E-commerce Entity
1. What is an E-commerce entity?
1.1 Meaning- Any person/entity that owns, operates, or manages a digital or electronic facility or platform for electronic commerce, but does not include any entity or business notified otherwise by the Government for the said purpose from time to time.
1.2 Examples- Popular e-stores like Amazon, AliExpress, and Walmart, streaming platforms like Netflix, Spotify, and YouTube.
2. Official Definition-
"E-commerce" means buying and selling of goods and services including digital products over digital and electronic network;
"E-commerce entity" according to Ministry of Consumer Affairs, Food and Public Distribution means a company incorporated under the Companies Act, 1956 or the companies Act, 2013 or a foreign company covered under clause (42) of Section 2 of the Companies Act, 2013, or an office, branch or agency in India covered under sub-clause (ii) of clause (v) of Section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999) owned or controlled by a person resident outside India and conducting e-commerce business;
"Marketplace based model of e-commerce" means providing of an information technology platform by an e commerce entity on a digital and electronic network to act as a facilitator between buyer and seller;
2.1 The Ministry of Consumer Affairs, Food and Public Distribution through the Department of Consumer Affairs has issued the Consumer Protection (E-Commerce) Rules, 2020 under the Consumer Protection Act, 2019-
The E-Commerce Rules defines "e-commerce entities" as any person who owns, operates, or manages a digital or electronic facility or platform (i.e., an online interface in the form of any software including a website or mobile applications) for electronic commerce. A seller who offers his goods or services for sale in a marketplace e-commerce entity is however excluded from the above definition. Therefore, only entities operating or manging a digital or electronic platform would be included in the definition of "e-commerce entities" and not the sellers offering their goods and services from a marketplace platform.
2.2 According to Law commission report, Electronic Commerce is a generic name given to business transactions which are entered into through electronic rather than paper-based means.
2.3 Department for Promotion of Industry and Internal Trade (DPIIT), FDI Policy, 2017: “E- Commerce” means buying and selling of goods and services, including digital products over digital and electronic networks.
Ministry of Electronics and Information Technology (MeitY): “E-Commerce” is a type of business model, or segment of a larger business model, that enables a firm or individual to conduct business over an electronic network, typically the internet. Electronic commerce operates in all four of the major market segments: business to business, business to consumer, consumer to consumer and consumer to business.
Consumer Protection Act, 2019: E-Commerce” means buying or selling of goods or services including digital products over digital or electronic networks.
2.4 According to Burgeon Law, E-commerce companies are also required to comply with the Foreign Exchange Management Act (FEMA) 1999, and the recently formulated Digital Personal Data Protection (DPDP) Act, 2023, which is poised to enhance data protection measures, while its rules are yet to be notified. These e-commerce laws in India collectively ensure a secure and legally compliant environment for the rapidly growing e-commerce sector, which is projected to reach US$ 350 billion by 2030.
3. Types of E-commerce Entities
i) Inventory Model
Inventory based model of E-commerce refers to the model where e-commerce marketplaces store inventory from brands, merchants, and sellers and sell the products directly to the consumers. Marketplaces following the inventory model manage the stocks from their sellers, thus helping them in order fulfillment.
Sellers who prefer to opt for marketplaces following an inventory-led model get full-fledged fulfillment services. They get the benefits like faster delivery, better quality control, inventory management, and order fulfillment from the marketplaces. However, the seller needs to fulfill a few criteria whenever they send the stocks to the marketplace’s warehouses.
Examples: The most common example of brands following the inventory model is Amazon FBA. Amazon FBA sources the inventory from the sellers and manufacturers, stores it, and dispatches the orders.
Other examples include Jabong, Yepme, and LatestOne, which aced on speedier delivery, enhanced customer experience, and better quality control.
ii) Marketplace Model
The marketplace model of E-commerce refers to the business model where e-commerce marketplaces provide a centralized platform to multiple sellers where they can sell their products while connecting with potential customers.
Irrespective of B2B or B2C operation, with a marketplace model, online retailers can increase their product assortments, expand their sales channels, and enhance profitability at lesser risk. Hence, sellers can focus more on their core competencies i.e. offering relevant products to the customers that will enhance customer experience.
