‘Restrictive’ changes to e-commerce rules

Within a year of issuing the Consumer Protection (e-commerce) Rules, 2020 issued under the Consumer Protection Act, 2019 (CPA 2019), the government has proposed certain amendments to these rules in the form of Consumer Protection (e-commerce) (Amendment) Rules, 2021.

Many experts have felt that the amendments are too “restrictive”. For example, some have frowned at the one that restricts B2B sales in e-commerce. Why force e-commerce companies to sell only directly to consumers?

Another example of a needless restriction is the proposed ban on a transaction between a marketplace e-commerce company and the sellers. This would effectively kill home brands because the marketplace company would still need to have the home brand goods made by someone else. These arguments have merits embedded within them.

Fallback liability

However, there are some other objections that do not seem to be logical. For instance, there is one proposed amendment to bring in a new liability called ‘Fallback liability’.

According to this, the marketplaces are held accountable in case the sellers registered with them fail to make deliveries or slip in making disclosures.

This amendment seems to have left some experts red in the face. For instance, lawyer Rikita Sharma feels that this amendment “seems to be quite an over-reaching liability”. Writing in Manupatra , she says, “In the event this amendment is brought into force, the e-commerce entities will need their legal folks to do a thorough review of the contracts entered into with these sellers registered with them and ensure that there is adequate protection in such contractual arrangements in terms of indemnity, should a liability arise on the marketplace e-commerce entity at any point in time.”

However, this amendment appears to be necessary from the consumer protection point of view. If you buy a Louis Vuitton bag online and if the bag has a hole or a tear, should you be running after LVMH, the company that owns the brand for redressal? If an Amazon or a Flipkart has to deal with such issues, it is part of their business. The Fallback liability appears to be well-founded.

There are certain other amendments which include for instance an abuse of dominant position. Sharma sees an overlap under the consumer protection laws and the competition laws concerning adjudication on aspects having the same underlying issues. “This would result in multiple litigations for e-commerce entities before different regulatory authorities,” she says.

She represents a community of experts that believes that while some amendments intend to curb certain undesirable practices of large e-commerce businesses, they put “unnecessary responsibilities and liabilities on all start-ups and MSMEs”. The burden of compliance comes with a huge cost, impacting their businesses.

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