1. Background

E-commerce has grown exponentially in India, in the recent few years. It likely received further impetus due to the lockdowns imposed on account of the Covid-19 pandemic. While e-commerce has brought forth various benefits for consumers and businesses alike, there were various alleged unfair trade practices being adopted by e-commerce entities, to the detriment of consumer welfare. Accordingly, the Government of India (GoI) had notified the Consumer Protection (ECommerce) Rules, 2020 (Rules), in July 2020, by exercising its powers under Section 101(1)(zg) of the Consumer Protection Act, 2019 (Act).

Despite notification of the rules, various stakeholders continued to allege adoption of unfair trade practices by e-commerce entities. These included: product search results manipulation, preferential treatment to some sellers, marketplace e-commerce entities having indirect stake in some sellers on their platform, selling goods close to expiration, predatory pricing, among others. Various amendments have now been proposed in the Rules to curb such malpractices. Some of these amendments are also in line with the recommendations of the Rajya Sabha Committee Report on the Rules (RS Committee Report).

Narayan Chamber of Law and Policy (NCLP) expresses its gratitude to the Department of Consumer Affairs (DoCA), for inviting comments and suggestions on the proposed amendments.

2. Analysis

The proposed amendments appear to have well-intentioned objectives of promoting consumer welfare, preventing predatory pricing, and curbing preferential treatment of some sellers by ecommerce giants. However, there exists various pros and cons in the amendments.

    • The Good: They do well in promoting transparent information disclosure for consumers, and protecting consumers against manipulative search indexes.
    • The Bad: Some provisions are likely to hinder the Ease of Doing Business (EoDB), have lack of clarity, and may lead to information overload for consumers.
    • The Ugly: Many of the proposed amendments are likely to be beyond the ambit of the Rules, and may be better dealt under different acts, by different regulators/departments.

These have been discussed below in detail.

2.1 The Good

The proposed amendments are aimed at furthering consumer welfare emanating from e-commerce. It does well on various counts, which have been discussed in the table below.

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Information Disclosure for Consumers
5(7)(a) Requires e-commerce entities disclose to consumers, with respect to details of the importer and/or seller, in case of imported goods.

Such rules will enable useful transparent information disclosure to consumers, thereby helping them in making informed purchase decisions.

Furthermore, identifying goods on the basis of country of origin is not only useful information disclosure for consumers, but may also provide impetus to the government’s Make in India and Atmanirbhar Bharat initiatives.

5(7)(b) Mandates e-commerce entities to identify goods based on their country of origin, and provide filters for shortlisting goods based on country of origin.
5(15) E-commerce entities are to ensure that sponsored listing of products and services are distinctly identified with clear and prominent disclosures.
Consumer Protection
5(14)(c) Prohibits e-commerce entities from misleading users by manipulating search result or search indexes. This is likely to prevent any possible adverse behavioural change/control of the purchase preferences of users.
Level Playing Field between Foreign and Domestic E-commerce Entities
2(1) & (2) The rules have been made applicable on foreign and domestic ecommerce entities alike. This provides a level-playing field between such entities with respect to the rules. However, similar parity is also needed in the Foreign Direct Investment (FDI) Policy.

2.2 The Bad

Many shortcomings can also be observed in the proposed amendments. These pertain to hinderance to EoDB; lack of clarity; information overload for consumers, among others. Such issues have been discussed in the table below.

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Issues requiring Attention


Hinderance to EoDB
4(1) Mandatory requirement for e-commerce entities to register with the Department for Promotion of Industry and Internal Trade (DPIIT).

Such requirements although well intentioned for protecting consumer interests, must also take into account a business perspective with respect to EoDB, given that they will add more layers of compliance for e-commerce entities. This may especially be burdensome for new entrants, who may not have the wherewithal to comply with more regulatory requirements.

Accordingly, it is suggested that thresholds of sale volume, or revenue, or years of operation, or the like may be prescribed, and e-commerce entities exceeding such thresholds may only be required to comply with such requirements. Furthermore, conducting a Cost-Benefit Analysis may also be useful, to ascertain that the envisaged benefits of these requirements, outweigh the possible costs of compliance. Alternatively, complying with these requirements may be made voluntary for small e-commerce entities.

5(8) E-commerce entities are required to become a partner in the convergence process of the National Consumer Helpline of the Central Government.
(b) & (c)
Requirement to appoint Chief Compliance Officer (CCO), Nodal Contact Person and Grievance Officer.

