ROLL NO.

(IN DIGITS): 1806

ROLL NO. (IN WORDS): ONE THOUSAND EIGHT HUNDRED AND SIX
SEMESTER: II (TWO)
SUBJECT: LAW OF TORTS
TOPIC NUMBER: 3
TOPIC NAME: LIABILITY OF INDIAN E-COMMERCE
COMPANIES UNDER THE CONSUMER
PROTECTION ACT : A COMPARATIVE
STUDY BETWEEN INDIA AND USA

1
LIABILITY OF INDIAN E-COMMERCE COMPANIES UNDER THE CONSUMER
PROTECTION ACT : A COMPARATIVE STUDY BETWEEN INDIA AND USA

SYNOPSIS
PROBLEM QUESTION:

The problem that this paper deals with is – “Liability of Indian e-commerce Companies under
the Consumer Protection Act : A Comparative Study between India and USA”.

PROBLEM STATEMENT:

The writer of this paper believes that there is need for a comparative analysis of liabilities of
E-commerce platforms under consumer protection laws of India and USA.

LITERATURE REVIEW:

While reviewing various blogs and articles, the writer of the paper came across the fact that
though a lot of analytical material is present over the liabilities of E-commerce websites in
different jurisdictions, including of India and USA, but there is lack of comparative analysis of
liabilities under laws of these two nations. Considering India and USA as one of the rising
markets for e-commerce transactions, it becomes imperative for the legal fraternity to analyse
the laws governing the consumer protection in these nations and the same has been tried to be
achieved by the following work.

RESEARCH DESIGN AND OBJECTIVES:

The method of research opted by the writer of this paper was doctrinal research from both
primary and secondary sources. Majority of research work has been done via articles and
journals available in online databases, Case Laws, Acts and Statutes. Other sources like various
works by learned authors have also been referred. The design followed by the writer in this
paper is more problem based, rather than elaborative. The paper first discusses in brief the laws
governing the E-consumer protections in both USA and India and then goes on to compare and
analyse the laws for specific issues pertaining to consumer protection, like misleading
advertisements, etc. The paper ends with a brief suggestion, which the author believes should
be implemented to bring more clarity into the region.

LIMITATIONS OF THIS STUDY:

2
One of the limitations of the entire research work is the unavailability of consumer protections
law cases in both USA and India. In both the jurisdictions, the cases of such nature are generally
disposed off by their respective forums and the same are very rarely reported or printed in the
database available online. While the author has relied on various journal articles, new paper
articles and books for the same, but most the data regarding recent cases are sourced from
independent news agencies and thus are subject to uncertainty in case of reliability.

3
 ACKNOWLEDGMENT
On the completion of this project, the writer of this project, takes the opportunity of thanking
the people who contributed in the completion of it, without whose aid, contribution and help
this project wouldn’t have seen practicability.
First, I extend my heartfelt gratitude to, my mentor and Professor of Law of Torts, Mr. Rohan
C. Thomas, Faculty of Law of Torts, whose continuous guidance and support provided me with
the much-needed impetus and gave me a better insight into the topic. I am grateful to the IT
Staff for providing all necessary facilities for carrying out this work. I thank all members of
the Library Staff for providing me the assistance anytime needed.
I also thank my friends and batch mates for providing me the much-needed aid whenever
needed.

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 TABLE OF CONTENTS

SYNOPSIS ................................................................................................................................. 2

ACKNOWLEDGMENT............................................................................................................ 4

TABLE OF CONTENTS ........................................................................................................... 5

INTRODUCTION ..................................................................................................................... 6

WHAT IS E-COMMERCE?...................................................................................................... 7

WHAT IS CONSUMER PROTECTION .................................................................................. 7

THE INDIAN JURISPRUDENCE ............................................................................................ 8

THE AMERICAN JURISPRUDENCE..................................................................................... 8

INDIAN AND AMERICAN JURIPRUDENCE: THE COMPARISION ................................ 9

A. MISREPRESENTATION............................................................................................. 10

B. ONLINE PAYMENT WHILE SHOPPING ................................................................. 13

C. DEFICIENCY IN SERVICE ........................................................................................ 14

D. FAKE/PAID REVIEWS OF PRODUCTS ................................................................... 16

SUGGESTIONS ...................................................................................................................... 18

CONCLUSION ........................................................................................................................ 19

BIBLIOGRAPHY .................................................................................................................... 20

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 INTRODUCTION
E-consumerism is a new and evolving concept where the laws try to integrate the existing
notion of consumer protection with the ever-increasing industry of E-commerce. Since the late
20th and early 21st century, the world has seen a surge and upward trend in the online shopping
industry, i.e. E-commerce. With the development of technology, transportation and integration
of markets, the E-commerce sector has taken a boost in the last two decades. If we see today
in 2020, most consumers prefer shopping online rather than spending bucks on fuel. The ever
expanding industry has also widened its scope to bill payments, recharge, online ticket booking,
etc., which one were the field of brick and mortars shops.

However, with any commercial sectors, laws are required to be framed to address consumer
protection. Though consumer protection isn’t a new theory, but the laws regarding the same
has been rather unchanged and unaltered for decades. These laws dates back to the 20th century
or even earlier, when the market was majorly controlled and provided to by brick and mortar
shops. But with the advent of the e-commerce sector, the need for laws governing it and
protecting the consumers of this sector also increased.

As we know, laws are dynamic in nature and keep evolving with the needs of the society. The
same stands true with consumer protection laws. The countries and their courts have been
legislating laws and interpreting them at various instances to accommodate the rising sector.
Therefore, it becomes to understand how different countries address the issue of e-consumer
protection.

Two of the major players of the E-commerce markets are India and USA, with hundred or
thousands of e-commerce platforms serving the needs of its vast population. While maintaining
its steep growth, the countries too have faced the challenges related to e-consumer protection
and has addressed the same by series of laws, guidelines, legislations and judgements.
Considering their vast difference in functioning of their legal systems, it becomes important to
study, compare and analyse on how these two big players of the industries approach and address
the growing needs of E-consumer protection.