E-commerce marketplaces using this model are not responsible for maintaining stocks and order fulfillment services. Sellers get control of the entire fulfillment process starting from managing inventory, pricing, and packing to shipping goods to the end customers.
Marketplace Model of Ecommerce Examples:
Examples of brands following the marketplace model are Amazon FBM, Shopclues, eBay, Etsy, etc.
Liability of e-commerce entity-
An E- commerce Entity shall not,
i) directly or indirectly influence the price of the goods or services and shall maintain a level playing field;
ii) adopt any trade practice which for the purpose of promoting the sale, use or supply of any goods or for the provision of any service, or composite supply, adopts any unfair methods or unfair or deceptive practice that may influence transactional decisions of consumers in relation to products and services;
iii) falsely represent themselves as consumers or post reviews about goods and services in their name; or misrepresent or exaggerate the quality or the features of goods and services.
An E-Commerce Entity shall,
i) display terms of contract between e-Commerce entity and the seller relating to return, refund, exchange, warranty / guarantee, delivery / shipment, mode of payments, grievance redressal mechanism etc. to enable consumers to make informed decisions.
ii) ensure that the advertisements for marketing of goods or services are consistent with the actual characteristics, access and usage conditions of such of goods or services;
iii) mention safety and health care information of the goods and service advertised for sale;
iv) provide information on available payment methods; the security of those payment methods, how to use those methods; how to cancel regular payments under those methods; charge back options and any costs applicable to those payment methods; details, including clarification of their business identity, the products they sell, and how they can be contacted by customers shall be displayed in the web site.
vi) Ensure that personally identifiable information of customers are protected, and that such data collection and storage and use comply with provisions of the Information Technology (Amendment) Act, 2008.
vii) Accept return of goods if delivered late from the stated delivery schedule or delivery of defective, wrong or spurious products, and/or not of the characteristics/features as advertised;
viii) Effect all payments towards accepted refund requests of the customers within a period of maximum of 14 days.
ix) if the E-commerce entity is informed by the consumer or comes to know by itself or through another source about any counterfeit product being sold on its platform, and is satisfied after due diligence, it shall notify the seller and if the seller is unable to provide any evidence that the product is genuine, it shall take down the said listing and notify the consumers of the same
x) be held guilty of contributory or secondary liability if it makes an assurance vouching for the authenticity of the goods sold on its marketplace – or if it guarantees that goods are authentic.
- The duties prescribed for Marketplace E-Commerce entities specify that such entities must comply with Section 79 of the IT Act and the Intermediaries Guidelines of 2011, in order to claim exemption from liability for any third-party content published on their platform. However, all E-Commerce Entities (including but not limited to Marketplace E-Commerce entities) by the mode and manner of their operation fall within the definition of ‘intermediary', as defined under the IT Act, and would by default, have to satisfy the conditions of Section 79, in order to claim the aforementioned exemption. Hence, there did not exist a requirement to make a specific reference only qua Marketplace E-Commerce entities. Such an erroneous inclusion may provide a ground for other kinds of e-commerce platforms to argue that they have been specifically excluded from the definition of ‘intermediaries', in order to avoid requisite compliances and liability pertaining to intermediaries under the IT Act.
- A specific time period for effecting refunds or returns for defective/spurious products ought to be specified in the Rules in order to prevent unnecessary delays on part of the e-commerce entities or sellers.
- A schedule or template of a proposed grievance redressal system may be added to the Rules to provide direction to e-commerce entities on the general structure which may be appointed for their internal grievance redressal mechanisms. The same would assist in streamlining such internal mechanisms and improving their effectiveness.
- Appointment of a nodal officer, who shall ensure compliance with provisions of the CP Act and Rules, has been mandated for all E-Commerce Entities. However, no provisions have been introduced for personal liability of the nodal officer, in the event of any breach of compliance. The appointment of a nodal officer for ensuring compliance on part of the E-Commerce Entity may not provide its due benefit, unless some personal liability is attached to such appointment.
The CP Act and its provisions will certainly boost the drive for increased protection of consumer rights, especially on the e-commerce platform. As jurisprudence develops on the New Act and its associated Rules, the Parliament may consider future amendments to introduce improvements to the New Act.
