Important Laws every E-commerce Consumer must know

Introduction

It was in 1995 that the Internet was first launched in India. Thereafter, technology has been on an ever-evolutionary ascent with online portals coming up for everything, even business and trading. This contributed to making our lives simpler by making it possible to get what we need, as and when we need it, with a few clicks from the comfort of our homes.

However, for running any business, legal compliance forms one of the most crucial things to be considered. Any fault therein, might bring in unwanted costs and endless litigation. This could be avoided by being aware of all the relevant laws and regulations in place, as a customer.

Given the rapid growth and emerging trend of e-commerce, consumer preferences have changed to buying online. The growing e-commerce looks promising with a strong legal framework and consumer protection measures. The new regulations are arguably strong enough to protect and safeguard the customer interests and rights online and boost the growth of the e-commerce sector in India. This article attempts to elaborate on the laws every e-commerce customer must know and analyses the prevalence of such laws.

E-commerce: Growth and Prevalence

At its etymological core, ‘e-commerce’ means the process of buying and selling products and services through the use of the internet. The Organization for Economic Cooperation and Development (OECD) qualifies e-commerce as any business occurring over networks that use non-proprietary protocols that are established through an open standard-setting process such as the Internet.

In simple terms, e-commerce is a means of conducting business electronically (including all retail activities that can be conducted over the internet such as purchasing goods, availing services, delivery, payment facilitation as well as supply chain and services management), rather than the conventional physical means.

E-commerce has now come to be considered as a game-changer for the Indian economy, on the whole, and especially for the future of the ‘Digital India’. Moreover, with the exponential growth in Internet and online infrastructure, it came as no surprise that the e-commerce market experienced a similar boost. While the adoption of online shopping has been steadily climbing for years now, the pandemic accelerated the use of e-commerce at a pace that had never been observed before.

In addition to that, government initiatives like Startup India, Digital India, fund allocation for the BharatNet Project, the promotion of ‘cashless economy’, along with launching of the UPI have further strengthened the e-commerce sector in the country. Factors such as advertising online services have also contributed towards increased awareness and thereby, increased number of customers.

However, along with the increasing prevalence of the e-commerce sector, there also comes a need for being aware of all the relevant laws.

Applicable Laws and Regulations

The e-commerce industry has certain complex legal issues. Every country has its own set of rules for the necessary regulation of the e-commerce sector and it is essential for any customer to know and understand the laws relevant and applicable to them.

The various laws applicable in India can be categorized into Regulatory laws, Technology and Data Protection laws and other laws and regulations that apply to the e-commerce businesses.

Regulatory Laws
  1. The Foreign Direct Investment Policy:- The Indian FDI policy defines two models of e-commerce; the Marketplace model and the inventory model. According to the government guidelines on FDI,100% FDI under automatic route is permitted in the marketplace model of e-commerce whereas FDI is not permitted in the inventory-based model of e-commerce.
  2. Payment and Settlement Systems Act, 2007:- According to the law stated herein, ‘a payment system’ indicates a system that enables payment to effect between a payer and a beneficiary. An e-commerce entity is required to be qualified as a payment system by complying with the rules as provided by the RBI relating to online payments. This ensures a qualified payment mechanism, preventing the payment scams.
  3. Labelling and Packaging:- All e-commerce entities have to comply with the standard set for labelling and packaging under the Legal Metrology Act, 2009; the Food Safety and Standards Act, 2006; and the Drugs and Cosmetics Act, 1940. These acts require the e-commerce entities to display the requisite information about the goods so that consumers are made aware about the product specifications.
  4. The Sale of Goods Act, 1930:- The Sale of Goods Act, 1930 mentions the sales and shipping policies that a business entity must contain. It also specifies the warranties, conditions, and transfer of property in goods and refund/return policy as well. This safeguards consumer interests which is especially required for an online purchase and sale.
Technology and Data Protection Laws
  1. Information Technology Act, 2000 :- It was the first law on e-commerce in India and it sought to give effect to the UNCITRAL Model Law Electronic Conference, 1996. This IT Act of 2000 sought to give legal recognition to transactions taking place through electronic means of communications, now known as the e-commerce. It specified what is meant by electronic records and digital signatures and further determined the time and place for dispatch and receipt of electronic records. Additionally, it provided the regulatory and punitive frameworks for various cyber-crimes and other offenses.
    • IT Act, 2000 r/w Indian Contract Act,1872Governs the validity of contracts formed electronically and further provides specifications for all the conditions such as the terms of service, privacy policy, and return policies, etc.
    • IT Act, 2000 and General Data Protection Regulations (GDPR)E-commerce entities must comply with the Information Technology (Reasonable security practices and procedures and sensitive personal data or information) Rules, 2011.
  2. Consumer Protection Act, 2019 :- Recently, e-commerce has been specifically brought under the purview of the Consumer Protection Act, 2019. The Consumer Protection Act, 2019 serves as parent legislation and empowers the Central Government to take measures to prevent unfair trade practices in e-commerce and to protect the interests and rights of consumers participating in e-commerce.
  3. Consumer Protection (E-commerce) Rules, 2020 :- To introduce a more concrete regulatory framework that facilitates fairness and transparency in the operations of e-commerce entities in India, the Ministry of Consumer Affairs, Food, and Public Distribution through the Department of Consumer Affairs notified the Consumer Protection (E-Commerce) Rules, 2020. These Rules were notified on 23rd July 2020 and became effective from that date itself.
  4. PCI Compliance :- There can be no denying that even e-commerce businesses have been prime targets for data breaches and theft, PCI compliance is a must for online sellers. All SaaS e-commerce platforms are thus PCI compliant. PCI compliance ensures protection for online buyers and sellers. It is not merely about offering an encrypted checkout process, but also avoids capturing any purchase information in any form.

