E-Commerce consumer protection policy: Small piece of a larger puzzle

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The government has recently opened consultations for the draft E-commerce guidelines for consumer protection, as the Department of Consumer Affairs, under the Ministry of Consumer Affairs, Food and Public Distribution looks to finalize on the guidelines that will regulate the e-commerce sector in India. The policy once implemented is intended to help build customers trust by putting in place various check and balances across the e-commerce ecosystem, for grievances ranging from payment refunds, fake reviews, product quality, etc.

The policy intends to provide guidelines for preventing fraud, unfair trade practices and protecting legitimate rights and interests of consumers. One of the welcome fundamental facets is that the policy proposes to bring equitable treatment amongst both foreign and domestically funded companies. The policy in spirit is positive and sets out a range of laudable measures, however, there needs to measured response to ensure DIPP maintain the right balance between regulating consumer interest while at the same time encouraging entrepreneurship, innovation, growth, and investment opportunities. Some of the key aspects covered in the policy are:

The guidelines require all e-commerce business to have a presence in India as a ‘legal entity’. Mandating a corporate presence in India for the foreign e-commerce websites and apps operating in India will hinder the scheme of facilitating the “ease of doing business in India”. This will directly restrict Indian consumers’ choice and accessibility to global products and services. Further, any reciprocal restriction that may be imposed by other countries in retaliation to this condition in India, would also impact the expansion of Indian entities and products overseas.

The policy seeks to ensure as part of e-commerce entities obligation restricts the adoption of any unfair trade practice/methods for sales promotion, which may influence transactional decisions of consumers of choice of one v/s the others.  Though the intent seems to only restrict the unfair trade practices, it appears that any sales promotion activities could also get covered under this umbrella. This requires clarifications by the government.  Also, to avoid ambiguity, it would be good to have some use case of such unfair trade / promotional activities.

The policy also seeks to ensure that the advertisements are consistent with the products sold over its platform. In the case of the marketplace model of e-commerce, meeting such a requirement would create practical difficulties where millions of seller are listed on these platforms.  It may be virtually impossible for such marketplace entities to vouch and check for each and every product listed on its platform with respect to the actual characteristics, access and usage conditions of the wide range of products sold over its platform. Another way to approach this would be for marketplace players to have compliance contracts with sellers listed on the platform. Having said this, it may be prudent to impose such guidelines for ‘inventory-based’ e-commerce entities as well as the sellers selling on marketplace platforms.

Further, the liability to accept the return of defective, wrong or spurious products, etc., by the e-commerce entities should be restricted only to inventory-based model of e-commerce entities.  Such liability may not be fair to be imposed on a marketplace entity given that the marketplace platform is only a facilitator between the sellers and buyers on the platform.

The draft policy has posed significant onus on e-commerce entities alone. While enforcing this would hold good for inventory based e-commerce entities, it may not be right for the same treatment to be meted out to marketplace e-commerce entities. Marketplace entities business model contrasts in both scale and business model when compared to inventory-based e-commerce entities and implementation of stated policies may be difficult to enforce for the former.

While the policy guidelines for compliance have imposed conditions and responsibilities on e-commerce entities, the consequences for non-compliance have not been prescribed. The government also needs to provide sufficient runway for the policies to take effect.

While it is a step forward that the government is bringing in regulations to help protect consumers, however the lack of a more holistic policy governing the sector still eludes. Larger policies such as data privacy, e-commerce policy, etc need to be tackled on a war footing. While the intent to address various facets of this dynamic sector is acknowledged and present, however, the slow movement on this causing increasing discomfort in the community. We look forward to the governing bodies closely working with industry players to bring a comprehensive policy rather than a piece-meal approach.

DISCLAIMER : Views expressed above are the author’s own.

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