India’s Gilded Age: The Decay Underneath
December 15, 2020
Reforming the Negotiations Mechanism at WTO
December 30, 2020

THE CONSUMER PROTECTION (E-COMMERCE) RULES, 2020: A TUG OF WAR BETWEEN THE CONSUMER AND SMALL BUSINESSES

Introduction
Consumers play the most vital role in adjudging the growth of any business ecosystem. Changing times require a change in the law to keep up with consumer patterns. The Competition Commission of India, in a market study, highlighted the growth in revenue of the E-commerce sector, thereby concluding that e-commerce volumes continue to grow massively in the country. The Consumer Protection (E-Commerce) Rules, 2020 notified in accordance with the Consumer Protection Act, 2019 have been introduced at an advantageous time. Through the new rules, E-commerce will now be tightly regulated with a view to offer better services to the consumers and to essentially protect them from unfair trade practices on online platforms. However, any law must be analysed from the perspective of all entities that it has an effect on. The new E-Commerce rules will not just have an effect on the consumers but also the businesses that operate online and will now have to comply with the overburdening compliance regulations as per the said rules. This article will attempt to analyse the effect of the new law from a two-fold perspective of the consumer and the small businesses.
Effect of the E-Commerce Rules on the Consumer
The following provisions of The Consumer Protection (E-Commerce Rules, 2020) will effectively address the issues of the consumer, more specifically the consumer that shops from smaller retailers that operate online-:
  1. Grievance Redressal
Most consumers face an issue with technical support or customer care services with small online businesses. Rule 4(4) makes it mandatory for all e-commerce entities to have a grievance redressal forum and a grievance redressal officer who’s supposed to respond within 48 hours of when the complaint is filed. Rule 5(3) (a) confers the right to consumers to demand information related to the product subsequent to the purchase for the facilitation of dispute resolution. The rules also make it mandatory for the websites to have a tracking mechanism of the complaint filed by the consumer under Rule 5(3) (b).
  1. Return, Exchange and Refund Policies
E-commerce entities cannot impose cancellation charges on users unless the e-commerce entity itself has to bear the same under Rule 4(8). Another problem most consumers face with small businesses is that of timely and efficient delivery and the return and exchange policy. According to the new rules information relating to return, refund, exchange, warranty and guarantee, delivery and shipment is a compulsory disclosure.
Furthermore, as per the new rules, the seller shall not refuse to take back goods or withdraw or discontinue services purchased or agreed to be purchased or refuse to refund consideration if such goods or services are defective, deficient or spurious or if such goods or services are delivered late from the stated delivery schedule.
  1. Trust in Payment Mechanisms
An issue which is more specific to small online sellers is the absence of trustworthy payment mechanisms on their websites. Consumers seem to place more trust in e-commerce giants because of the assurance that their payment mechanisms are efficient. However, the new e-commerce rules make it mandatory for all entities, big or small to disclose all kinds of information related to payment methods. Information on available payment methods, the security of those methods, any fees or charges payable by users, the procedure to cancel regular payments, charge-back options and contact information of the relevant payment service provider has been made mandatory under rule 5(3) (d).
  1. False Reviews on Websites
Reviews are remarks made by consumers e-commerce websites based on their shopping experiences. These reviews and ratings influence consumer biases and thus makeup as unfair trade practices. Rule 6(2) and 7(2) prohibit the seller disguising himself as a consumer posting false reviews on the websites. This ensures transparency as essential for the consumer shopping experience.
  1. False Advertising
Advertising is another tool used by online sellers to lure consumers into buying their product. Accountability with regards to advertising should increase for online sellers since it is the only way for consumers to assess the product. Rule 6(4) (c) and 7(3) mandate e-commerce sellers to confirm that their advertising is in line with the quality of their product.
Effect of the E-Commerce Rules on Small Businesses
The Issue of the Cancellation Charge
Under Rule 4(8), the E-commerce platform cannot charge any cancellation charge on consumers, unless they themselves bear any part of the charge. This can potentially give rise to a huge challenge for vendors selling through large e-commerce entities or market place entities.  
