Govt clarifications needed to prevent e-commerce rules from becoming a compliance nightmare

August 25, 2020 5:40 AM

The govt needs to bring out necessary clarifications to prevent the e-commerce rules from becoming counter-productive and a compliance nightmare

Displaying payment information, customer consent, shipping policies and liabilities of an e-commerce entity further add to ambiguity in many sectors that do not sell goods.Displaying payment information, customer consent, shipping policies and liabilities of an e-commerce entity further add to ambiguity in many sectors that do not sell goods.

By Rameesh Kailasam & Priyanka Mathur

On July 20, the old Consumer Protection Act, 1986 (COPRA) was replaced by the new Consumer Protection Act, 2019 (CPA) bringing changes that significantly empowered the consumer. The new Act strengthens consumer protection and significantly enhances the functioning, jurisdiction and powers for consumer courts besides introduction of authorities and severe punishment for misleading ads, injury from adulteration and spurious goods and product liability.

Since e-commerce is a fast emerging form in the country and in recent years a significant amount of consumer-related issues have been piling up with the ministry of consumer affairs, the e-Commerce Rules, 2020 under the CPA were notified. The CPA defines ‘e-commerce’ under Section 2(16), as “buying or selling of goods or services including digital products over digital or electronic network, and further, the Rule 3(b) defines “e-commerce entity” to mean 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. The remaining Rules 3(f)(g)(i)(l) define inventory, marketplace, platform, user with elaboration on a single brand, multi-brand and form of online interface. These definitions are read with references to the IT Act 2000 for expressions not defined specifically to include everyone in the online world.

While the rules seem to lean towards a one-size-fits-all approach covering goods and services sold online, however, at various places the language seem to more perfectly fit online retail goods. This puts many start-ups and unicorns not selling goods but offering services in the online space in a spot as they conflict with their existing sectoral regulations and regulatory compliances. While the overall intent of providing adequate safeguards to customers from faceless and contactless sellers was well intentioned, the regulations seem to miss some practical challenges businesses would face while attempting to comply.

While the rules apply to companies, there are LLP’s, co-operative societies operating an online marketplace space that are not covered. Various clauses relating to counterfeit goods, accepting the return of goods, shipping policies, cannot be applicable to online service players as they sell or ship no goods. Online insurance web aggregators as per the IRDAI are not supposed to display ratings, rankings, endorsements or best sellers of insurance products on their website.

This may put them in direct conflict with the new e-commerce rules that require businesses to do so and clearly detail out reasons. The rules also do not identify an “agency model” of e-commerce where a platform merely acts as a facilitator between the service provider and end-user. Service providers have a limited role in determining prices, terms of services, refunds, grievance redressal, etc. There is also ambiguity on other aspects such as the definition of a “digital product”. What happens in a situation where a social media platform which is a free to use and provides certain additional features for an enhanced experience to its customer?

Mandating email, address, fax, landline, mobile of customer care of grievance officer can become an over compliance as modes like fax, landline is either obsolete or unavailable in some places. A fully functional customer support, 48 hours turnaround may not work for many sectors that do not require exhaustive assistance.

Displaying payment information, customer consent, shipping policies and liabilities of an e-commerce entity further add to ambiguity in many sectors that do not sell goods.

There is surely a definitive need for online businesses to initiate necessary actions in response to grievances and follow ethical business practices, however, this should not result in burdening businesses with over-regulation or impractical compliances and a balanced practical approach is the need of the hour to promote “ease of doing business”.

The ministry needs to bring out necessary clarifications maybe as an FAQ to prevent the rules from becoming counter-productive and a compliance nightmare for many consumer internet-based service providers and social media companies, which are different from a goods-based e-commerce service entity.

Kailasam is CEO and Mathur is Manager, Policy at Views are personal

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