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 WHAT IS E-COMMERCE?
Electronic commerce platforms allow for Internet-enabled trade in unprecedented ways. With
its ubiquitous reach, the architecture of electronic commerce provides a dynamic and
collaborative platform to business and consumers. Consumers get to choose from a whole range
of goods and services across the world, from anywhere and at any time. Businesses are
constantly innovating new technologies in order to adapt to new and evolving challenges in the
area of e-commerce. One of the main drivers underlying e-commerce growth is the rise in
number of individuals using the Information and Communication Technology (ICT) as a
platform to trade.

The UNCITRAL Model law on E-commerce refers e-commerce to transactions carried out by
means of electronic data interchange and other means of electronic communication, which
involve the use of alternatives to paperbased methods of communication and storage of
information. The WTO Work Programme on Electronic Commerce defined “electronic
commerce” to mean “the production, distribution, marketing, sale or delivery of goods and
services by electronic means”.1 The Department of Industrial Policy and Promotion (DIPP) in
its Guidelines for Foreign Direct Investment (FDI) on E-commerce defines E-commerce as “E-
commerce means buying and selling of goods and services including digital products over
digital and electronic network”.2

E-commerce has indeed emerged as a major opportunity for India. With the phenomenal spread
of mobile telephony and the advent of 4G in the country, buyers from small towns and cities
are also buying online in large numbers. It is a fact that internet has dissolved the discrimination
factor between the small and the big cities enabling buyers from small towns to have access to
the same branded goods, and quality products which earlier was a privilege of large city buyers.
Internet Live Stats show that there were 462 million internet users in India. A 2016 report from
the Internet and Mobile Association of India (IAMAI) stated that the overall Internet
penetration in India is currently around 36.5%. The ‘Digital India’ Programme is transforming
the country into a digitally empowered society and knowledge economy.

WHAT IS CONSUMER PROTECTION

Consumer confidence primarily involves two convictions, that the consumer will get what he
expects and that if things go wrong, the consumer can seek a remedy. The virtual aspect of e-

1
WORLD TRADE ORGANIZATION, Declaration on Global Electronic Commerce, 199, WT/MIN (98)/DEC/2.
2
DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION, MINISTRY OF COMMERCE AND INDUSTRY, Guidelines
for Foreign Direct Investment (FDI) on E-commerce, Press Note 3 (2016 Series).

7
commerce sale throws up newer confronts to consumer trust and confidence. The Consumer
Protection law recognises several unfair trade practices such as false and misleading
representation of goods and services in terms of standard, quality, grade etc., materially
misleading the public as regard the price at which the goods are ordinarily sold, disparaging of
goods, misrepresentations as to warranty or guarantee etc.

THE INDIAN JURISPRUDENCE

The E-commerce sector in India has seen a steady rise since the early 2000s. Since the online
shopping industry as grown rapidly to become one of the chief contributors to the economy.
Before the advent of E-commerce, the laws surrounding consumer protection for brick and
mortar sellers was chiefly laid down in Consumer Protection Act, 19863. But, the same failed
to properly addresses the growing E-commerce sector and thus calling for specific legislations.
The Govt. first addressed the demand for e-commerce laws in the Information Technology Act,
20004. The legislation though acknowledged the growing sector but still failed to lay down
satisfactory consumer protection laws. Subsequently, the Govt. passed the Consumer
Protection Act, 20195, which added E-commerce to its definitions and further laid down certain
E-consumer protection provisions. Thus, the latest Act coupled with the Guidelines on e-
Commerce for consumer protection, 20196, released recently serves as the chief legislations
concerning consumer protection in India. Though the laws have taken a long road to come in
force, the Indian Courts have, at various instances, interpreted the provisions of the Consumer
Protection Act, 19867 in a liberalistic approach to accommodate the growing cases related to
E-consumer protection.

THE AMERICAN JURISPRUDENCE

The United States has not enacted a great deal of new legislation to protect consumers who
contract or buy goods via the Internet. Rather, the Federal Trade Commission ("FTC") and
various state agencies apply traditional laws to the Internet.8 The FTC has implemented a three
pronged strategy aimed at protecting e-consumers: aggressive enforcement of existing

3
The Consumer Protection Act, No. 68, (1986).
4
The Information Technology Act, No. 21, (2000).
5
The Consumer Protection Act, No. 35, (2019).
6
GOVERNMENT OF INDIA MINISTRY OF CONSUMER AFFAIRS, FOOD &PUBLIC DISTRIBUTION, Model Framework
for Guidelines on e-Commerce for consumer protection, https://consumeraffairs.nic.in/sites/default/files/file-
uploads/latestnews/Guidelines%20on%20e-Commerce.pdf.
7
Supra note 3.
8
Alan Charles Raul, et al, Fighting Fraud in Cyberspace: Protecting Online Consumers and Investors,
WALLSTREETLAWYER.COM: SECURITIES IN THE ELECTRONIC AGE (June 2, 1999) at
http://www.sidley.com/cyberlaw/features/fighting.asp?.

8
regulations, consumer education, and business education.9 Thus far, this strategy is aimed at
traditional fraud conducted in the cyber context. While the effectiveness of this policy in
protecting consumers is debatable, it certainly has engendered a growth environment for the
Internet. The FTC has the power granted by statute to prohibit unfair methods of competition,
unfair acts or practices, or practices, and false advertising.10

In addition to these federal regulations, "many States have initiated law enforcement actions
concerning online fraud."11 They do not, however, diverge from federal regulations. Instead,
most state laws broadly prohibit unfair and deceptive trade-practices, and further define some
of the terms used in federal acts. Though subtle differences in states' approaches to the
enforcement of these prohibitions exist,12 they are largely consistent with FTC in the cyber
context because of the aggressive stance the Federal Government has taken in enforcing
existing antifraud legislation. Because of the state and federal regulations, the Federal
Government has not found it necessary to significantly alter the existing legislation.