These requirements appear to be stemming from the recently notified Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules 2021 (IT Rules 2021). It is to be noted that such requirements have only been imposed on ‘Significant Social Media Intermediaries’, i.e., those having more than 50 lakh users in India. A similar threshold on different parameters may also be prescribed for ecommerce entities, exceeding which these provisions may be made applicable. In its current form, the provisions risk hindering the EoDB for small and new ecommerce entities.

A possible solution in this regard, may be to allow smaller e-commerce entities to appoint one personnel for the three roles.

Lack of Clarity
3(b) Entities engaged in order fulfilment have also been defined as e-commerce entities. The meaning of ‘fulfilment of orders’ has not been defined under the rules. This may give rise to ambiguities regarding the scope of services provided under order fulfilment, which may lead to the service provider being classified as an ecommerce entity.
3(e) Flash sales have been clarified to mean those which ‘are organised by fraudulently intercepting the ordinary course of business using technological means with an intent to enable only a specified seller or group of sellers managed by such entity to sell goods or services on its platform’.

While the intention of the rule appears to be valid for curbing practices of preferential treatment of select seller(s), there is lack of clarity on what may constitute ‘fraudulently intercepting the ordinary course of business using technological means’. This is likely to lead to regulatory ambiguity, which may impact the genuine operations of e-commerce entities.

While the Ministry of Consumer Affairs has clarified that ‘conventional flash sales’ would still be permitted, and only ‘those which are predatory in nature’ have been prohibited, there still exists a grey area on how to accurately and uniformly distinguish between the two. Clear definitions have not been provided as to what will constitute ‘conventional flash sale’ or ‘predatory flash sales’

Similarly, the term ‘managed by such entity’ is also not clear, i.e., whether it is to be interpreted to mean ‘related parties’, ‘associated enterprises’, or is to be interpreted to mean some other relationship between such seller and e-commerce entity. Deferred clarity in this regard would be akin to a knee jerk reaction for such sellers, forcing them to restructure their business or operational model for compliance, while also fuelling regulatory uncertainty.

4(2) E-commerce entities are required to display invoice of everyday order on their platform. The term ‘everyday order’ is unclear, and has not been defined under the rules. This may therefore give rise to regulatory ambiguities.
5(1) E-commerce entities are required to appoint a resident nodal person of contact or an alternate senior designated functionary, who will ensure compliance with the Act and Rules.

There appears to be a lack of clarity in the difference between the responsibilities of the nodal person of contact (under 5(1)), and the CCO (under 5(5)(a)), given that both are required to ensure compliance with the Act and Rules.

Also, the rules fail to clarify if two separate personnel need to be appointed as nodal person of contact (under 5(1)), and nodal contact person (under 5(5)(b)).

The issue of appointing such personnel, has also been discussed above, from the lens of EoDB for new entrants in the e-commerce sector.

5(5)(a) E-commerce entities are required to appoint a resident CCO who shall be responsible for ensuring compliance with the Act and Rules, among other responsibilities.
5(5)(b) E-commerce entities are required to appoint a nodal contact person for 24×7 coordination with Law Enforcement Agencies (LEAs) and officers to ensure compliance to their orders or requisitions.
5(2)(e) &
No e-commerce entity shall adopt any unfair trade practice, whether in the course of business on its platform or otherwise. Given that the same rule is stated twice, it is recommended that rule 5(2)(e) is deleted.
6(3) Marketplace e-commerce entities have to prominently display various kinds of information on its platform. Many of these issues have been discussed previously in the Rules. Accordingly, they may be appropriately merged.
6(6)(c)(i) & 3(1)(b) Related parties have been defined. Related parties have been defined under 6(6)(c)(i) and 3(1)(b) of the Rules. Accordingly, such definition may be deleted from one of the Rules.
7(5)(d) Sellers on a marketplace e-commerce entity are to provide various information to the ecommerce entity. Notably, many of the information mentioned in (d), have also been mentioned in (g), (h) and (i). Accordingly, these may be merged together in the interest of avoiding repetition.
Information Overload for Consumers
5(12)(a) & (b) Mandates e-commerce entities to provide adequate disclosure to users with respect to (a) Name of the entity providing data for crossselling; and (b) Data of such entity used for crossselling.

