News & Analysis

Govt. to Tighten eCommerce Rules

The consumer affairs ministry is proposing a fallback liability on platforms as part of measures to make them liable for seller frauds

The Ministry of Consumer Affairs is proposing a new “fallback liability” on eCommerce platforms as a means to check seller-side frauds on products in what is seen as a tightening of rules around the digital retail industry. The government had shared a thought paper two years ago that was received with skepticism by the digital platforms. 

A report published in the ET quoted senior officials with the consumer affairs ministry as saying that the rules would be formalized once these platforms responded to queries related to frauds committed by sellers. These would be shared with the platforms by the ministry of electronics and information technology (MeitY). 

The focus has to be on the consumers

The MeitY note was a result of queries raised by the department of consumer affairs who sought to know how eCommerce companies saw their role as an intermediary. Platforms and marketplaces such as Amazon and Flipkart act as intermediaries connecting buyers and sellers. 

These platforms are protected by safe harbor provisions contained in Section 79 of the IT Act of 2000. The new rules proposed by the government seeks to change this and add responsibility to the platforms as an intermediary. With the government’s efforts to democratize eCommerce via its open protocols created by ONDC, the focus on quality of service is bound to go up. 

Protection of consumer interest is foremost in the minds of the government and restructuring the rules to add the fallback option to the platforms is one way to guard against reports of faulty products or sometimes even getting unrelated stuff during delivery. Marketplaces need to be liable for goods sold on their platforms, the official was quoted as saying. 

What set the cat amongst the pigeons?

The issue came to the fore first when eCommerce rules were placed in the public domain in July of 2020, alongside the government’s notification of the Consumer Protection (eCommerce) Rules, 2020, under Section 101 of the Consumer Protection Act of 2019. It proposed barring affiliates from selling on digital platforms and restricting flash sales. 

Not only did the eCommerce platforms respond negatively to the rules, even government entities such as the Corporate Affairs Ministry and the Niti Aayog felt that the proposals were too tough and even tougher to implement. However, in 2022, the Central Consumer Protection Authority penalized several platforms for selling products not adhering to quality standards. 

It began with a crackdown on pressure cookers not carrying the mandatory ISI mark and the penalties got eCommerce platforms into a bind as they claimed intermediary status on such sales and felt the liability should rest with the sellers alone. This prompted the MeitY to come out with a strong response. 

“Communications received from the Department of Consumer Affairs regarding the various challenges being faced by consumers in redressal of grievances while shopping online, particularly in case of grievances raised by consumers concerning a purchase, (where) ecommerce entity refuses to acknowledge any liability or responsibility or provide appropriate remedy to consumers, by making a reference to Section 79 of the Information Technology Act, 2000,” MeitY had said.

Should customer support be a seller’s problem?

Many of the platforms came back arguing that customer support was being delivered through their grievance redress mechanisms with Amazon actually pointing out that they were also a convergence partner for the National Consumer Helpline and that all complaints of any nature were resolved within five working days. 

On its part, the Open Network of Digital Commerce, a not-for-profit entity funded by government and public sector banks, has also reiterated on the customer redress as a key point for engaging across its networks of buyers, sellers, delivery agencies and payment gateways. ONDC is reportedly working on creating protocols for these with the idea of bunging it into the overall scheme of decentralized eCommerce. 

Network participants on ONDC have raised the issue in the past of who owns the compliance as unlike in the traditional platforms, the unbundling of buyers, sellers, fulfillment providers and payment gateways means that issues faced by the consumer could be with any or all of these different participants. 

Participants such as eSamudaay (a Bengaluru based start-up) believe that hyperlocal commerce, which they propagate, means that there would be a local entrepreneur who brings the buyers and sellers online. And issues of quality and product delivery etc. would become this local business owner’s focus area. So, decentralization could be the solution here as well. 

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