Thus, the american jurisdiction is primarily based on the FTC act, 191513, which has been time
and again interpreted in contect of e-commerce developments by the Federal Trade Comission.
In addition to the interpretations, USA has several state and specific legislations governing E-
consumer protection.

INDIAN AND AMERICAN JURIPRUDENCE: THE COMPARISION

As we saw that laws relating to the protection of consumers on e-commerce platforms largely
vary in their approach and jurisdiction, we need to compare the jurisprudence of both the
nations to analyse them in detail. Drifting from the conventional approach of comparison, the
author has taken some major issues related to E-Consumerism and tried to analyse the approach
of both Indian and American Jurisprudence on the same.

9
Eileen Harrington, Federal Trade Commission on Consumer Protection in Cyberspace: Combating Fraud on
the Internet, June 1998, at http://www.ftc.gov/os/1998/9806/test.623.htm.
10
15 U.S.C. § 45 (West 1997).
11
Letter to Donald S. Clark, Secretary Federal Trade Commission from Eliot Spitzer, New York Attorney General
(Apr. 30, 1999), available at http://www.ftc.govIbcp/icpw/comments/stateofnewyorketal.htm.
12
DEE PRIDGEN, CONSUMER PROTECTION AND THE LAW, § 3.04[4] (1989).
13
The Federal Trade Commission Act, 1915, 15 U.S.C. §§ 41-64.

9
 A. MISREPRESENTATION
Advertising has been defined as ‘a work unit for introducing and selling a good or service to
mass media buyer’.14 Since the advent of the Internet, online advertising has grown rapidly as
consumers have shifted their attention online.15 Misrepresentation by online shopping websites
or E-commerce platforms have been an issue of vary since the very beginning of the E-
commerce industry and has continued to be a major challenge with online shopping.16 When
a buyer opts for purchasing on an online platform, his decisions are purely guided by the
information provided by the website.17 Factors including, but not limited to, pictures,
specification of the products, reviews by other customers and discount provided significantly
affect the choices of any customer. Any misrepresentation of the above factors goes
significantly against the spirit of Law.

In India, the same is covered under ‘misleading advertisement’ in the Consumer Protection
Act, 2019, which is defined as an advertisement which false describes a product, gives false
guarantee, deliberately conceals information, etc.18 The same act penalizes any offence of
misleading advertisement with a maximum fine of 50 Lakhs and imprisonment of 5 years.19
Further, the Monopolistic and Restrictive Trade Practices (MRTP) Act, 1969 define the
practice of misleading the customers as an unfair trade practice and thus carries penalties.20
Though the above laws doesn’t specifically cover E-commerce but, the recent publication of
draft Guidelines on e-Commerce for consumer protection, 2019, hints that the Govt. wishes to
expand the liabilities under the CPA, 2019 and MRTP Act, 1969 to E-commerce platforms. The
Guidelines, under Art. 4 & 5, establishes liabilities of both the E-commerce platform and the
Seller in cases of misleading advertisements.

Though, there is no central statutory agency or uniform legislation regulating the advertising
industry. The Indian advertising market as a whole is regulated and controlled by a non-
statutory body, the Advertising Standards Council of India (ASCI). In the absence of uniform

14
Yusuf Kes, ‘Current Approaches in E-Advertisement’ , (2011) 2(2) IJBSS 124,
https://www.tandfonline.com/doi/abs/10.1080/13600834.2017.1289835?scroll=top&needAccess=true&journalC
ode=cict20.
15
PHILIP J KITCHEN AND E UZUNOGLU, INTEGRATED COMMUNICATIONS IN THE POSTMODERN ERA (Palgrave
Macmillan, 2015), p. 100–117.
16
Sergio Roman, ‘Relational Consequences of Perceived Deception in Online Shopping: The Moderating Roles
of Type of Product, Consumer’s Attitude toward the Internet and Consumer’s Demographics’ (2010) 95 (3) JBE
373–391.
17
Victor T. Nilsson, ‘You’re Not from Around Here, Are You? Fighting Deceptive Marketing in the Twenty-First
Century’ (2012) 54 ALR 801, 827.
18
§1(28), Consumer Protection Act, 2019.
19
§ 89, Consumer Protection Act, 2019.
20
§ 36A, Monopolistic and Restrictive Trade Practices (MRTP) Act, 1969.

10
integrated legislation, it is necessary for advertisers to ensure that an advertisement is in
compliance with all local and national advertising laws. In the recent times, ASCI and the
National Consumer Dispute Redressal Commission has taken cognizance of cases of false
advertisement on E-commerce platforms.

There have been many reported cases of false advertisement by e-commerce websites filed
with the Advertising Standards Council of India, some of which are21:

1. Flipkart’s ads that claimed ‘100% original products’ and ‘Flipkart matlab bilkul
pakka’ were held to be not substantiated and misleading by exaggeration.

2. Amazon Kindle’s ad for ‘Unlimited Reading’ was held to be not substantiated as a limit
of 10 books was advertised as an ‘unlimited offer’.

3. OLA Cabs claim for ‘OLA Micro @ Rs6/km’ was found to be misleading by omission
and not substantiated.

4. Askmebazaar’s ad for ‘Asus Zenfone 2 at Rs 1435’ was found to be grossly misleading.

5. Simplilearn Solutions ad where the company claimed to be ‘world’s largest

professional certifications company’ was held to be grossly misleading.

