Govt proposes increased liability for e-commerce companies under new draft rules

The Indian government on Monday released draft amendments to the consumer protection e-commerce rules, a move aimed at giving teeth to the existing for more stringent and effective protection of consumers’ rights.

The draft rules issued by the Ministry of Consumer Affairs propose to increase the liability on e-commerce entities for unfulfilled orders, suggest domestic alternatives to imported products, and register themselves with the government, among other things. 

The draft rules also introduce the concept of “fall-back liability” and say that e-commerce companies will be held liable in case a seller on their platform fails to deliver goods or services due to negligent conduct which causes loss to the consumer. 

While the currently enacted consumer protection e-commerce rules, which were notified in July 2020, already mandate that e-commerce companies show the country of origin alongside imported product listings, the proposed amendments go one step further. 

They propose that e-commerce companies identify goods based on their country of origin, provide a filter mechanism on their website and display notifications regarding the origin of goods at the “pre-purchase stage”, and at the time of goods being viewed for purchase. 

E-commerce companies will have to offer suggestions of alternative domestic goods in lieu of imported products, the draft says. Companies will have to ensure that their ranking parameters do not discriminate against domestic goods and sellers.

Parties and associated enterprises related to e-commerce companies cannot be enlisted as sellers on their platform. Enterprises having 10 percent or more common ultimate beneficial ownership, among other things, will be considered an “associated enterprise” of an e-commerce entity.

Amazon, Paytm Mall and Snapdeal declined to comment on our queries. Flipkart and other social commerce companies like Meesho did not respond until publication. 

In its vote of support, a spokesperson for the trade body All India Online Vendors Association, welcomed the draft rules and said “we find the proposed amendments as a concrete solution to the current unfair practices in the industry. We will seek relief for small companies from some of the clauses”. 

E-commerce companies will have to register with the Department for Promotion of Industry and Internal Trade and obtain a registration number which is to be prominently displayed on their platform.

No e-commerce company should “mislead” users by “manipulating search results or search indexes”, the rules propose, presumably in a bid to address long-standing concerns of sellers of a select few sellers getting preferential treatment by e-commerce companies. 

The draft rules require all these companies to appoint a chief compliance officer who should be a senior employee of the e-commerce company and a resident and citizen of India. 

However, it is not a job many people would be lining up to take as the compliance officer can be made “liable” in “any proceedings” in case of non-compliance, meaning that it comes associated with the potential risk of going to jail. 

E-commerce companies will also have to appoint an India-based nodal contact person for round the clock coordination with law enforcement agencies and a grievance officer for handling user complaints. The rules however do not propose any time frame within which user complaints need to be resolved. 

For investigative purposes, e-commerce companies will have to reveal required information within 72 hours of the receipt of an order from a competent authority. 

As opposed to the current rules which require e-commerce companies to become a part of the National Consumer Helpline on a best efforts basis, the draft amendments require them to mandatorily become a part of it. 

The draft also bars e-commerce companies from conducting flash sales of goods, a sales tactic commonly used by many platforms.

Stakeholders can submit their comments on the proposed rules until July 6 (here).