Introduction

The Indian E-commerce industry has been seeing an upward growth. This has further been accelerated by the unprecedented COVID-19 pandemic and the resultant lengthy nationwide lockdowns.  On-line shopping is not just convenient in such times, but a necessity. As per an India Brand Equity Foundation (a Trust established by the Department of Commerce, Ministry of Commerce and Industry, Government of India) report, India will be the second largest E-commerce market in the world by 2034. The E-commerce market is expected to reach Rs 13,97,800 crore (US$ 200 billion) by 2027 from Rs 2,69,076.5 crore (US$ 38.5 billion) in 2017, supported by rising income and surge in internet users. The population of online shoppers in India reached 120 million in 2018 and are expected to reach 220 million by 2025. Online retailers deliver to 15,000-20,000 pin codes out of nearly 100,000 pin codes in the country[1].

With the rapid growth of shopping on e-commerce sites, there have been equally growing concerns around sale of spurious goods via e-commerce. Since the consumer is unable to see the product physically, distinguishing whether a listing on an online marketplace is real or counterfeit, is very difficult. The e-commerce platforms have an inherent responsibility to restrict the abuse of their infrastructures for illicit trade. For this, there has been an urgent need to define the duties and liabilities of e-commence entities and to strengthen the laws for enforcement against illicit trade on e-commerce. The Information Technology Act, 2000 and Intermediary Liability Guidelines, 2011 provide for regulatory guidelines for Intermediaries.

The Consumer Protection Act, 2019 and Consumer Protection (E-Commerce) Rules, 2020, India

To strengthen protection of consumers on e-commerce and direct market space, The Ministry of Consumer Affairs, Food & Public Distribution, Government of India notified The (New) Consumer Protection Act, 2019 (‘Act’) and the Consumer Protection (E-Commerce) Rules, 2020 (‘Rules’) . These legislative changes came into force on July 20, 2020 and July 24, 2020, respectively.

Specifically, the Rules mandate the e-commerce entities to provide all details of the product and the seller and mandates appointment of grievance officer for consumer grievance redressal and acknowledgment of consumer complaint within forty-eight hours. In addition to well-defined provisions to empower the consumers, the Act and the Rules provide teeth to enforcement agencies to take quick and effective actions against illicit trade. The (old) Consumer Protection Act, 1986 provided for a three-tier consumer dispute redressal machinery at the National, State and District levels. However, the new Act, additionally, requires the central government to set up a Central Consumer Protection Authority (CCPA) and investigation wing thereunder. The Central Consumer Protection Authority will have the power to investigate and to search and seize evidence of violation under the Act. The Act also makes certain grave offences cognisable and non-bailable offence.

Salient features of the provisions:

1) Definitions:

  • “consumer” means any person who “buys any goods” and “hires any services” includes offline or online transactions through electronic means or by teleshopping or direct selling or multi-level marketing.
  • “e-commerce” which means buying or selling of goods or services including digital products over digital or electronic network. The e-commerce entities include both Indian and Foreign company.
  • “product liability” the responsibility of a product manufacturer or product seller of any product or service to compensate for any harm caused to a consumer due to defective product manufactured, sold or deficiency in services relating thereto.
  • “spurious goods” means such goods which are falsely claimed to be genuine.

2)  Rights of the consumer includes-

(i)be protected against the marketing of goods, products or services which are hazardous to life and property.

(ii)be informed about the quality, quantity, potency, purity, standard and price of goods, products or services.

(iii)be assured, wherever possible, access to a variety of goods, products or services at competitive prices.

(iv)be heard and to be assured that consumers’ interests will receive due consideration at appropriate fora.

(v)seek redressal against unfair trade practice or restrictive trade practices or unscrupulous exploitation of consumers; and

(vi)consumer awareness.

3) Applicability:

(i) to all goods and services bought or sold over digital or electronic network including digital products (ii) all models of e-commerce, including marketplace and inventory models of e-commerce (iii) all e-commerce retail, including multi-channel single brand retailers and single brand retailers in single or multiple formats and (iv) all forms of unfair trade practices across all models of e-commerce. The Rules shall not apply to any activity of a natural person carried out in a personal capacity not being part of any professional or commercial activity undertaken on a regular or systematic basis.

4) Duties and liabilities of the e-commerce entities and sellers:

(i) The Rules mandate every e-commerce entity to provide details about the sellers supplying the goods and services. These details are inclusive of identity of the business, legal name, principal geographic address, name of website, E-mail address, contact details, clarification of their business identity and the types of the products they sell, contact details of the sellers.