Similarly, In the United States, the federal government regulates advertising through
the Federal Trade Commission (FTC) with truth-in-advertising laws22, and additionally
enables private litigation through various statutes, most significantly the Lanham
Act (trademark and unfair competition). Further, State governments have a variety of unfair
competition laws, which regulate false advertising, trademarks, and related issues. Many are
very similar to that of the FTC. These laws also go by the terminology "Unfair, Deceptive, or
Abusive Acts and Practices" Laws (UDAAP or UDAP Laws) and can vary widely in the degree
of protection they provide to consumers.23

In interpreting Section 5 of the FTA Act, the FT Commission has determined that a
representation, omission or practice is deceptive if it is likely to: mislead consumers and affect
consumers' behavior or decisions about the product or service.24 The Commission set forth in

21
Viswanathan, P., & Pongiannan, K. (2018). Misleading online advertising in the new business era in
India. Asian Journal of Interdisciplinary Research, 1(1), 12-19. https://doi.org/10.34256/ajir1812.
22
Truth in Advertising, FEDERAL TRADE COMMISSION, https://www.ftc.gov/news-events/media-resources/truth-
advertising.
23
Consumer Protection in the states, NATIONAL CONSUMER LAW CENTER,
https://www.nclc.org/images/pdf/udap/udap-appC.pdf.
24
§ 5, FTC Act, 1915.

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its 1983 Policy Statement on Deception, a representation, omission, or practice is deceptive if
it is likely to mislead consumers acting reasonably under the circumstances and is material to
consumers – that is, it would likely affect the consumer’s conduct or decisions with regard to
a product or service.25 The FTC also states that “Deception” occurs when an ad misleads
consumers about a material fact26 and, material facts are those that are important to consumers’
choices or conduct regarding a product.27

FTC Act further prohibits unfair or deceptive advertising in any medium. That is, advertising
must tell the truth and not mislead consumers. A claim can be misleading if relevant
information is left out or if the claim implies something that's not true.28 The E-commerce
platforms are responsible for reviewing the information used to substantiate ad claims.29 They
may not simply rely on an advertiser's assurance that the claims are substantiated. In
determining whether an ad agency should be held liable, the FTC looks at the extent of the
platform’s participation in the preparation of the challenged ad, and whether the platform knew
or should have known that the ad included false or deceptive claims.30 This approach by the
FTC tries to set a balance between the liabilities of the Seller and the E-commerce platforms
in such cases.

But, interestingly, though the Lanham Act penalises the act of misleading advertisement under
its Section 112531, but it doesn’t empower a customer to bring a suit against such party at
offence32. The act only provides remedies to competitors and only such a competitor can invoke
the Act against another party.33

In the recent past, the FTC has taken actions and has filed lawsuits against various e-commerce
websites for misrepresenting information of using misleading advertisements.:

1. Operators of the LendEDU website entered into a settlement agreement with the
Federal Trade Commission (FTC) in response to allegations that LendEDU misled

25
FTC Statement on Deception, 103 F.T.C. 174, 175 (1984) (appended to Cliffdale Assocs., Inc., 103 F.T.C. 110
(1984)).
26
Deception Policy Statement, 103 F.T.C. at 182.
27
Kraft, Inc. v. FTC, 970 F.2d 311.
28
Advertising and Marketing on the Internet: Rules of the Road, FEDERAL TRADE COMMISSION,
https://www.ftc.gov/tips-advice/business-center/guidance/advertising-marketing-internet-rules-road.
29
Ibid.
30
Ibid.
31
Lanham Act, 41 U.S.C. § 1125(a).
32
Benjamin A. Nix & Daniel L. Rasmussen, Checklist for Suing (or Being Sued) For False Advertising under the
Lanham Act , P A Y N E F E A R S, https://www.acc.com/sites/default/files/2019-04/2019-03-
14%20%20Lanham%20Act%20False%20Advertising%20Claims-PPTX.pdf.
33
Ibid.

12
 consumers by claiming that its website provided objective, unbiased rankings of
financial products, when in fact they offered better ratings to companies that paid for
the endorsement.34
2. The FTC also entered into a settlement with website call FashionNova which
misrepresented the delivery time of its products on its platform. The platform paid $
9.3 millions in the settlement suit.35
3. Class action plaintiffs filed a lawsuit in February against Gojo Industries, Inc., the
maker of Purell hand sanitizers, alleging that Gojo’s marketing and advertising claims
on its website and social media accounts give consumers the impression that Purell
products “are effective at preventing colds, flu, absenteeism and promoting bodily
health and increased academic achievement.”36

Even recently, post the rise of COVID-19 to a pandemic, American E-commerce websites saw
surge in listing of products which claimed to cure the virus or work as a preventive. As the
claims were false and misleading, the FTC took cognizance and sent notices to 50 such
platforms to warn about consequences of using deceptive means.37

B. ONLINE PAYMENT WHILE SHOPPING

While shopping online, the consumers get options of payment for the products ordered or
services availed, through either various online payment getaways or pay-on-delivery option. In
the case of the former, at various instances, it has been observed that consumers are defrauded,
cheated or sometimes their vital credentials have been shared to third party vendors. This has
caused major demand for laws to address them and protect E-consumers.

In the same regard, the US govt enacted the Restore Online Shoppers’ Confidence Act, 2010
[“ROSCA”] in the year 2010. It made it an offence for third party sellers to charge or attempt
to charge any consumer for any good or service sold in a transaction effected on the Internet,

34
Daniel Glenn, ET. AL, LendEDU Agrees to Settle FTC Charges Alleging Deceptive Advertising Practices,
PERKINS COIE,
https://www.consumerprotectionreview.com/2020/03/lendedu-agrees-to-settle-ftc-charges-alleging-deceptive-
advertising-practices/#more-2268.
35
Ibid.
36
Jason Howell, ET. AL, Lawsuit Filed Against Makers of Purell For Hand Sanitizer Disease Prevention Claims,
PERKINS COIE,
https://www.consumerprotectionreview.com/2020/03/lawsuit-filed-against-makers-of-purell-for-hand-sanitizer-
disease-prevention-claims/#more-2263.
37
FTC Sends Letters Warning 50 More Marketers to Stop Making Unsupported Claims That Their Products and
Therapies Can Effectively Prevent or Treat COVID-19, FEDERAL TRADE COMMISSION,
https://www.ftc.gov/news-events/press-releases/2020/05/ftc-sends-letters-warning-50-more-marketers-stop-
making.

