E-Commerce 101: Cancellation Charges

INTRODUCTION

The imposition of cancellation charges or fees by various e-commerce entities on consumers has been a contested issue - was it justified? Or was it a method to gather unfair revenue? The Consumer Protection (E-Commerce) Rules, 2020 ("E-commerce Rules") issued under the aegis of the Consumer Protection Act of 2019 ("Act") wades into this debate, attempts to clarify the issue and succeeds in muddying the waters.

THE LEGAL FRAMEWORK ON CANCELLATION CHARGES

The Act appears to recognise that the imposition of a penalty on a consumer for cancellation that is wholly disproportionate to the loss incurred by the entity is an 'unfair contract'. The E- commerce Rules explicitly prohibit e-commerce entities from imposing cancellation charges on consumers who unilaterally, for any reason, cancel a confirmed purchase order, unless similar charges are borne by these entities.