The PCI Securities Council was founded by several financial institutions including Visa and MasterCard to develop and implement security standards for the protection of customers’financial data.

Other laws like
  1. Intellectual Property Issues
  2. Labour Laws
  3. The Patents Act, 1970
  4. The Income Tax, 1961
  5. Goods and Services Tax
Duties of E-commerce entities towards customers
  • Display to its customers its legal name, address of its headquarters and branches, name and details of the website, contact details including the e-mail address, landline/mobile number of customer care as well as the grievance officer.
  • A grievance officer must be appointed and any complaint filed must be acknowledged within 48 hours and redressed within one month of its date of receipt.
  • Specify names and other details of the importers
  • Cancellation charges must not be imposed on customers, unless similar charges be borne by the entity.
  • Explicit consent of the customer be recorded through affirmative action.
  • Customer refund requests be accepted as per the guidelines specified by the RBI.
  • Price manipulation of goods and/or services offered must be desisted from.
  • E-commerce entities must notdiscriminate among consumers of the same class, in a manner prejudicial towards their rights.
Rationale for Consumer Protection in E-commerce

Consumer Protection is a burning issue in e-commerce and throughout the globe. E-commerce increases productivity and widens choice through cost savings, competitiveness and a better production process. All customers need to have access to e-commerce.

Due to the technological advances and the in-root internet penetration, it is important to build customer trust and confidence in e-commerce which requires the development of transparent and effective consumer protection mechanism to check fraudulent or misleading and unfair practices online. It is time that all the stakeholders, the government and businesses and consumers or their representatives, pay a close attention so that an effective redress system be created. The United Nations Conference on Trade And Development (UNCTAD) in 2017 expressed similar challenges with regards to consumer protection in e-commerce.

Online criminals target information, both personal and financial. Such scammers target customers who trade online. Complaints about consumer exploitation included, but were not limited to, online shopping fraud, misrepresented products, refund issues and/or delivery failure. Thus, it is important that consumer trust be gained and ensured by developing and effectively enforcing relevant laws and policies.

Remedies to the customers when defrauded online
  • Every e-commerce company is required to have a grievance officer as directed under the Information Technology Act, 2000 and details of the same are to be necessarily posted on the e-commerce website.
  • Complaints can be filed to the grievance officer. And such a complaint must be redressed within a month from the date of receipt of the complaint.
  • Companies having arbitration policy provides for alternate dispute redressal mechanism to facilitate resolving the issue.
  • A complaint letter can otherwise be addressed to the dealer as well as the manufacturer/service provider stating the problem, its nature, required proofs and documents and the relief. A solution can be sought and asked for.
  • If none of the above options work, the consumer forum/commission can be approached at. A local consumer group can help with the same.
  • Though the Consumer Protection Act does not allow this, a Supreme Court order dated August 2017 allowed e-commerce complaints to be filed at the consumer forum/commission in the city where the cause of action arises.
  • There are many Consumer Rights Organizations across the country that work with citizens on similar lines and increase public awareness. The organizations can be sought after to seek help in resolving the complaint.
Conclusion

Lack of confidence and trust in quality of the goods and/or services and in the suppliers of the same, was one of the primary reasons for people not buying online. Owing to the widespread internet spread and an ever-increasing use of electronic devices , e-commerce experienced this push across countries, India being no exception.

The development of e-commerce brought about new methods and processes, new opportunities, and at the same time, new forms of unfair and unethical trade practices. The earlier laws and measures to protect the customers were inadequate. However, with the new laws and development in the old Regulations, people have been able to gain confidence in online shopping with safety and security ensured.

Though laws and regulations might sometimes look unsettling to understand, it is essential for the customers, before beginning with the e-commerce trading, to familiarize themselves with all the laws governing trades and their privacy, and the implications of such businesses. The e-commerce laws and its knowledge and compliance would ensure protection from online frauds and data breaches, etc.

The “Consumer is the King with power” now. The new reforms, i.e., the enactment of the two laws, the Consumer Protection Act, 2019 and the Consumer Protection (E-commerce) Rules of 2020;have aided in doing business too. Some legal complications may come up in future with more experience. However, it is to be concluded here that the online consumer’s safety and security will be the growth of e-commerce in India.

What is e-commerce?

Electronic commerce is the buying and selling of goods and services or transmitting of funds or data, over an electronic network, primarily the internet.

What are the types of E-commerce?

There are four types of e-commerce transactions that take place- (i) Business to Business (B2B); (ii) Business to Consumer (B2C); (iii) Consumer to Consumer (C2C); (iv) Customer to Business (C2B).

Why is consumer protection so important in e-commerce?

Online criminals target information, both personal and financial. Such scammers target customers who trade online. Complaints about consumer exploitation included, but were not limited to, online shopping fraud, misrepresented products, refund issues and/or delivery failure. Thus, it is important that consumer trust be gained and ensured by developing and effectively enforcing relevant laws and policies.

Why should e-commerce websites and business keep in mind the laws?

The Indian laws contain heavy penalties incase of non-compliance of laws.

What are some of the major remedies available to consumers?

They appoint a grievance officer to whom the complaints can be filed, and they also have policies for alternate dispute resolution. If internally the matter is not resolved the same can be done by approaching the consumer forums.

References

Author

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    Tanisha Agarwal is a second year B.A. LLB (Hons.) student at Institute of Law, Nirma University, Ahmedabad, Gujarat. She is inclined towards professional litigation and has researching skills.

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