13
unless before obtaining the consumer's billing information, the post-transaction third party
seller has clearly and conspicuously disclosed to the consumer all material terms of the
transaction.38 Further, it made it unlawful for an initial merchant to disclose a credit card, debit
card, bank account, or other financial account number, or to disclose other billing information
that is used to charge a customer of the initial merchant, to any post-transaction third party
seller for use in an Internet-based sale of any goods or services from that post-transaction third
party seller.

While in context of the Indian jurisprudence on the issue, the Draft Rules, 2019 provide that
all businesses engaged in e-commerce must conform to Reserve Bank of India [“RBI”]
guidelines for payment facilities. The RBI via notification no. 424, detailed the Security and
Risk Mitigation Measures for Electronic Payment Transactions to the consumers of e-
commerce.39 However, there is no specific piece of legislation to govern the financial, payment
related sensitive information and other personal data of these e-consumers, but the same is
being deliberated upon in the final version of the Draft Rules, 2019. The Department for
Promotion of Industry and Internal Trade is reportedly applying the final touches to a new draft
of the e-commerce policy, after studying the Personal Data Protection Bill and issues
pertaining to non-personal data.40
C. DEFICIENCY IN SERVICE
With the rise of E-commerce transactions in the modern world, the notion of ‘Deficient
Service’ has also widened over time. As people resort to online shopping platforms over Brick
and Mortar sellers, the liabilities carried by the later also required to be extended to the former.
An online transaction at any E-commerce platform can result in deficiency in service, which
includes but not limited to, wrong or counterfeit product sent, delay in delivery, delivery of
damaged or used products or any other unfair practice.

Previously, consumer rights, protected by provisions like Section 6 of the Consumer Protection
Act, 198641 (CPA), also apply to electronic consumers. The rights of physical and online

38
Restore Online Shoppers’ Confidence Act, 2010, 15 USC Ch. 110,
https://uscode.house.gov/view.xhtml?req=granuleid%3AUSC-prelim-title15-chapter110&edition=prelim.
39
Security and Risk Mitigation Measures for Electronic Payment Transactions, RESERVE BANK OF INDIA,
RBI/2012-13/424, Press Release, Feb. 28, 2013,
https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=7874&Mode=0.
40
New e-commerce policy expected this week, sector could get dedicated regulator, THE WEEK,
https://www.theweek.in/news/biz-tech/2020/03/23/new-e-commerce-policy-expected-this-week-sector-could-
get-dedicated-regulator.html.
41
§ 6, Consumer Protection Act, 1986.

14
consumers, although equal in notion, differ in operation. The online space had a few unique
practical problems like place of business, jurisdictional issues, non-availability of common
dispute resolution system, etc. These require special measures that were not provided in the
existing laws. To tackle the same, the legislature came out with the Consumer Protection Act,
2019, which not only broadened the scope of liabilities but also included ‘E-commerce’ into
its jurisdiction.

Section 85 of the Act provides for liabilities of a service provider if the product/service is
deficient or inadequate in quality, quantity, any commission or omission of act which shall
harm the customer, etc.42 It further touches the cases where the identity of the manufacturer
cannot be determined, the seller/platform shall be liable.43 In furtherance of Section 94 of the
act, which empowers the central govt. to make laws to protect the rights of consumers in E-
commerce, released the Draft Guidelines on e-Commerce for consumer protection, 2019. The
guidelines explicitly lay down the liabilities of the Sellers and E-commerce entities.

The courts and the NDRC have parallelly expanded the scope of liabilities in various cases in
the recent time. One such issue that came up before the consumer court is the case of Rediff.
com India Ltd. v/s Urmil Munjal44, wherein the consumer was dissatisfied with the goods
delivered by the online shopping website. While the consumer wanted to return the product
and claim refund, he did not find a Return Policy, which provided details of the address to
which the products were to be returned. Since the online portal was facilitator between the
sellers and buyers as mentioned in the terms and conditions, it was the duty of the facilitator to
inform the consumer as to how the goods are to be returned to the seller. The Court held the
online portal liable on the grounds of ‘Deficiency in Service’ for not providing sufficient
information. In another case, E-Biz Com Pvt. Ltd. v. Vishwanatha Patil45, the E-commerce
platform didn’t deliver the ordered product, though the customer had paid the amount. The
SCRDC held the actions of the platform to be deficiency of service and thus held them liable
to pay damages.

In USA, the FTC Act is the primary legislation which secures the consumers from any
‘deficient service’ by an E-commerce platform. Section 5 of the FTC Act prohibits the
commission of any unfair action or omission by an entity to a consumer, offline or online.46 An

42
§ 85, Consumer Protection Act, 2019.
43
§ 86(d), Consumer Protection Act, 2019.
44
Rediff. com India Ltd. v. Urmil Munjal, RPNo.4656 of 2012.
45
E-Biz Com Pvt. Ltd. v. Vishwanatha Patil, First Appeal No. A/10/159, SCDRC.
46
§ 5(a), FTC Act, 1915.

15
act or practice is “unfair” if it “causes or is likely to cause substantial injury to consumers which
is not reasonably avoidable by consumers themselves and not outweighed by countervailing
benefits to consumers or to competition.”47

As the above legal provisions do not explicitly include ‘deficiency in services’, the
Commission through various cases has expanded the interpretation of the laws to include the
same. Some of the landmark judgments in this regard were:

1. FTC v. Brandzel48: In its first case involving promotions in Usenet newsgroup messages
and online bulletin boards, the Commission charged the defendants with violating the
Mail Order Rule for failing to deliver computer memory chips it sold consumers. The
Commission obtained a permanent injunction.
2. U.S. v. Iomega Corp.49: The Commission charged this large manufacturer of data
storage products such as the “Zip Drive” with failing to deliver cash rebates and product
premiums advertised online. In the settlement, the defendant agreed to pay $900,000 in
civil penalties, the highest penalty the FTC has ever obtained for non-fraudulent
violations of the Mail Order Rule.