(ii) Where an e-commerce entity offers imported goods for sale, it shall mention the name and details of any importer from whom it has purchased such goods or services, or who may be a seller on its platform. This information will make it easy to track down entities who are dealing in spurious goods.

(iii) e-commerce entities to appoint a nodal person of contact or an alternate senior designated functionary who is resident in India, to ensure compliance with the provisions of the Act or the Rules made thereunder.

(iv) grievance officer must acknowledge receipt of any consumer complaint within forty-eight hours and redress the complaint within one month from the date of the complaint. A marketplace e-commerce entity which seeks to avail the exemption from liability under sub-section (1) of section 79 of the Information Technology Act, 2000 (i.e. Safe Harbour) will have to comply with sub-sections (2) and (3) of that section, including the provisions of the Information Technology (Intermediary Guidelines) Rules, 2011.

(v) Every marketplace e-commerce entity shall take reasonable efforts to maintain a record of relevant information allowing for the identification of all sellers who have repeatedly offered goods or services that have previously been removed or access to which has previously been disabled under the Copyright Act, 1957 (14 of 1957), the Trade Marks Act, 1999 (47 of 1999) or the Information Technology Act, 2000 (21 of 2000).

(vi) No seller offering goods or services through a marketplace e-commerce entity shall refuse to take back goods, or withdraw or discontinue services purchased or agreed to be purchased, or refuse to refund consideration, if paid, if such goods or services are defective, deficient or spurious.

5) Central Consumer Protection Authority (CCPA) – For the first time, the central government established CCPA e.f. July 29, 2020.[2] . It will be governed by the Consumer Protection (Central Consumer Protection Council) Rules, 2020.

(i) CCPA’s objective is to promote, protect, and enforce the rights of consumers.  It will regulate matters related to violation of consumer rights, unfair trade practices, and misleading advertisements.

(ii) It will be headquartered in the National Capital Region of Delhi and it will regional offices in other parts of the country as the Central Government may decide. It will have a Chief Commissioner as head, and only two other commissioners as members — one of whom will deal with matters relating to goods while the other will look into cases relating to services.

(iii) CCPA will have an Investigation Wing that will be headed by a Director General. CCPA can inquire or cause an inquiry or investigation to be made into violations, either suo motu or on a complaint received or on a direction from Central Government.

(iv) For the purpose of the conducting an investigation, the Director-General or any other officer authorised by him, shall have the power to enter any premises to search and seize document, record, article or such evidence. If CCPA is satisfied on the basis of investigation of the violation of consumer rights, it may pass any such orders as may be necessary, including recalling of goods, reimbursement of the prices to the purchaser.

(v) It is interesting to note that the CCPA will have the power to impose penalty on a manufacturer or an endorser of up to Rs 10 lakh and imprisonment for up to two years for a false or misleading advertisement.  In case of a subsequent offense, the fine may extend to Rs 50 lakh and imprisonment of up to five years.

6) Punishment for manufacturing for sale or for storing or selling or distributing or importing spurious goods. Whoever, by himself or by any other person on his behalf, manufactures for sale or stores or sells or distributes or imports any spurious goods shall be punished, if such act –

(i) causing injury not amounting to grievous hurt to the consumer, with imprisonment for a term which may extend to one year and with fine which may extend to three lakh rupees.

(ii) causing injury resulting in grievous hurt to the consumer, with imprisonment for a term which may extend to seven years and with fine which may extend to five lakh rupees.

(iii) results in the death of a consumer, with imprisonment for a term which shall not be less than seven years but may extend to imprisonment for life and with fine which shall not be less than ten lakh rupees.

(iv) The offences under (ii) and (iii.) above shall be cognizable and non-bailable.

(v) the court may, in case of first conviction, suspend any licence issued to the person referred to in the complaint for a period up to two years, and in case of second or subsequent conviction, cancel the licence.

Conclusion

The enforcement of the Act and Rules will certainly help consumers to make informed purchases. Due to seller information transparency, not only will counterfeiters be deterred from selling spurious goods on-line, their whereabouts can be tracked easily. Any habitual infringers can be blocked, and it would provide reliable shopping experience for the customers while safeguarding trade and brand owners against counterfeiting. Lastly, once the CCPA is fully operational, the fear of legal and punitive consequences will further deter the counterfeiters.

 

Author: Priya Rao, Partner, K&S Partners | Intellectual Property Attorneys, India

Link to Priya Rao’s profile: https://www.knspartners.com/people-details/priya-rao-partner/30

 

[1] Source – https://www.ibef.org/

[2] https://pib.gov.in/PressReleasePage.aspx?PRID=1642422

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