By Rupin Chopra and Apalka Bareja
Shopping, as an activity, is one which has seen huge paradigm shifts in the last decade or so in India. The terms AMAZON.IN, FLIPKART, NYAKAA, MYNTRA, etc., are now synonymous with shopping. E-commerce is the reality of the world of shopping, with the influence and market share of traditional brick-and-mortar stores slowing eroding away.
However, with great power, comes great responsibility, as immortalized in the iconic Spiderman movies. In this context, the responsibility of e-commerce websites and entities can be construed as the plethora of compliances that the said entities have to adhere to.
What is an e-commerce entity?
An e-commerce entity can be described as any platform that is being used for conducting electronic commerce. An e-commerce entity also refers to an individual who owns, operates or manages any digital or electronic facility. This categorization however does not include a seller who is offering his goods or services for sale on a marketplace e-commerce entity.
An e-commerce entity has to be incorporated under the Companies Act, 2013 or if it is a foreign company with an office, branch or agency which is being controlled by a resident in India then as provided under the Foreign Exchange Management Act, 1999.
Compliances to be followed by an e-commerce website
There are some general compliances which all e-commerce websites have to adhere to, such as use of fair-trade practices whether in the course of business on its platform or otherwise, establishment of an adequate redressal mechanism, should not manipulate the prices of the goods or services offered by an e-commerce website on its platform etc. as to gain unreasonable profit or discriminate between consumers of the same class or make any arbitrary classification with respect to the consumers, etc. However, there are certain specific compliances for different types of e-commerce entities, with the types being –
- Marketplace E-commerce entities – these are the type of e-commerce entities which provide a digital platform or create a digital or electronic network to bring buyers and sellers together and facilitate transactions between the two through an IT platform.
- Inventory E-commerce entities – these are the type of e-commerce entities which themselves own the inventory of goods or services and such goods or services are sold directly to the consumers. These types of entities can include single brand retailers and multi-channel single brand retailers depending upon the business model.
Compliances for a marketplace e-commerce entity
A marketplace e-commerce entity can be considered as an intermediary between the seller and the consumers and therefore there are a lot of things that need to be regulated in order to create a harmonious platform to facilitate business transactions between the two. The usage of the term ‘intermediary’ herein isn’t to be taken lightly – as an intermediary has a set definition under the Information Technology (IT) Act, 2000. As such, intermediaries are also eligible to certain protection from liability as per Section 79 of the IT Act.
A marketplace e-commerce entity has to keep a check on the business practices of the sellers as well as itself and protect and work towards what’s in the best interests of the customers. Therefore, these marketplaces have to comply with even more compliances as compared to an inventory e-commerce entity.
Every marketplace e-commerce entity has to comply with the regulation of requiring the sellers to sign an undertaking to ensure that the descriptions, images, and other content in regard to the 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.
Information has to be displayed by a marketplace e-commerce entity in a clear and accessible manner and must be prominently visible to its users at the appropriate places. So as to help the consumer to make an informed choice details regarding delivery, shipment, warranty, guarantee, refund, exchange, payment mode must be clearly and accurately presented on the platform. More recently, new compliances such as the goods’ country of origin, have to be mentioned on e-commerce listings.
The sellers are given ratings based upon certain criteria’s which might include customer reviews, product quality, delivery, etc. The explanation of such mechanism or parameters for such classification determining the ranking of the sellers must be publicly available and be described in a plain and intelligible language. A marketplace e-commerce entity sometimes provides a differentiated treatment to a particular good or service between the sellers of the same category, therefore such entity should provide a description in its terms and conditions governing the entity’s relationship with the sellers on its platform.
The marketplace e-commerce entity should ensure that all the sellers on its platform are complying with the duties and compliances placed on the sellers and are abiding by the Consumer protection (E-commerce) Rules, 2020 as well as the Consumer Protection Act, 2019.
The working mechanism of a market place e-commerce is such that a large number of buyers and sellers from all around the world communicate within a common online space over the internet. Therefore, it is necessary for a proper grievance redressal mechanism to be developed by a marketplace e-commerce entity for addressing the grievances of its customers online. A grievance officer must be appointed by the seller who acknowledges receipt of any consumer complaint received within forty-eight hours and redresses the complaint within one month from the date of receipt of the complaint.
If a request has been made by a consumer, in writing, who after a purchase from the platform wants to inquire and gain information about the seller from which the consumer has made the purchase, then such information should be provided by a marketplace entity to the consumer for communication with the seller ultimately leading to an effective dispute resolution mechanism.
