that in the case of late delivery, this sub rule shall not apply if such late
delivery was due to force majeure.
(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.
(5) Any inventory e-commerce entity which explicitly or implicitly vouches
for the authenticity of the goods or services sold by it, or guarantees that such
goods or services are authentic, shall bear appropriate liability in any action
related to the authenticity of such good or service.
(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
(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.
(10) Every marketplace e-commerce entity shall take reasonable efforts to maintain a record of relevant information allowing for the identification of all sellers who have repeatedly offered goods or services that have previously been removed or access to which has previously been disabled under the Copyright Act, 1957 (14 of 1957), the Trade Marks Act, 1999 (47 of 1999) or the
Information Technology Act, 2000 (21 of 2000)
The table below showcases bifurcation of duties of Marketplace E-commerce and Inventory E-commerce entities in accordance with Proposed Amendments to Consumer Protection (E-commerce) rules 2020

Understanding of E-commerce and its models:

As per Consumer Protection (E-commerce) rules Section 3(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.

As per Consumer Protection (E-commerce) rules Section 3(f) Inventory e-commerce entity means an e-commerce entity which owns the inventory of goods or services and sells such goods or services directly to the consumers and shall include single brand retailers and multi-channel single brand retailers.

As per Consumer Protection (E-commerce) rules Section 3(g) Marketplace e-commerce entity means an e-commerce entity which provides an information technology platform on a digital or electronic network to facilitate transactions between buyers and sellers.

IndicatorsMarketplace E-commerce ModelInventory E-commerce model
DefinitionsAccording to the FDI policy guideline, “Marketplace model of e-commerce means providing of an information technology platform by an e-commerce entity on a digital and electronic network to act as a facilitator between buyer and seller.”According to the FDI policy, “Inventory model of ecommerce means an ecommerce activity where inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly.”
Model structureIt is a platform that enables a large, fragmented base of buyers and sellers to discover price and transact with one another in an environment that is efficient, transparent and trusted.The main feature of inventory model is that the customer buys the product directly from the ecommerce entity.
ManagementInventory, stock management, logistics etc are not supposed to be actively done by the ecommerce entity.The Entity manages an inventory (stock of products), interfaces with customers, runs logistics and involves in every aspects of the business.
UsersThree distinct users: Admin, Seller and BuyerTwo users: Admin and Buyers
ExamplesAmazon, FlipkartNaaptol, Ebay

 


Authored and compiled by Naika Salaria  (Junior IP Associate, BananaIP Counsels)

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