While in the interest of transparency, such information is important to be disclosed to users, the same may not be made prominently available on the main page of the platform, since it may lead to information overload for users. Alternatively, such information may be provided in its data protection and/or privacy policy.

Furthermore, this rule lacks clarity as to its contours and purpose. Perhaps the same can be substantiated through an explanation, or making amendments to the definition of cross-selling.

6(4) Marketplace e-commerce entities to provide conditions generally governing its relationship with sellers on its platform, along with details of any differentiated treatment given between goods or services or sellers of the same category.
Other Issues
6(7) Marketplace e-commerce entities have been prohibited from selling goods or services to sellers on its platform. The rules may clarify that such a provision would only be applicable in case of purchase made by its seller for the purpose of reselling the goods or services, and not when such good or service has been purchased by a seller for its own consumption.
6(9) Marketplace e-commerce entities have been subjected to fall-back liability

Such liability and prohibition, although well intentioned for protecting consumer interests, goes against the very concept of marketplace e-commerce entity. It is to be noted that such entities merely provide an IT platform on a digital to facilitate transactions between buyers and sellers. Contrary to inventory e-commerce entities, they have no control over the sellers or products registered or advertisements being run on their platform. Accordingly, they must be exempt from any fall-back liability or duty to check misleading advertisements, arising from misconduct from sellers on its platform.

Furthermore, these provisions must also take into account its possible creation of an artificial entry barrier for smaller/new e-commerce entities who may not have the necessary wherewithal to comply with such provisions. Accordingly, this provision may only be made applicable on inventory e-commerce entities.

5(4) The rule prohibits e-commerce entities from displaying or promoting misleading advertisements on its platform.

2.3 The Ugly

Some rules pertain to defining Platform to Business (P2B) and Business to Business (B2B) relationships, within the realm of e-commerce. However, these seem to beyond the ambit of the Rules, and are also likely to cause regulatory overlaps. This has been discussed in the table below.

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Regulatory Overlaps
3(1)(b) Definition of e-commerce entity

There is a difference in these definitions as given in the Rules, and those given in DPIIT’s (erstwhile Department of Industrial Planning and Promotion – DIPP) Press Note 2 of 2018. Such regulatory overlaps may be avoided to avoid regulatory ambiguity and uncertainty.

Furthermore, the broad definition of e-commerce entities may also include travel, food delivery and taxi aggregator service providers, who may inadvertently have to comply with these Rules. Accordingly, there is a need to trim down the definition to specifically include intended entities.

3(1)(j) Definition of inventory e-commerce entity.
5(5) E-commerce entities are required to establish an adequate grievance redressal mechanism.

The IT Rules have laid a grievance redress mechanism which needs to be put in place by intermediaries (including e-commerce entities). It remains to be checked, whether additional or separate grievance redress mechanism needs to be put in place for the purpose of compliance with this provision.

5(6) Grievance officer of e-commerce entities are required to acknowledge receipt of consumer complaints within 48 hours, and redress the complaint within 1 month.

The IT Rules have mandated different timelines for grievance redress. They require grievance officers to acknowledge the complaint within 24 hours, and dispose-off the complaint within 15 days. Given that the definition of intermediaries given under the Information Technology Act 2000 (IT Act 2000), encompasses e-commerce service providers, such contradictory timelines for consumer grievance redress are likely to lead to regulatory ambiguity and uncertainty. 

5(18) E-commerce entities have to provide: information under its control or possession, or assistance to the Government agency, as soon as possible, but not later than seventy-two hours of the receipt of an order.

The provision has already been covered under the IT Rules, and rule 6(1) asks ecommerce entities to be complaint with the IT Act and IT Rules. Also, the provision governs a Business to Government (B2G) relationship, and is not consumer facing. Hence, in the interest of avoiding overlaps, rule 5(18) should be removed from these Rules.

9 Provisions in case of contravention of the Rules.

The Rules state that the provisions laid under the Act would be applicable in case of a violation of the Rules. However, given that the Rules also entails various overlapping provisions with the IT Rules and Competition Act (as discussed above), it remains to be clarified as to which department would have the right to initiative proceedings in case of violations, and under which Act or Rules. This again leads to regulatory ambiguity and uncertainty.

Beyond the Ambit of the Rules
5(14)(d) Marketplace e-commerce entities have been prohibited to permit usage of their name or brand for promotion or offer for sale of goods or services on their platform, which may suggest that such goods or services are associated with it.