Compliances for an inventory e-commerce entity
There are certain standards to which such online e-commerce platforms have to adhere to with respect to the quality, information, returns, etc. as well as the way they conduct their business. It is very important that the information provided online is provided in a conspicuous way so as to prevent any chances of misinformation and misunderstanding. It is the duty of every inventory e-commerce entity to display the information to its users in a clear, accessible and prominent manner.
Accurate information regarding the refund, return policies, warranty and guarantee policies, delivery and shipment, cost of such services, along with the modes of payment available or any other similar information which may be required by the consumers must be present so that the customer can make an informed choice.
The grievance redressal mechanism on an inventory e-commerce website must be simple and effective and should be easy to access. The contractual information required to be disclosed by law must be present on the platform in case anyone wants to read it.
The price must be displayed in a non-ambiguous way. The total price of any good or service must be presented in a single figure along with the breakup price. All the charges such as delivery charges, postage, etc both voluntary and involuntary must also be showed properly.
An inventory e-commerce entity should not misrepresent the quality or the features of any goods or services and must not falsely represent itself as a consumer and post reviews about the goods and services being offered on its platform.
Advertisements done on the platform must be true and in consonance with the actual characteristics, access and usage conditions of such goods and services.
If the goods or services provided by an inventory e-commerce entity are defective or 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, then the entity cannot refuse to take back the goods, or withdraw or discontinue the services purchased or agreed to be purchased, or refuse to refund consideration, if already paid by the consumer. In such case a proper mechanism should be developed to make the necessary rectifications by the e-commerce entity.
If any inventory e-commerce website vouches or promotes the authenticity of the goods or services sold by the platform, whether explicitly or implicitly and if anything is proved as to be in contravention to this standing, for example if the goods are not authentic or duplicate in nature or of inferior quality as compared to that which being advertised and promoted by the platform, then the platform will be appropriately liable to its customers.
These are some of the compliances that an e-commerce entity must comply with and also ensure that the same are being followed by the sellers (on their portals) in case of marketplace e-commerce entity as well. The main objective of such compliances is to regulate how goods and services are bought or sold online or on a digital platform or network, and to protect the rights of the customers.
With the ever increasing number of e-commerce portals/ websites/ platforms in India, with up and coming businesses and entrepreneurs also opting to start their business via e-commerce rather than other traditional modes, it is more important than ever to be aware of the various compliances that one must adhere to while planning to open an e-commerce business, whether as a marketplace or as an inventory e-commerce entity.
There are many aspects of compliances that one must be aware of – from GST registration, to data protection mechanisms and policies, to adherence with competition (antitrust) rules and regulations. Such compliances are ever increasing and businesses must keep abreast of such developments, to avoid being in default. For instance, as per recent developments, an e-commerce entity, which while proving goods in India, is however located outside India, must have a Nodal Officer.
 The Consumer Protection (E-Commerce) Rules, §2 (b), Central Government, 2020
 The Consumer Protection (E-Commerce) Rules, §4 (1) (a), Central Government, 2020
 The Consumer Protection (E-Commerce) Rules, §2 (g), Central Government, 2020
 The Consumer Protection (E-Commerce) Rules, §2 (f), Central Government, 2020
 The Consumer Protection (E-Commerce) Rules, §5 (2), Central Government, 2020
 The Consumer Protection (E-Commerce) Rules, §5 (3), Central Government, 2020
 The Consumer Protection (E-Commerce) Rules, 2020 https://consumeraffairs.nic.in/sites/default/files/E%20commerce%20rules.pdf
 The Consumer Protection Act, Act of Parliament, 2020 https://egazette.nic.in/WriteReadData/2019/210422.pdf
 The Consumer Protection (E-Commerce) Rules, §6 (4), Central Government, 2020
 The Consumer Protection (E-Commerce) Rules, §6 (4) (b), Central Government, 2020
 The Consumer Protection (E-Commerce) Rules, §5 (3) (a), Central Government, 2020
 The Consumer Protection (E-Commerce) Rules, §7 (1) (a), Central Government, 2020
 The Consumer Protection (E-Commerce) Rules, §7 (1) (e), Central Government, 2020
 The Consumer Protection (E-Commerce) Rules, §7 (4), Central Government, 2020
 The Consumer Protection (E-Commerce) Rules, §7 (5), Central Government, 2020