Consumer Protection (e-commerce) Rules 2020 "EMPOWER IAS"

Context:

• To monitor deep discounts offered on e-commerce websites, the government recently proposed changes to the Consumer Protection (e-commerce) Rules 2020.

 

Background:

• The Ministry of Consumer Affairs mentioned in a statement that, it had been receiving several complaints against widespread cheating and unfair trade practices being observed in the e-commerce ecosystem.
• The draft rules released are broadly in line with the IT intermediary rules announced for social media companies earlier in 2021.
• Original Rules focused on aspects such as transparency about product information to help consumers make informed decisions.

 

Complaint:

• Certain e-commerce entities are engaging in limiting consumer choice by indulging in ‘back-to-back’ or ‘flash’ sales. 
• Wherein one seller 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.

 

Consumer Protection (E-Commerce) Rules, 2020

About:

• The Consumer Protection (E-commerce) Rules, 2020 are mandatory and are not advisories.

Applicability:

• Apply to all e-commerce retailers, whether registered in India or abroad, offering goods and services to Indian consumers.

Nodal officer:

• E-commerce entities need to appoint a nodal person, resident in India to ensure compliance with the provisions of the act or rules.

Prices and Expiry Dates:

• The sellers through the e-commerce entities will have to display the total price of goods and services offered for sale along with the break-up of other charges.
• Expiry date of the good needs to be separately displayed.

 

Importer and Relevant Details:

• All relevant details about the goods and services offered for sale by the Seller including country of origin and in case of imported goods the name and details of the importer, and guarantees related to the authenticity or genuineness of the imported products need to be provided to enable the consumer to make an informed decision at the pre-purchase stage.

 

Grievance Redressal Mechanism:

• Marketplaces, as well as sellers, need to appoint a grievance officer.
  • Marketplace Model of E-commerce: It means providing an information technology platform by an e-commerce entity on a digital and electronic network to act as a facilitator between buyer and seller.

Restriction on Unfair Trade Practice, Manipulation and Discrimination:

• No e-commerce entity shall manipulate the price of goods or services to gain unreasonable profit or discriminate between consumers of the same class or make any arbitrary classification of consumers affecting their rights.

 

Should not Post Fake Reviews or Mislead:

• No seller or inventory e-commerce entity shall falsely represent itself as a consumer and post reviews about goods or services or misrepresent the quality or the features of any goods or services.

No Cancellation Charges:

• No e-commerce entity shall impose cancellation charges on consumers.
• Sellers should not refuse to take back goods, or withdraw or discontinue services if such goods and services are defective, deficient or spurious.

 

Record Information of Sellers Selling Counterfeit Products:

• E-commerce entities need to maintain a record of information for the identification of all sellers who have repeatedly offered goods or services that have previously been removed or restricted under the Copyright Act, 1957, the Trade Marks Act, 1999 or the Information Technology Act, 2000.

 

Penalty:

• The violation of the rules will attract penal action under the Consumer Protection Act, 2019.

 

 

 

• The proposed changes have been put up on the website of the Ministry of Consumer Affairs calling for public comments till 6 July 2021.
• The Ministry clarified that the ‘conventional’ flash sale had not been banned, but that only ‘predatory’ ones would be banned.
  • Conventional flash sales by third party sellers are not banned on e-commerce platform.

• The e-commerce companies would need to register with the Department of Promotion for Industry and Internal Trade (DPIIT). 
• E-commerce companies would also have to share information with the government agency. 
  • Which is lawfully authorised: 
    • For investigative or protective or cyber security activities, 
    • For the purposes of verification of identity, 
    • For the prevention, detection, investigation, or prosecution, of offences under any law for the time being in force and 
    • For cyber security incidents.
• It proposes that the information sought by the Government agency will have to be produced by the e-commerce company within 72 hours of the receipt of an order from the said authority.
• On the lines of IT intermediary rules, the Consumer Affairs Ministry has proposed to mandate e-commerce companies to appoint a grievance officer, a chief compliance officer, and a nodal contact person for 24×7 coordination with law enforcement agencies.
• Any violation of these rules attract penal action under the Consumer Protection Act, 2019.
• The rules are applicable for all goods and services bought or sold over digital or electronic networks, including digital products.
• They are valid for all models of e-commerce, including marketplace and inventory models, including multi-channel single brand retailers and single brand retailers.
• Furthermore, to make the existing e-commerce norms more stringent, the Ministry is looking to ensure that these firms do not use data collected through their business for “unfair advantage” .
  • On this front, the Government has called for disallowing “specific flash sales” on e-commerce platforms.
• A “flash sale” is defined as a sale organised 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.
• Additionally, the proposed rules also look to add to the Centre’s push behind domestic goods.
  • They propose that e-commerce firms should mention the name and details of any importer from whom it has purchased such goods or services.
• These firms will also have to provide alternative suggestions to customers before they make a purchase “to ensure fair opportunity for domestic goods”.
• In December 2018, the Industry Department had published changes to its foreign direct investment policy for e-commerce to tighten loopholes exploited by online marketplaces in previous policies announced by the Centre.
  • These included curbing marketplaces from exercising control over inventory and restricting the relationship between the marketplace and sellers on its platform.
  • In the proposed amendments to e-commerce norms, the Government is looking at bolstering these aspects by mandating that no logistics service provider of a marketplace e-commerce entity shall provide differentiated treatment between sellers of the same category.