This rule appears to be targeted to address the ongoing debate on the alleged malpractices of large foreign e-commerce entities – flouting of Foreign Direct Investment (FDI) rules, engagement in anti-competitive practices like predatory pricing, preferential treatment to select sellers, deep discounting, and inventory control, among other manipulative and arbitrary practices. However, it is to be noted that such allegations are currently being investigated by the CCI, as well as the Enforcement Director (ED).

Also, such issues do not appear to be directly related with consumer welfare, and may accordingly be deliberated upon by DPIIT, through a National E-commerce Policy, or a clarification Note on the distinction between marketplace and inventory models of e-commerce. Alternatively, they may also be dealt under the Competition Act, 2002 (Competition Act).

Furthermore, the insertion of ‘if such practices amount to unfair trade practice and impinges on the interests of consumers’ in 5(14)(f) seems unnecessary.

5(14)(f) Prohibits marketplace e-commerce entities to use information collected by it, for sale or promotion of goods bearing its own a brand or name, if such practices amount to unfair trade practice and impinges on the interests of consumers.
5(14)(e) Prohibits e-commerce entities to disclose any information of a consumer to any other person, without the consumer’s affirmative consent.

The provision would certainly be beneficial for advancing consumers fundamental right to privacy. However, the issue of consent is being deeply delved by the Personal Data Protection Bill 2019 (PDPB), and is beyond the ambit of the Rules.

Notably, the RS Committee Report had recommended that a provision may be given in the Rules, stating that personal data protection of consumers of e-commerce, would be given under the PDPB. NCLP also recommends such a provision. However, it remains to be checked whether such a provision should be made at this moment, or after the PDPB has been passed as an Act.

5(16) E-commerce entities have been prohibited from organising flash sales of goods or services offered on its platform. These issues are well covered under the Competition Act, and appear to be beyond the ambit of the Rules. It is the duty of CCI and not consumer the Consumer Protection Authority to protect consumers from anti-competitive practices.
5(17) Dominant e-commerce entities have been prohibited against abusing their dominant position.
6(5) Logistics service providers of marketplace ecommerce entities have been prohibited from providing differentiated treatment between sellers of the same category.
6(6) Marketplace e-commerce entities are required to abstain from various practices involving related parties and associated enterprises. Irrespective of the merits of such prohibitions, given that such practices do not link directly with consumers, the same may not be made a part of the Rules. These may be separately dealt by DPIIT, or the CCI.
6(8) Marketplace e-commerce entities have been prohibited from advertising a body of sellers for the purpose of subsidising a sale on their platforms.
5(7)(c) E-commerce entities to ensure that the ranking parameters of goods do not discriminate against domestic goods and sellers. The rule is well-intentioned with respect to providing a level-playing field for domestic and foreign goods. However, just like the provisions discussed above, this provision does not fall under the ambit of the Rules, and may be dealt with separately by DPIIT or CCI.

3. Conclusion

As has been discussed above, there is substantial scope for refining and trimming the proposed amendments to the Rules. While they appear to be well-intentioned, most of its provisions are beyond the ambit of the Consumer Protection Act, 2019.

The government has rightly acknowledged that many of the provisions of the rules are consistent with provisions in many other jurisdictions. For instance:

European Union’s (EU) Digital Services Act and Digital Markets Act, prohibits: ‘Gatekeepers’ from giving favourable ranking to their products and services, than those being offered by third parties, while also ensuring transparency in key parameters used for deciding product rankings; and Sharing user activity data with businesses.

Similarly, the United States of America (US), has proposed a new bill to end monopolies, and making it unlawful for large platforms to own or operate a business that presents a clear conflict of interest. Another legislation in the US, seeks to prohibit dominant platforms from offering their products and services, favourably, against those offered by their competitors.

However, it is to be noted that such provisions have not been included in consumer protection rules, and have been effectuated through legislation by the Parliament, and not through delegated legislation by the executive. Accordingly, the proposed amendments to Consumer Protection (ECommerce) Rules, 2020 may be pursued elsewhere, such as the IT Rules, Competition Act and PDPB.

Furthermore, it remains to be established that the Rules in their present form were proving to be inadequate in upholding consumer interests with respect to e-commerce. In may be prudent for the government to focus upon the in-spirit implementation of the recently notified rules, instead of proposing amendments so early in its existence.

NCL looks forward to DoCA considering and adopting the recommendations given above.