In the context of E-commerce websites, the FTC in the case of FTC v. Balls of Kryptonite50
brought a online shopping company to court on complaints of delayed delivery, sub-quality
products delivered and other issues by the customers. The court held that the actions of
providing deficient services by the defendant was against the laws under FTC Act and thus
attracts penalties.

D. FAKE/PAID REVIEWS OF PRODUCTS

E-consumerism is majorly based on information of a product available online. Most consumers,
while shopping online, rely on the information provided by the platforms or the sellers about a
product. The only unbiased information they rely upon while purchasing is the reviews by
previous purchaser of such products and their experience. Therefore, making reviews an
integral part of the online shopping experience. But, many a times, it has been observed that e-
commerce platforms and sellers upload fake reviews of their products through either fraudulent

47
15 U.S.C. § 45(n).
48
Protection Consumers Online, FEDERAL TRADE COMMISSION,
https://www.ftc.gov/sites/default/files/documents/reports/protecting-consumers-online/fiveyearreport.pdf.
49
Ibid.
50
FTC v. Balls of Kryptonite, CV 09-05276 DDP (Ex).

16
agencies or other means, to lure customers to buy their products. This issue is clear violation
of basic consumers rights.
On this issue, in India, there are no legislations which explicitly prohibits posting fake reviews
online on e-commerce websites. No case has ever been decided for the same too. However, the
research is of the strong opinion that if challenged, the same will classify as an ‘unfair trade
practice’ under Consumer Protection Act. However, there have been instances where fake
reviews have been pointed out. On Amazon for instance, consumers continue to be ripped off
as a result of fake review “factories” on Facebook that manufacture
51
misleading Amazon product reviews. Many items also boast a high number of five-star
ratings posted in a short space of time – another indicator suggesting inauthentic reviews.52 It
was reported that one fake review was bought for Rs. 1200.53
While in a contrasting approach to the issue, US laws consider fake reviews under the ambit of
false advertising. Though there are laws which prohibit removing honest and genuine reviews
from the websites (Consumer Review Fairness Act),54 the FTC has no explicit law which
prohibits ‘fake reviews.’ However, judgements by the FTC has shown that this newly born
practice is illegal too. It was in 2019 that the FTC brought its first ever case for fake reviews
online. Cure Encapsulations, paid a third-party website to write five-star Amazon reviews for
a weight-loss supplement called garcinia cambogia.55 Finally, the order imposed a judgment of
$12.8 million, which will be suspended upon payment of $50,000 to the Commission. Further,
in the case of, Devumi, LLC (Devumi) v. FTC, the defendants sold more than 800 fake LinkedIn
followers to marketing, advertising, and public relations firms; companies offering computer
software solutions; banking, investment, and other financial services firms; human resources
firms; and others. These fake followers, the complaint alleged, enabled the buyers to deceive

51
Rupert Jones, Fake reviews: How the Facebook 'factories' are still ripping us off, THE GUARDIAN,
https://www.theguardian.com/technology/2019/apr/20/fake-reviews-how-the-facebook-factories-are-still-
ripping-us-off; Fake review factories fooling online Amazon shoppers: Report, THE HINDUSTAN TIMES,
https://tech.hindustantimes.com/tech/news/fake-review-factories-fooling-online-amazon-shoppers-report-story-
zr7xGKAPTqC1uynJtKQBrO.html.
52
Rebecca Smithers, Flood of ‘fake’ five-star reviews inundating Amazon, Which? Finds, THE GUARDIAN,
https://www.theguardian.com/technology/2019/apr/16/flood-of-fake-five-star-reviews-inundating-amazon-
which-finds.
53
Fake review for Rs 1,200 each: How sellers on Amazon, others dupe customers, THE FINANCIAL EXPRESS,
https://www.financialexpress.com/industry/sme/fake-review-for-rs-1200-each-how-sellers-on-amazon-others-
dupe-customers/1803235/.
54
Consumer Review Fairness Act, 2016. PUB. L, 114-258.
55
FTC Brings First Case Challenging Fake Paid Reviews on an Independent Retail Website, FEDERAL TRADE
COMMISSION, https://www.ftc.gov/news-events/press-releases/2019/02/ftc-brings-first-case-challenging-fake-
paid-reviews-independent.

17
potential clients, investors, partners, and employees.56 The company was held liable. More
recently, in the LendEDU case, LendEDU misled consumers to believe its website provided
objective product information, when in fact it offered higher rankings and ratings to companies
that paid for placement. Specifically, the FTC alleged that LendEDU falsely claimed that the
information on its website was not affected by compensation from advertisers. The FTC also
alleged the company touted fake positive reviews of its website. LendEDU was required to pay
$350,000.57

SUGGESTIONS
Though both the countries lack the enactment of a specific legislation to address the issue, but
the courts have mostly done the work of expanding the ambit of existing laws. However, it is
always desirable to enact laws on a specific subject matter, especially when the E-commerce
sector is seeing a steady growth.

In context of the Indian draft rules released in 2019 regarding the matter, some loopholes does
prevail which may hinder the very spirit of the future legislation. One loophole being that the
Draft Guidelines, if and when enacted, will carry the exemption of liability for E-commerce
entities, under the IT Act. Section 79 exempts an ‘intermediary’ from liabilities any
transmission of data or communication link made available by it. 58 The E-commerce entities
generally shrug off their liabilities by taking the defence of ‘intermediary’. The new guidelines
fail to address the issue and still allows the law and thus creating a loophole. Therefore, the
legislature should counteract the defense available under Section 79 by making changes to the
draft guidelines, before enactment.

