Comments on proposed amendments to the Consumer Protection (E-Commerce) Rules, 2020

The Consumer Protection (E-commerce) Rules, 2020 were first introduced in an attempt to ensure that consumers were granted adequate protections and to prevent the adoption of unfair trade practices by E-commerce entities. The amendments have proposed several rules which will protect the consumer with a restriction on misleading advertisements and appointment of grievance officers based in India. However, while on this path, the proposed rules have created hurdles in the operations of e-commerce, reducing the ease of business and increasing the costs of operations especially for smaller players; which could eventually pass on to the consumers.

In our submission to the Ministry of Consumer Affairs, we focussed our analysis on eight points: Definitions and Registration, Compliance, Data Protection and Surveillance, Flash Sales, Unfair Trade Practices, Jurisdictional Issues with Competition Law, Compliance with International Trade Law and Liabilities of Marketplace E-commerce Entities. 

A snapshot of our recommendations and analysis is listed out below. To read our full submission, please click here.

Definitions and Registrations

The registration of entities with the DPIIT must be made as smooth as possible especially considering the wide definition of E-commerce entities in the rules, which may include smaller businesses as well. In particular, we suggested doing away with physical office visits. 

Compliance

As a general observation, compliance obligations should be differentiated based on the size of the entity and the volume of transactions rather than adopting a ‘one size fits all’ approach which may harm smaller businesses, especially those that are just starting up. Before these rules come into force, further consultations with small and medium-sized business enterprises would be vital in ensuring that the regulation is in line with their needs and does not hamper their growth. Excessive compliance requirements may end up playing into the hands of the largest players as they would have larger financial coffers and institutional mechanisms to comply with these obligations.

There is some confusion in the law as to whether the Chief Compliance officer mentioned in the amended rules is the same as the “nodal person of contact or an alternate senior designated functionary who is resident of India” under Rule 5(1).

The safe harbour should therefore refer to due diligence by the CCO and not the e-commerce entity itself. The requirement for the compliance officer to be an Indian citizen who is a resident and a senior officer or managerial employee may place an undue burden on small E-commerce players not located in India. 

Data Protection and Surveillance

In the absence of a Personal Data protection bill these rules do not adequately protect consumers’ personal data and reduce the powers given to the Central Government to access data or conduct surveillance

Flash Sales 

Conventional flash sales should be defined. Clear distinction must be made between conventional flash sales and fraudulent flash sales. The definition should not be limited to interception of business “using technological means”, which limits the scope of the fraudulent flash sales. Further parameters must be provided for when a flash sale will be considered a fraudulent flash sale. 

Unfair Trade Practices 

The rules place restrictions on marketplace E-commerce entities from selling their own goods or services or from listing related enterprises as sellers on their platforms. No such restriction applies to brick and mortar stores, and this blanket ban must be rethought. 

 Jurisdictional Issues with Competition Law 

This rule brings the issue of ‘abuse of dominant power’ under the fora of the Consumer Protection Authority or the Consumer Disputes Redressal Commissions.  Overlapping jurisdiction of this nature could introduce regulatory delays into the dispute resolution process and  can be a source of tension for the parties and regulatory authorities. The intention behind importing a competition law concept such as “abuse of dominant position” in the consumer protection regulations may be understandable, such a step might be effective in jurisdictions which have a common regulatory authority for both competition law as well as consumer protection issues, such as Australia, Finland, Ireland, Netherlands. However, in a country such as India which has completely separate regulatory mechanisms for competition and consumer law issues, such a provision may lead to logistical difficulties.

Compliance with International Trade Law 

A robust framework on ranking with transparent disclosure of parameters for the same would also go a long way towards addressing concerns with discrimination and national treatment under WTO law. Further, the obligation to provide domestic alternatives should be clarified and amended to ensure that it does not cause uncertainty and open India up to a national treatment challenge  at the WTO.

Liabilities of Marketplace E-commerce Entities

Fallback liability is an essential component of consumers’ protection in the E-commerce space. However, as currently envisioned there is a lack of clarity surrounding the extent to which fallback liability is applicable on E-commerce entities as well as exemptions to this liability. We have recommended alternate approaches adopted in other jurisdictions, which include

1. Liability through negligence

2. Liability as an exemption to safe harbour