DR.

RAM MANOHAR LOHIYA NATIONAL LAW

UNIVERSITY, LUCKNOW

FINAL PROJECT

E-COMMERCE LAW

‘CRITICAL ANALYSIS OF THE E-COMMERCE

RULES, 2020’

Submitted to: Submitted by:

Mr. Amandeep Singh Srajika Gupta

(Assistant Professor) 160101150

RMLNLU, Lucknow. Semester IX

 ACKNOWLEDGEMENT

A research project of such great scope and precision could never have been possible without
great co-operation from all sides. Contributions of various people have resulted in this effort.
Firstly, I would like to thank God for the knowledge he has bestowed upon me.

I would also like to take this opportunity to thank Amandeep Sir, without whose valuable
support and guidance, this project would have been impossible. I would like to thank the
library staff for having put up with my persistent queries and having helped me out with the
voluminous materials needed for this project. I would also like to thank my seniors for having
guided me and culminate this acknowledgement by thanking my friends for having kept the
flame of competition burning, which spurred me on through the days.
 TABLE OF CONTENTS

ACKNOWLEDGEMENT.........................................................................................................2

INTRODUCTION......................................................................................................................4

SALIENT FEATURES OF THE RULES.................................................................................5

PROHIBITION OF UNFAIR TRADE PRACTICES...............................................................7

CONCLUSION..........................................................................................................................9

BIBLIOGRAPHY....................................................................................................................11
 INTRODUCTION

Governments across jurisdictions have always maintained a delicate balance between the
competing interest of consumers and the dynamics of the market. True to its nature, markets
have undoubtedly been inclined towards profit maximization, while consumers have sought
to exploit the scant margin of competition in the market 1. The internet revolution has opened
a new avenue of business through e-commerce. The Organization for Economic Cooperation
and Development (OECD) has defined e-commerce as “a new way of conducting business
over networks which uses non-proprietary protocols that are established through an open
standard-setting process such as the Internet.”2

The rapid popularity and acceptance of e-commerce have brought about a paradigm shift in
the realm of marketing and trading in India.3 In India, e-commerce has already spawned
thousands of entrepreneurs, thus encompassing a more comprehensive range of goods and
services. The advent of e-commerce has posed new challenges regarding the applicability of
traditional law, thus entrusting a heavy responsibility on the legislature to tread cautiously by
framing rules to regulate e-commerce.4 The challenges include unfair trade practices, the
validity of e-contracts, jurisdictional questions in disputes, privacy concerns and pricing
regulations. Although the e-commerce platform sought to resolve certain grievances of the
customers, the need was felt to streamline its functioning. As e-commerce gained enormous
popularity, governments found it pertinent to revamp the consumer protection law to
safeguard the interest of consumers. Besides, a vibrant and effective regulatory mechanism
was crucial for the success of e-commerce in India. 

Intending to streamline the law surrounding e-commerce, the Central Government

notified the Consumer Protection (E-commerce) Rules, 20205 to prevent unfair trade
practices ensuing from the operations of e-commerce entities to protect the interests and
rights of the consumers thereby brining the e-commerce entities within the ambit of the
consumer protection regime.

1
<https://indiacorplaw.in/2020/08/consumer-protection-e-commerce-rules-2020-an-analysis.html> accessed 7 th
November, 2020.
2
<http://www.oecd.org/digital/ieconomy/1893506.pdf> accessed 7th November, 2020.
3
<https://www.researchgate.net/publication/330845555_Ecommerce_Laws_and_Regulations_in_India_Issues_a
nd_Challenges> accessed 6th November, 2020.
4
<https://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/E-Commerce_in_India.pdf>
accessed 6th November, 2020.
5
<https://consumeraffairs.nic.in/sites/default/files/E%20commerce%20rules.pdf> accessed 7 th November, 2020.
The Rules enlist the duties and liabilities of an e-commerce entity as well as any seller
conducting sale on an e-commerce marketplace6. The former is defined to include any person
who is the owner, operator or manager of any electronic platform created for electronic
commerce (Rule 3(1)(b)). Further, the Rules encompass the duties and liabilities of an
‘inventory e-commerce entity’ (Rule 7) and a ‘marketplace e-commerce entity’ (Rule 5). I
have discussed and analysed the clauses in rules in detail in my upcoming heads.

SALIENT FEATURES OF THE RULES

Scope & Applicability

The Rules apply to all forms of e-commerce businesses, including entities adopting both the
marketplace as well as the inventory-based model of e-commerce. The Rules further
encompass all kinds of multi-brand and single brand retail carried out online. The Rules and
the liabilities imposed thereunder are however, not applicable to any activity carried out by a
natural person, which does not form a part of his professional or commercial activities
undertaken on a regular or systematic basis.7 Thus, for instance, people selling goods on
online portals like E-Bay, OLX, etc., would be exempt from these rules if the same does not
form part of activities undertaken by them on a regular commercial basis.8

Further, Rule 4(1)(a) mandates that the e-commerce entity must be a registered company
under the Companies Act, 2013, or a foreign company covered under the Companies Act, or
a branch, office or an agency outside India owned or controlled by a person in India as per
Section 2 of the Foreign Exchange & Management Act, 1999. Thus, the Rules prohibit any e-
commerce entity to run as a sole proprietorship or a partnership or in any other business form
in India.