Thus, it is expected that the Govt. will address the loophole and make necessary changes to
bring out a legislation which can serve the purpose of consumer protection on e-commerce
platforms.

56
Devumi, Owner and CEO Settle FTC Charges They Sold Fake Indicators of Social Media Influence; Cosmetics
Firm Sunday Riley, CEO Settle FTC Charges That Employees Posted Fake Online Reviews at CEO’s Direction,
FEDERAL TRADE COMMISSION, https://www.ftc.gov/news-events/press-releases/2019/10/devumi-owner-ceo-
settle-ftc-charges-they-sold-fake-indicators.
57
FTC Finalizes Settlement in LendEDU Case Related to Deceptive Rankings and Fake Reviews, FEDERAL TRADE
COMMISSION, https://www.ftc.gov/news-events/press-releases/2020/05/ftc-finalizes-settlement-lendedu-case-
related-deceptive-rankings.
58
§ 79, Information Technology Act, 2000.

18
 CONCLUSION
With the rise of E-commerce sectors, the problems surrounding consumer protection on online
platforms have also increased. In the above analysis we saw how to major players of the
ecommerce sector take different routers in addressing the issue of e-consumer protection.
While Indian laws stood largely unchanged since the Consumer Protection Act, 1986, the
Americans had the FTC in force to check and adjudicate the matters through cases and expand
the ambit of FTC Act. Similarly, the Indian court have time and again tried to expand the ambit
of the Consumer Protection Act, 1986 through a series of judgements. Both the countries saw
legislations regarding consumer protection in online shopping industry only in the 21st century.
While the USA has some legislations dealing with specific e-consumer issues, India has widely
extended the meaning and provisions of Consumer Protection to E-commerce sectors through
the Consumer protection Act, 2019. The only major legislation seen in this context are the
guidelines released in 2019, which still are in the line of being enacted as law.

After a detailed analysis of the above four issues pertaining of protection of consumers in the
online shopping platforms and how Indian and American jurisprudence address them, it can be
seen that both the nations have taken different approach to the same but still largely convey
similar rules for consumer protection. Even in cases of absence of a law to govern a specific
issue, courts of both the nations have taken liberal approach in extending existing laws to
protect the consumers.

But, with the ever-increasing scope of this sector and the rising risk of consumers being cheated
or defrauded on online platforms, it is important that govts pass legislation for the specific
matter of e-consumer protection and unify the existing laws. Only time can tell on when the
nations shall do the same.

19
 BIBLIOGRAPHY

Cases

E-Biz Com Pvt. Ltd. v. Vishwanatha Patil, First Appeal No. A/10/159, SCDRC. ................. 15
FTC v. Balls of Kryptonite, CV 09-05276 DDP (Ex). ............................................................ 16
Kraft, Inc. v. FTC, 970 F.2d 311. ............................................................................................ 12
Rediff. com India Ltd. v. Urmil Munjal, RPNo.4656 of 2012. ............................................... 15

Statutes

§ 36A, Monopolistic and Restrictive Trade Practices (MRTP) Act, 1969. ............................. 10
§ 5(a), FTC Act, 1915. ............................................................................................................. 15
§ 5, FTC Act, 1915. ................................................................................................................. 11
§ 6, Consumer Protection Act, 1986. ....................................................................................... 14
§ 79, Information Technology Act, 2000................................................................................. 18
§ 85, Consumer Protection Act, 2019. ..................................................................................... 15
§ 86(d), Consumer Protection Act, 2019. ................................................................................ 15
§ 89, Consumer Protection Act, 2019. ..................................................................................... 10
§1(28), Consumer Protection Act, 2019. ................................................................................. 10
15 U.S.C. § 45(n). .................................................................................................................... 16
Lanham Act, 41 U.S.C. § 1125(a). .......................................................................................... 12
The Consumer Protection Act, No. 35, (2019). ......................................................................... 8
The Consumer Protection Act, No. 68, (1986). ......................................................................... 8
The Federal Trade Commission Act, 1915, 15 U.S.C. §§ 41-64. .............................................. 9
The Information Technology Act, No. 21, (2000). .................................................................... 8

Other Authorities

Letter to Donald S. Clark, Secretary Federal Trade Commission from Eliot Spitzer, New York
Attorney General (Apr. 30, 1999), available at
http://www.ftc.govIbcp/icpw/comments/stateofnewyorketal.htm. ........................................ 9

Treatises

DEE PRIDGEN, CONSUMER PROTECTION AND THE LAW, § 3.04[4] (1989). ............... 9
PHILIP J KITCHEN AND E UZUNOGLU, INTEGRATED COMMUNICATIONS IN THE POSTMODERN ERA
(Palgrave Macmillan, 2015), p. 100–117............................................................................. 10

Regulations

20
Deception Policy Statement, 103 F.T.C. at 182. ...................................................................... 12
DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION, MINISTRY OF COMMERCE AND

INDUSTRY, Guidelines for Foreign Direct Investment (FDI) on E-commerce, Press Note 3
(2016 Series). ......................................................................................................................... 7
FTC Statement on Deception, 103 F.T.C. 174, 175 (1984) (appended to Cliffdale Assocs., Inc.,
103 F.T.C. 110 (1984)). ....................................................................................................... 12
GOVERNMENT OF INDIA MINISTRY OF CONSUMER AFFAIRS, FOOD &PUBLIC DISTRIBUTION,
Model Framework for Guidelines on e-Commerce for consumer protection,
https://consumeraffairs.nic.in/sites/default/files/file-
uploads/latestnews/Guidelines%20on%20e-Commerce.pdf. ................................................ 8
Security and Risk Mitigation Measures for Electronic Payment Transactions, RESERVE BANK
OF INDIA, RBI/2012-13/424, Press Release, Feb. 28, 2013,
https://www.rbi.org.in/scripts/NotificationUser.aspx?Id=7874&Mode=0. ......................... 14
WORLD TRADE ORGANIZATION, Declaration on Global Electronic Commerce, 199, WT/MIN
(98)/DEC/2. ............................................................................................................................ 7