In case the consumer cancels services of the online seller at the eleventh hour, the vendor would bear its brunt.  It is highly unlikely for the market place entity to pay vendors the cancellation charge which they pass on to the consumer. Therefore, the consumer wins but the seller loses. This is particularly problematic for smaller sellers who already have low-profit margins. There is also no prescribed mechanism in the act to penalize irresponsible consumer behaviour.
A reasonable cancellation charge must be permitted to ensure that indiscriminate bookings and last-minute cancellations do not take place. It is very common for offline many businesses to take a non-refundable deposit or cancellation charges if cancellations occur after the purchase.
The burdens of having a grievance officer
Rule 6(4) and 6(5) make it mandatory for vendors selling in e-commerce marketplace to appoint a grievance redressal officer and the marketplace platform details of their website, email and customer care contacts.
It is pertinent to note that not all vendors may have the necessary financial and resource wherewithal to have a dedicated grievance officer. In such scenarios, the owner will list himself as the grievance officer, in which case, the task of having to acknowledge consumer complaints within 48 hours may not be easy while handling the business simultaneously.
Dicincentivising Marketplace Platforms from hosting small sellers
Under Rule 5(3)(a), the consumer can demand information related to the product subsequent to the purchase. It is unclear as to what extent or how much information is to be disclosed to the consumer. However, what’s abundantly clear, though, is the fact that collecting the requisite data on every seller especially the novel and smaller retailers, will be burdensome for the marketplace platform which in turn will discourage them from hosting these small retailers who are unable to meet the long checklist of compliances for them to operate online.
The Pits of Confusion
An ‘e-commerce entity’ for the purpose of the scope and applicability of the rules is defined as “any person who owns, operates or manages digital or electronic facility or platform for electronic commerce, but does not include a seller offering his goods or services for sale on a marketplace e-commerce entity”. Online storefronts that provide just the tech infrastructure or technology solutions to retailers to set up their online stores became prevalent in the pandemic. The determination whether these businesses amount to an “e-commerce entity” or merely a “seller offering his goods for sale on a marketplace e-commerce entity is an issue that is unresolved and might harm the business due to the confusion.
Social media websites also offer e-commerce solutions for individual businesses now. In such cases, the online ordering is largely controlled by the website but the order fulfilment remains the responsibility of the individual business. The effect of the rules on these solutions also remains unclear.
Small retailers use schemes such as price surging, customer discounts, preferred customer privileges, etc. to promote their businesses. The new consumer protection rules, while prohibiting the use of unfair trade practices and misleading advertisements for the benefit of the consumers have failed to prescribe set parameters to adjudge what qualifies as an unfair trade practice and what doesn’t. This ambiguity can prove to be disadvantageous for the small retails who use the aforementioned techniques for promotion.
Suggestions and Conclusion
The Covid-19 pandemic and tensions on the border with China have forced India to reassess its international trade policy. This is a propitious time for Indian businesses to capitalise on the changes underway in global value chains. The new law is certainly a step in the right direction for consumer welfare and has paved the way in increasing accountability for e-commerce entities operating in India. However, the new rules also entail a dark side while posing challenges for the small businesses trying to grow amidst a global pandemic.
It is important for the regulatory frameworks and policies around E-commerce such as the new consumer protection law to be inclusive and not restrictive. Compliance burdens can act as strong deterrents to smaller businesses using e-commerce platforms thereby rendering the law counterproductive. Compliance requirements must ideally increase proportionately with the increase in the business’ scale and capacity. Furthermore, the definition of “E-Commerce entity” under the rules should be made wider to include a product seller conducting e-Commerce business whether through an inventory-based model of e-Commerce, or market place-based model of e-Commerce, or both. 

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ABOUT THE AUTHOR

 

Manasvi Ahuja is a fourth-year law student at Symbiosis Law School, Pune.

 

In Content Picture Credit: SCC Online

 

 

Kindly note the views or opinions expressed are of the author and not of the Indian Journal of Law and Public Policy.

1 Comment

  1. srujan says:

    good one!

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