META DESCRIPTION; The blog largely elucidates the validity of an e-commerce

gateway’s act in selling the DSEs products without their consent. The matter was heard in 2
benches and both the benches differed in their decisions. Read the blog to know why.

AMAZON VS AMWAY INDIA ENTERPRISES LTD; SELLING DSEs

PRODUCTS ONLINE
In a fresh order from Delhi High Court, the division bench decided that the products of direct
selling entities could be sold online without any consent. The matter was first heard by a
single judge bench which enlisted a six point summary of the issue and decided against the
defendants. A direct selling entity means an entity not being engaged in a pyramid scheme,
which sells or offers to sell goods or services through a direct seller. Direct selling means
marketing, distribution and sale of goods or providing of services as a part of network of
direct selling other than under a pyramid scheme. So, such products aren’t allowed to be sold
in general market by network of subscribers. It usually has an identified jurisdiction of
operation. The Amway India enterprise alleged infringement of trademark on Amazon and
other online platforms for selling the products under its name. The online gateways were also
alleged for the violation of clause 7(6) of the Direct Selling Guidelines, 2016.
THE MATTER OF CONFLICT
The matter arose back in 2018 when Amway, a direct selling entity got aware that the e-
commerce groups including Amazon and many others were selling tampered products and
replicas under its brand name. Amway moved ahead to make the e commerce giants liable
under trademark infringement charges as well as violation of clause 7(6) of DSG guidelines,
2016. The defendants however contended that they were mere intermediaries and hold no
liability under section 79 of the Information Technology Act, 2000.
Hence, the matter of conflicts or issues raised in the case which became the deciding factor of
the case are; (i) whether the direct selling guidelines, 2016 are valid and binding on the
defendants and if so, to what extent; (ii) whether the sale of plaintiff’s products on e-
commerce violates the plaintiff’s trademark rights or constitutes misrepresentation, passing
off and results in dilution and tarnishes the goodwill and reputation of the plaintiff’s brand;
(iii) whether e-commerce giants are protected under section 79 of the information technology
act, 2000; (iv)whether e-commerce platforms are guilty of tortuous inference with the
contractual relationship of the plaintiffs with their distributors/direct sellers.
THE COURT RULINGS (BOTH SINGLE AND DIVISION BENCH)
The single judge inferred that the DSGs issued and notified in terms of the article 77 of the
constitution of India were binding laws and defendants were acquainted of this fact. The
defendants were not only the passive players but also active intermediaries as they provided
services like storage, packaging and delivery of the products and providing new warranties.
Thus, the defendants were found guilty of trademark infringement of the DSEs trademarks,
dilution, passing off and misrepresentation. The continued sale of DSEs products on the e-
commerce platforms without the consent of DSEs result in inducement of the breach of
contract and tortuous interference with consent of the DSEs contractual relationships with
their distributors and the defendants couldn’t establish that the products they sold were
genuine and not tampered.
The matter was further taken up by the division bench of Delhi High Court. While the
division bench purely rejected the infringement of trademark claim, it also held that the
restraint put were violated exhaustion principle. The division bench thus, overturned the
ruling of single judge bench. The court expressed its dissent over the previous judgement in
five points; (i) the suits were not filed for passing off or infringement under the Trade Marks
Act, 1999 and thus, no charges could be decided for infringement; (ii) the clause 7(6)
couldn’t be enforced to the e-commerce groups as they weren’t the direct sellers but the third
parties; (iii) The DSGs weren’t laws or rules made under statute. They were mere guidelines
under consumer protection act, 2019 which were yet to be enforced as laws; (iv) section 79
doesn’t discriminate between active and passive intermediaries, so, any intermediary that
complies with the provisions mentioned in section 79(2) and 79(3) shall not be liable for any
third party information, data or communication link made available or hosted by him; (v) The
division bench held that mere knowledge regarding the contract between DSEs and direct
sellers couldn’t be a reason to sue for breach of contract. The complainant requires to present
evidence for the same. Although, on the fourth point, the single judge bench was of the
opinion that it was rather the responsibility of e-commerce companies and entities to ensure
that it mustn’t under any circumstance tend to violate the contract between DSEs and direct
sellers.
CONCLUSION
Therefore, the division bench judgement affirms that the e-commerce groups aren’t
necessarily required to take permissions from DSEs before selling their products on online
platform. In doing so, it totally reverses the order of single judge. However, the division
bench admitted the lacunae in facts and evidences presented by the local commissioner. It
couldn’t be made out either whether the products were tampered or not and opined that the
matter could be purely concluded only after the trial is completed. However, some IP experts
condemn the decision on the ground that the division bench just decision lacked in decisive
or substantial content because it only negated the single judge’s order and didn’t give
sufficient ratio decidendi for their decision. The critics of the decision point out that the
division bench purely overlooked the single judge’s finding which unravelled that the e-
commerce platforms aided second sales through advertisement, offering their own
guarantees, endorsing and name associating themselves with the complainants and instituting
their own return and refund policies for the products. The following acts qualify in terms of
copyright infringement. Another disagreement popularly arises from the court’s admission on
the insufficiency of the evidences and resultant ambiguity in reaching any decision.
Accordingly, it makes it totally unnatural to come to this conclusion that no trademark
infringement has been done. Besides all this, the modifications and probable additions to the
evidences, if any, expected from the trial courts could be a major take away from the case.

REFERENCE
[1] https://spicyip.com/2020/02/delhi-hc-div-bench-sets-aside-order-restraining-e-commerce-
platforms-from-selling-products-of-direct-selling-companies.html
[2]file:///C:/Users/Windows/Downloads/Amazon_Seller_Services_Pvt_Ltd_vs_Modicare_Lt
d_Ors_on_31_January_2020%20(1).PDF
[3]https://iprmentlaw.com/2020/02/17/amazon-v-amway-delhi-high-court-rules-that-direct-
sellers-on-e-commerce-websites-prevail-over-and-without-consent-of-direct-selling-entities/

BHAVYA
CHANAKYA NATIONAL LAW UNIVERSITY
3RD YEAR