Articles

Advertising and Marketing on the Internet: Rules of the Road, FEDERAL TRADE COMMISSION,
.............................................................................................................................................. 12
Consumer Protection in the states, NATIONAL CONSUMER LAW CENTER,
https://www.nclc.org/images/pdf/udap/udap-appC.pdf. ...................................................... 11
Daniel Glenn, ET. AL, LendEDU Agrees to Settle FTC Charges Alleging Deceptive Advertising
Practices, PERKINS COIE, ..................................................................................................... 13
Devumi, Owner and CEO Settle FTC Charges They Sold Fake Indicators of Social Media
Influence; Cosmetics Firm Sunday Riley, CEO Settle FTC Charges That Employees Posted
Fake Online Reviews at CEO’s Direction, FEDERAL TRADE COMMISSION,
https://www.ftc.gov/news-events/press-releases/2019/10/devumi-owner-ceo-settle-ftc-
charges-they-sold-fake-indicators ........................................................................................ 18
Eileen Harrington, Federal Trade Commission on Consumer Protection in Cyberspace:
Combating Fraud on the Internet, June 1998, at
http://www.ftc.gov/os/1998/9806/test.623.htm. .................................................................... 9
FTC Brings First Case Challenging Fake Paid Reviews on an Independent Retail Website,
FEDERAL TRADE COMMISSION, https://www.ftc.gov/news-events/press-
releases/2019/02/ftc-brings-first-case-challenging-fake-paid-reviews-independent. .......... 17

21
FTC Finalizes Settlement in LendEDU Case Related to Deceptive Rankings and Fake Reviews,
FEDERAL TRADE COMMISSION, https://www.ftc.gov/news-events/press-
releases/2020/05/ftc-finalizes-settlement-lendedu-case-related-deceptive-rankings. ......... 18
FTC Sends Letters Warning 50 More Marketers to Stop Making Unsupported Claims That
Their Products and Therapies Can Effectively Prevent or Treat COVID-19, FEDERAL TRADE
COMMISSION, ........................................................................................................................ 13
Jason Howell, ET. AL, Lawsuit Filed Against Makers of Purell For Hand Sanitizer Disease
Prevention Claims, PERKINS COIE, ...................................................................................... 13
Protection Consumers Online, FEDERAL TRADE COMMISSION,
https://www.ftc.gov/sites/default/files/documents/reports/protecting-consumers-
online/fiveyearreport.pdf. .................................................................................................... 16
Truth in Advertising, FEDERAL TRADE COMMISSION, https://www.ftc.gov/news-events/media-
resources/truth-advertising. .................................................................................................. 11

Newspaper Articles

Alan Charles Raul, et al, Fighting Fraud in Cyberspace: Protecting Online Consumers and
Investors, WALLSTREETLAWYER.COM: SECURITIES IN THE ELECTRONIC AGE
(June 2, 1999) at http://www.sidley.com/cyberlaw/features/fighting.asp?. ........................... 8
Benjamin A. Nix & Daniel L. Rasmussen, Checklist for Suing (or Being Sued) For False
Advertising under the Lanham Act , P A Y N E F E A R S,
https://www.acc.com/sites/default/files/2019-04/2019-03-
14%20%20Lanham%20Act%20False%20Advertising%20Claims-PPTX.pdf................... 12
Fake review factories fooling online Amazon shoppers: Report, THE HINDUSTAN TIMES, ..... 17
Fake review for Rs 1,200 each: How sellers on Amazon, others dupe customers, THE
FINANCIAL EXPRESS, https://www.financialexpress.com/industry/sme/fake-review-for-rs-
1200-each-how-sellers-on-amazon-others-dupe-customers/1803235/. ............................... 17
New e-commerce policy expected this week, sector could get dedicated regulator, THE WEEK,
https://www.theweek.in/news/biz-tech/2020/03/23/new-e-commerce-policy-expected-this-
week-sector-could-get-dedicated-regulator.html. ................................................................ 14
Rebecca Smithers, Flood of ‘fake’ five-star reviews inundating Amazon, Which? Finds, THE
GUARDIAN, https://www.theguardian.com/technology/2019/apr/16/flood-of-fake-five-star-
reviews-inundating-amazon-which-finds. ........................................................................... 17

22
Rupert Jones, Fake reviews: How the Facebook 'factories' are still ripping us off, THE
GUARDIAN, https://www.theguardian.com/technology/2019/apr/20/fake-reviews-how-the-
facebook-factories-are-still-ripping-us-off .......................................................................... 17

Journals & Research Papers

Sergio Roman, ‘Relational Consequences of Perceived Deception in Online Shopping: The

Moderating Roles of Type of Product, Consumer’s Attitude toward the Internet and
Consumer’s Demographics’ (2010) 95 (3) JBE 373–391 ................................................... 10
Victor T. Nilsson, ‘You’re Not from Around Here, Are You? Fighting Deceptive Marketing in
the Twenty-First Century’ (2012) 54 ALR 801, 827. .......................................................... 10
Viswanathan, P., & Pongiannan, K. (2018). Misleading online advertising in the new business
era in India. Asian Journal of Interdisciplinary Research, 1(1), 12-19.
https://doi.org/10.34256/ajir1812. ....................................................................................... 11
Yusuf Kes, ‘Current Approaches in E-Advertisement’ , (2011) 2(2) IJBSS 124,
https://www.tandfonline.com/doi/abs/10.1080/13600834.2017.1289835?scroll=top&needA
ccess=true&journalCode=cict20. ......................................................................................... 10

23