Mandatory Disclosures

The Rules accord immense importance to transparency and accountability by making it

mandatory for the e-commerce entity as well as the sellers to furnish certain basic
information on the portal.9 These mandatory disclosures, with respect to all e-commerce
6
<http://www.nlujlawreview.in/flipping-the-cart-consumer-protection-e-commerce-rules-2020/> accessed 8 th
November, 2020.
7
Rule 2 of the Consumer Protection (E-commerce) Rules, 2020.
8
<http://www.nlujlawreview.in/flipping-the-cart-consumer-protection-e-commerce-rules-2020/> accessed 8 th
November, 2020.
9
Rule 4(2) of the Consumer Protection (E-commerce) Rules, 2020.
entities, include a duty to provide their legal name, address, details of their website, important
contact details and details of the importer (in case of imported goods) to the consumer in an
unambiguous manner.

Further, the Rules impose a liability on the marketplace e-commerce entities to lay out details
of the seller and product related information provided by the sellers to them, information
relating to guarantee, warrantee, return, refund, available payment methods, etc., and an
explanation to the parameters which determine the rank of the product on their platforms to
enable the consumer to make an informed choice at the pre-purchase stage. 10 The seller is
also responsible to furnish similar details to the e-commerce entity. 11 Further, the Rules
confer upon the consumer, the right to demand information after the purchase has been made,
primarily to facilitate dispute resolution.

Welfare & Redressal Mechanism

The Rules lay down comprehensive duties and liabilities that offer to the consumers an
extensive grievance redressal mechanism and call for the appointment of a functionary with
his/her place of residence in India to oversee the compliance with the Act and the Rules. 12
Further, every e-commerce entity is duty bound to establish such grievance redressal
mechanism headed by a grievance officer whose contact details should be clearly listed on
the e-commerce platform.13 The officer is bound by a limitation period of 48 hours to
acknowledge the receipt of the complaint and further one month from the date of the receipt
to redress the complaint. Consumers are also relieved of any cancellation charge unless such
charges are borne by the e-commerce entity itself.

Payments arising out of accepted refund requests are to be paid within a reasonable period as
prescribed by the Reserve Bank of India or any other competent authority. In order to enable
the consumer to track the progress of his/her complaint, the Rules mandate all e-commerce
entities to generate a ticket number for each complaint. The Rules proscribe the seller and
inventory e-commerce entities from refusing to refund payment, accept returned goods or to
discontinue purchased services if such goods and services turn out to be defective, deficient,
delivered late or lacking of the characteristics as advertised.14

10
Rule 5(3) of the Consumer Protection (E-commerce) Rules, 2020.
11
Rule 6(5) of the Consumer Protection (E-commerce) Rules, 2020.
12
Rule 4(1)(a) of the Consumer Protection (E-commerce) Rules, 2020.
13
Rule 4(4) of the Consumer Protection (E-commerce) Rules, 2020.
14
Rule 6(3) and 7(4) of the Consumer Protection (E-commerce) Rules, 2020.
E-Contract Issues

The Rules briefly touch upon certain e-contract issues that commonly arise between
enterprises and consumers while dealing with such transactions. The Rules mandate the
entities to take an ‘explicit and affirmative’ consent of the consumer rather than recording it
in an automatic manner or through pre-ticked checkboxes.15

The prima facie intent behind the addition of this provision could be to nullify the
unestablished validity of browse-wrap agreements wherein consent is ‘presumed’ upon the
mere use of the website and that of shrink-wrap agreements wherein the terms and conditions
of the product purchase are communicated at a post-purchase state. The provision seems to
strongly uphold the validity of click-wrap agreements wherein contracts are only concluded
after obtaining the desired ‘explicit and affirmative’ consent of the consumer. It could,
however, also address the need to offer to the consumer an opportunity to thoroughly review
the order before the purchase is processed so as to avoid the occurrence of mistakenly placed
orders.16

PROHIBITION OF UNFAIR TRADE PRACTICES

The Consumer Protection Act, coupled with the Rules, prohibits the e-commerce entities as
well as the sellers conducting sale on their platforms from engaging in any unfair trade
practice in the conduct of their businesses. While the Act itself provides for a rather
expansive interpretation of what constitutes an unfair trade practice, the Rules further impose
the following duties and liabilities to address any deceptive, manipulative or any other unfair
trade practices that may be adopted by players in the e-commerce business:

1. Prohibition of False Reviews and Ratings: Various market studies conducted on the e-

commerce spectrum have shown that customer reviews and ratings play a key role in a
consumer’s decision making process.17 Fake reviews and ratings have the potential of
fundamentally distorting a consumer’s right to an informed choice. Thus, the Rules prohibit
any inventory-based e-commerce entity as well as any seller selling on any e-commerce

15
Rule 4(9) of the Consumer Protection (E-commerce) Rules, 2020.
16
Supra, Note 8.
17
Competition Commission of India Reports.
platform from falsely representing itself as a consumer and posting reviews or ratings about
the goods or services.18

2. Product Authenticity and Content Liability: The E-Commerce Rules mandate all

inventory-based e-commerce entities and sellers on all e-commerce platforms to ensure that
their advertisements marketing their goods and services are consistent with their actual
quality.

Further, it is pertinent to note that the Rules also impose an obligation on all marketplace e-
commerce entities to require undertakings from the sellers confirming the accuracy of the
disclosures made on their platform.19 This is in addition to the obligations imposed on them
by Section 79 of the Information Technology Act, 2000 which exonerates them from content
liability only if the platform merely acts as an information system between the buyer and the
sellers, and exercises due diligence in complying with his duties under the Information
Technology Act and any other guidelines prescribed by the Central Government.

3. Prohibition on Price Manipulation: The Rules prohibit the e-commerce entity from
gaining any unreasonable profits by engaging in manipulation of the prices of the goods and
services offered on its platform.20 However, the application of such prohibition is triggered
after giving due regard to the market conditions, essentiality of the goods or services offered
and any other extraordinary circumstances at the time.

4. Prohibition of Discriminatory Practices: The Rules prohibit any e-commerce entity from

discriminating between consumers of the same class or creating arbitrary distinction between
consumers that might affect their rights.21 Further, the Rules also mandate all online
marketplace entities to inform sellers of any differential treatment that they or their goods or
services might be subjected to.22

18
Rule 6(2) and 7(2) of the Consumer Protection (E-commerce) Rules, 2020.
19
Rule 5(2) of the Consumer Protection (E-commerce) Rules, 2020.
20
Rule 4(11)(a) of the Consumer Protection (E-commerce) Rules, 2020.
21
< https://www.iralr.in/post/analysis-of-consumer-protection-e-commerce-rules-2020> accessed 7th November,
2020.
22
Rule 5(4) of the Consumer Protection (E-commerce) Rules, 2020.
 CONCLUSION

The recently enacted Rules mark a paradigm shift in the regulation of the e-commerce entities
in India, who up till now remained largely self-regulated. The Rules are brought with a view
to develop efficiency and uniformity in the e-commerce trading business throughout the
country. These Rules have the potential to solve many problems pertaining to e-commerce
transactions and is a relevant inception in the prevalent time due to rise in the buying and
selling through technology. While the rules do cover a broad spectrum of unfair trade
practices and offer much needed certainty in e-commerce regulation, there are certain
problematic aspects as well.

Firstly, the obligation that all e-commerce entities have to be run in the form of a company
can cause significant disruptions in the market, given that a lot of these entities are also run as
limited liability partnerships and in other business forms.

Secondly, subjecting the prohibition on price manipulation by e-commerce entities to ‘market

considerations’ creates an ambiguity in its enforcement. For instance, e-commerce entities
like Zomato, Swiggy, etc., and cab aggregators like Ola and Uber could conveniently justify
their surge pricing strategy on the grounds of being guided by market demand considerations.
Further, tasking consumer redressal authorities with the job of assessing market conditions
would significantly intensify the already blurred line of distinction between competition and
consumer protection laws. Consequently, it would pave the way for potential jurisdictional
overlaps with the Competition Commission of India.

Further, even though the Draft National E-Commerce Policy recognized the need to remove
promotional reviews as well as ratings and reviews from unverified purchasers, the Rules
only prohibit the e-commerce entities and the sellers from posting such reviews themselves. 23
It therefore unfavorably narrows down the scope of regulation of paid reviews, thereby
ignoring instances of sellers incentivizing consumers in exchange for paid reviews. The Rules
should have thus imposed an obligation on the e-commerce entities to devise mechanisms to
prevent fraudulent reviews and ratings by the sellers as well as their affiliates.

23
< https://dipp.gov.in/sites/default/files/DraftNational_e-commerce_Policy_23February2019.pdf> accessed 8th
November, 2020.
However, despite the aforementioned limitations, the Consumer Protection (E-Commerce)
Rules, 2020 act as a landmark legislation in regulating the formerly unchecked practices of e-
commerce entities and securing consumer interest in India’s digital economy.
 BIBLIOGRAPHY

 https://dipp.gov.in/sites/default/files/DraftNational_e-
commerce_Policy_23February2019.pdf
 https://www.iralr.in/post/analysis-of-consumer-protection-e-commerce-rules-2020
 http://www.nlujlawreview.in/flipping-the-cart-consumer-protection-e-commerce-
rules-2020/