Developments in information and communications technology in the last decade have significantly changed lives and provided new opportunities for consumers and businesses. With the Covid pandemic unsettling the normal life of every Indian, an increasing number of consumers have gained access to the Internet and are increasingly engaging in e-commerce, which provides safe, easier and faster access to products and services.

The rapid development of e-commerce has introduced huge economic benefits to society, but at the same time, posed challenges for consumers that differ from those encountered during offline commercial transactions. Such challenges have given rise to the need to adapt existing legal and regulatory frameworks to suit the requirements of e-commerce.

E-commerce industry in India started late as compared to the rest of the world and hence, the legal basis for protection of e-consumer remained weak, with literally no protection guaranteed by the Consumer Protection Act, 1986; the 1986 Act having lost its relevance to protect interests of the 21st century tech-savvy consumers.

The Consumer Protection Act, 2019 (Act), some sections of which were notified on July 20, 2020, has provided the much-required relief to the e-consumers by broadening the definition of a consumer, providing protection for e-commerce transactions through notification of specific rules for the same, enabling consumers to institute complaints from place of residence or work; and establishing a dedicated regulator – the Central Consumer Protection Authority.

Section 2 (7) of the Act defines consumer to mean any person who buys any goods, or hires, or avails any services for a consideration which has been paid or promised, or partly paid and partly promised, or under any system of deferred payment and includes any third party who has been allowed to use such goods or services by the buyer. However, a person who obtains such goods for resale or for any commercial purpose (except goods purchased exclusively for the purpose of earning livelihood, by means of self-employment) are specifically excluded from the definition of Consumer.

The expressions “buys any goods” and “hires or avails any services” mentioned in section 2 (7) cover in its ambit all transactions offline or online done through electronic means or by teleshopping or direct selling or by multilevel marketing.

In accordance with the powers conferred by Section 94 of the Act read with section 101 (zg), the Central Government has notified the Consumer Protection (E-Commerce) Rules, 2020 (Rules) which were published in the official gazette on July 23, 2020. The Rules propose to regulate price manipulation and quality control by e-commerce entities, requiring them to adhere to a strict set of guidelines to enable consumers to make informed decisions on purchases, prevent fraudulent transactions; and prohibit unfair and deceptive trade practices, with a control on sale of counterfeits.

The Rules provide clear obligations, duties and liabilities that need to be complied by the Inventory e-commerce entity and marketplace e-commerce entity, which is a welcome step to protect the interests of the e-consumers.

Rule 3 (b) defines an e-commerce entity to mean any person who owns, operates or manages digital or electronic facility or platform for electronic commerce, however, excludes all sellers offering their goods or services for sale on a marketplace e-commerce entity. With the words “any person who owns, operates or manages digital or electronic facility or platform for electronic commerce’, the definition clearly includes, both, the inventory e-commerce entities and marketplace e-commerce entities in its ambit.

However, to differentiate the inventory-based e-commerce model and marketplace e-commerce model prevalent in the ecommerce business at present, the Rules define the inventory e-commerce entity and marketplace e-commerce entity separately.

Rule 3 (f) defines inventory e-commerce entity to mean an e-commerce entity, which owns the inventory of goods or services and sells such goods or services directly to the consumers and includes single brand
retailers and multi-channel single brand retailers. Rules 3 (g) defines marketplace e-commerce entity to mean an e-commerce entity, which provides an information technology platform on a digital or electronic network to facilitate transactions between buyers and sellers. The term platform means an online interface in the form of any software including a website or a part thereof and applications including mobile applications, thus bringing marketplace players like Amazon, Flipkart, etc., now under the Rules and compliances thereof.

Some of the important obligations imposed on the e-commerce entities by the Rules are as under: