Legal Framework For E-commerce In India: Shielding Indian Consumers From Cyber Commercial Malpractices

KEY TAKEAWAYS

• E-commerce platforms offer a medium to bridge the commercial relations between buyers and sellers, ditching the traditional methods of transactions and consumption. 
• Business organisations intend to provide various services to their consumers at their residential premises through the Internet,  
• The boom in the consumption of e-commerce services was recorded after the deadly pandemic of Coronavirus in the year 2019 after the adoption of no-contact services. 
• Protecting the interests of consumers in cyberspace is one of the key concerns of governments throughout the globe.
• The Consumer Protection Act, of 2019 was implemented to identify the electronic transaction for commercial transactions. 

ABSTRACT 

The infusion of technology has resulted in rapid growth, providing ventures to succeed and establish their commercial identity. By digitizing their presence on social platforms, businesses establish commercial relationships with their consumers. However, there is a lurking threat of monetary fraud, scams and malpractices with little to no practical remedies for the people who use these platforms. This article aims to address the laws governing e-commerce business  platforms in compliance with consumer protection laws

Picture credits: Mark König

1.    INTRODUCTION

E-commerce is the backbone of commercial business entities, that pitch in for new opportunities and relations for trade and transactions. They intend to connect with their target audience with their digital presence on social media networks. Channelising their focus towards accessibility, they have shifted their methodology of traditional business approach, virtually assisting people with their services by two-way communication systems.

From user-friendly domains to instant delivery platforms, the e-commerce services serve a lot of perks which their users to consume daily. The commercial platform supplies goods irrespective of geographical restraints, serving across boundaries. The door to door delivery services, cash backs and easy return policies are some of the advantages which the local vendors fail to provide, attracting people to choose their platforms. Even large companies have started to realise the importance of e-commerce evolution to thrive in the market. It is predicted that Indian consumers will change their preference from traditional shopping mediums to e-commerce mediums with a projected increase of 95% by 2040". 

2.    HISTORICAL EVOLUTION: The start of something new. 

Throughout history, traders have preferred Indian demography for flourishing business assets. From the Persians in the ancient era to the British colonisers in modern history, there was an obsession with exploring the terrains of the Indian Valley. Certainly, there was a scope for successful entrepreneurship in mitigating the territorial differences. With the modern lifestyle, there has been a gradual shift in the traditional business environment. 

Electronic commerce was introduced in 1991 when internet connection was in its budding stage. The Internet was a fancy tool, only affordable to the elite class. Indian Railway Catering and Tourism Corporation (IRCTC) pioneered introducing reservation platforms through online networks winning the trust of people. Gradually, people were introduced to the Tech-giant Amazon played a significant role in the emerging trend of e-commerce in India.

Post the technological revolution, Indian consumers are enticing a bunch of Multinational companies to establish themselves in India. Aiming to provide for everyday necessities, the companies aim to offer a variety of services with the intent to attract the hordes of potential platform users.  Since then, e-commercial platforms have gained the popularity and trust of the people, occupying their presence in every household. 

With affordable rates and bewitching offers introduced by telecom industries, the e-commerce industry is booming more than ever. The growth was amplified Post-pandemic when the public became accustomed to no-contact services. Transforming accessibility, there is an acceleration in digital education, media, healthcare facilities, and food delivery. The success rates increased as people became accustomed to digital networks

[1] 

PIE CHART:1

PIE CHART:2

Data Source: Official website International Trade Administration.

As per the data representation given by the International Trade Administration Center, the consumption of goods/ services slopped down during the initial period of the coronavirus pandemic. After some time, Indian Consumers started relying on Internet websites, consuming a lot of products and services, and transacting commercially online. (Refer the Pie chart :1 and Pie chart:2) 

3.    E-Commerce Frauds In India: An unaddressed realm. 

Striving to accelerate the profit ratios, business entities often fail to work in the interest of the consumers they are serving. They may have built a strong rapport in serving their customers but failed to secure the consumer data from lurking predators. The data is the collection of the consumer's personal information, who opts for the service offered by the business organisation. They are sensitive information including the contact and residential details of the person, bank account details, activity and interaction with the websites.

Image source: Nataliya Vaitkevich

 4.    KEY LEGISLATIONS: A cognisance of the consumers’ rights 

1.    Information and Technology Act, 2000 (IT Act)

The Internet facilitates commercial transactions and offers numerous business opportunities. With an uproar in the usage of the internet for day-to-day interaction, it is an easy spot for the offenders to target a vulnerable audience to pry on. Hence, the crime committed by someone within Cybercrime committed in cyberspace harms individuals. The handling of offences committed in cyberspace is given by the Information and Technology Act, of 2000. 

Fortunately, the rights of consumers concerning their transactions on the Internet are also governed by the IT Act. It lays a systematic procedure for networking operations and civil wrongs. The basics of contractual obligations are fulfilled when the ingredients of basic contracts are compiled through a “Reasonable mode”. For example, the person purchasing a commodity accepts the offer by clicking on the button “accept and continue”.They pay or promise to pay the agreed consideration amount provided by the platform. The person then receives the acknowledgement receipt or electronically generated invoice". 

Moreover, in the year 2008, the act was amended with the intention to strengthen the security of consumers in the e-commercial space by recognising electronic evidence and digital signatures while respecting and diligently using the sensitive data given by the consumer under the ambit of section 43A of the IT Act. 

2.    Consumer Protection Act, 2019

The Consumer Protection Bill was introduced by Mr Ram Vilas Paswan as the minister of the Food and Public Distribution intending to replace the Consumer Protection Act, 1986. The bill was passed in both houses of the parliament as the new laws ensure the rights of the consumers are recognised in the upcoming age of cyberspace. 

The person who prefer to obtain goods or services from business entities are considered consumers. Considering the basic rights of consumers, The Consumer Protection Act, 2019 was introduced to protect individuals who purchase goods and services through various mediums including online, offline, electronically, telephonically, or via other multi-level marketing channels. Under this Act, there are a total of six rights that ensure consumer safety in online domains. These rights are enumerated below:-

1. Protection against marketing of hazardous goods and services which may be injurious to life or property. 
2. Right to know the quality, quantity, purity, standards of ingredients and price of goods and services which are being consumed or available in the market. 
3. Access and availability of goods and services at competitive or reasonable prices. 
4. Right to redressal against unfair trade practices by the manufacturer or the service provider. 

The Central Consumer Protection Authority

The act empowers the government to institute the Central Consumer Protection Authority, which is responsible for implementing consumer rights. The authority has an Investigation department conducting investigations in case of violation of the rights of the consumer which is led under the directions of the Director-General. 

They have the power to penalise and punish the offender if the organisation is found guilty, and issue safety notices to the consumers. They also take action against the entities who are involved in unfair trade practices through misleading advertisements. 

Consumer Dispute Redressal Commission,

Aiming to solve the grievance of the consumer from malpractices and unfair trade practices, the Consumer Dispute Redressal Commission is empowered to entertain the grievance of the consumer at national, state and district zones ( refer Fig. A). The complaint is based on product liability borne by the service provider or manufacturer for compensating for injury or harm caused to the consumer. The complaint is filed as per the pecuniary jurisdiction. It entertains complaints associated with

1. Unfair trade or services involving malpractices
2. Deficiency in providing goods and services
3. Unreasonable charges for the products/services

Supplying goods or services which may harm the life/property of the consumer is condemned by the statutes, amounting to penalising the

Fig A: Hierarchy of consumer courts in India.

3.    Consumer protection e-commerce rules, 2020 

The initiative for publication of the rules were taken in by the Ministry of Consumer Affairs, Food, and Public Distribution. Under these rules, the companies involved in selling products on the e-commercial websites The rules were amended in the year 2021 mandating the commercial entities for registrations and inclusion of effective grievance mechanisms. It prevents the companies from manipulating search engines. 

1.    Legal requirements for e-commerce platforms in India 

The rules for consumer protection intend to deliver transparency and accountability to the consumers while being involved in the transactions of goods or services. It supports transactions which do not affect consumer rights. Some key features of the rules are

• Displaying the country of origination of products/services
• Providing information on the expiry dates and ingredients/substances used.
• Details and conditions for returns, exchanges, warranties, guarantees or other information. 

4.    Indian Contract Act,1872

As mentioned above, the Indian Contract Act, 1872 along with Information Technology Act,2000 together reconciled to safeguard the rights of the consumer. The recognition of the valid e-contract is given in case of legal transactions between the consumer and the manufacturer. The condition to avail of the protection for product liability by the consumer is to fulfil all the essential ingredients of the valid contract. The contract act imposes bindingness on both parties to abide by the terms and conditions of the contract. It also recognises the duties and liabilities of the parties in case of negligence or breach of the contract. 

5.    Sales of Goods Act, 1930

The Sales of Goods Act, of 1930 ensures the Performance of Contracts under sections 31 to 44 respectively, imposing duties on the buyer and seller to act on their part and act as per the contractual obligations. The Act also ensures that the issue of misrepresentation is legally dealt with in while conducting an e-commerce. It also recognises e-contracts binding the parties to adhere to their duties. 

6.    The Goods and Service Act, 2017

The Goods and Service Act was introduced in the year 2017, which impacted the functioning of business organisations providing goods and services on online platforms. Section 9(5) of the GST Act mandates the collection of tax amounts from sources in specialised transactions. This practice ensures that there is transparency and accountability in the activity of the organisation conducting business online. 

Through the ambits of section 24 of the Act, it ensures that the business organisation involved in choosing an e-commerce platform for carrying out business shall be obliged to get a GST Registration. The taxation laws hence ensure that the e-commercial business is carried out with legitimacy and security. 

7.    Intellectual property rights. 

Interestingly, intellectual property rights does recognise the importance of authenticity and the interest of the consumers. For instance, a trademark is considered to be an asset for the business holders. Making goodwill in a competitive market is not an easy job. It requires the business organisation to pour a lot of risk and investment to procure desired results. The Trademark Act, 1999 ensures that the brand of the registered business organisation is protected against any counterfeit or online brand infringement. 

The Copyright Act, of 1957 also ensures that business organisations protect their unique identity on e-commerce platforms. The digital content and software owned by the company is safeguarded against potential infringement. Indirectly, the laws of Intellectual Property safeguard the interest of the consumers from the deceitful impersonation of well-known business entities for cyber frauds and collecting information of the clients. 

4. FOREIGN DIRECT INVESTMENT (FDI) POLICY IN E-COMMERCE

Foreign Direct Investment is regulated by the Foreign Exchange Management Act, 1999. The Indian Government issues policies for enhancing productivity through the Department of Industrial Policy and Promotion and the Ministry of Commerce and Industry.  Considering the rise in popularity of e-transactions, the government now provides 100% FDI in the B2B e-commerce system. It also aims to provide 100% FDI in the B2C system as an “automatic route”.

To prevent hassle and prolonged procedures, the business entities are exempted from any specialised permission from the RBI or The Central government. Moreover, the commercial policies by the draft of Non-Personal Data Governance and Framework and The National Cyber Security Strategy, 2020 aim to cover the commercial policies under the FDI. 

5. DATA PROTECTION LAW:  

 Personal Data Protection Bill, 2019

Data breaches and cyber security are the biggest concern for people all around the world. The sensitive data of people are compromised every other day, the predators sell this collected information in the dark with a hefty price. Medical organizations, banking sectors, insurance agencies, and government offices are the most vulnerable to data breach cyber attacks, losing the personal information of the citizens with no amenable approach. There was a need to address the problem in the legislative assembly. 

Considering the situation, the Personal Data Protection Bill, 2019 was introduced under the ministry of Mr Ravi Shankar Prasad, which aimed to establish a data protection authority. The Ministry of Electronic & Information Technology, under the bill intended to secure and safeguard the sensitive information of the Indian Citizens which may be used to hamper the integrity of the nation. The bill curbs the activities of Indian-incorporated companies and the foreign organisations that handle the information of citizens of the nations. 

The bill was progressive in terms of imposing liabilities on the organization in handling personal information, mandating a strict, accountable, and transparent data handling system and grievance redressal forums to combat cyber attacks. The bill addressed the rights of e-consumers and parental consent for protecting children from the dangers of the internet. The data protection bill was to make certain amends in the exciting Information Technology Act, of 2000, along with imposing liabilities on the fiduciaries in managing the data. 

The data protection bill was to make certain amendments to the existing Information Technology Act of 2000, along with imposing liabilities on fiduciaries in managing data. There were exceptions to the circumstances, allowing the government to process the information for the sake of the integrity and security of the nation. The bill was handled by the standing committee for further progress considering the interest of the citizens in data protection.

However, it was withdrawn from Lok Sabha in August 2022 as the bill reportedly lacked competitive legislation. Currently in 2024, The Ministry of Electronics & Information Technology, under the bill, intended to secure and safeguard the sensitive information of Indian citizens, which may be used to hamper the integrity of the nation. 

6. COMPLIANCE FOR ONLINE BUSINESSES

As per the guidelines given in the Organisation Economic Cooperation and Development 1999, (OECD), there are three essential checkpoints to which e-commercial businesses shall adhere. 

1. The e-commerce platform shall be accessible to the target audience.
2. Building the trust and confidence of the consumers using their platforms through accountability and transparency. 
3. An effective redressal system for addressing grievances. 

Moreover, there are other practices such as generating invoices/ valid bills, establishing well-structured grievance centres, and compliances for protecting the data information of the customers. They are also liable for taking every precautionary measure to protect the sensitive information of their clients from potential data breaches.They are also liable to be penalized if they are involved in the illegitimate use of information. 

7.  LEGAL ISSUES IN E-COMMERCE IN  INDIA

Despite implementing IT and affiliated laws to safeguard the interest of the citizens, there is a grey area in legislation to safeguard the data privacy of the consumers. With increasing cyber crimes and the inefficiency of laws to act upon them, the victims are still compelled to suffer a lot without an actual remedy.  Making a presence on the internet via losing social media requires little to no investment. Using this as bait, seamsters are persuading a large amount of audience, they efficiently deceive people. 

8.  E-CONSUMERS: THE PREQUISTS OF CAVEAT EMPTOR. 

While the government strives to provide for the consumers' interest against malicious activities, it is indeed the responsibility of the consumers themselves to safeguard themselves from potential scams and business malpractices on online platforms. The consumers bear the responsibility of choosing websites which are legitimate and have genuine pricing schemes. They should check the quality and quantity of the products which are offered on the websites. Collecting and keeping an electronically generated invoice or bills while preferring a transaction holds the value of corroborative evidence. 

Vigilantibus non dormientibus iura subveniunt, the Latin maxim professes that the law shields the person who knows his rights and not the one who simply sleeps over them.It imposes the duty on the consumer to be diligent while interacting in cyberspace. The consumer must know about his rights and responsibilities if they are preyed on by scams or malicious trade practices by the product or service providers. The agencies and said judicial authorities are efficient in extending their help only when the consumer is willing to assert their rights.

Also, to safeguard himself from the hassle of unnecessary litigation or judicial suits, he himself holds the responsibility of “being aware” of the goods purchased and services availed when he uses digital platforms. 

9. CONCLUSION

E-commerce websites have fruitfully presented the world with choices and efficient services. People can get access to the commodities irrespective of the geographical location. Value-saving coupons, big deals, and saving options magnetise lots of people who are willing to savour the deals. The popularity and easy accessibility entices a large amount of the population. Social media platforms like Instagram and Facebook have given a leap in commercial profits as well. However, it invites inauthentic product and service sales for scamming people. 

The problem escalates when there is no transparency and letter to hold accountability, there are people who are reluctant to use the platform, especially in the case of monetary transactions. The government is aware of the infringement of the rights of consumers on cyberspace platforms as well. It is the need of the hour that the gap in the legislation is filled to deal with the rising rates of cyber crimes efficiently. There is also a need for the consumers to know their rights on the electronic platforms. Due to a lack of awareness and unfamiliarity with internet platforms, they often get trapped in malpractices and deceitful commercial offers. 

10. FAQ

1.    What is the framework of e-commerce in India?

The e-commerce framework involves structured software which is used to provide multiple services to consumers through different software applications. They provide efficiency in brand establishment. There are different dimensions in which the e-commercial platforms work wherein the services are layered as per the nature of their businesses. 

2.    What is the legal perspective of e-commerce?

Fraudulent activities on e-commercial platforms are a concerning issue for governments all around the world. This has resulted in multiple business fallouts and multiple deceitful transactions, hampering consumers’ rights on electronic platforms. Hence, legislative bodies all around the world are trying to curb the interest of the citizens by implementing stringent laws which deal with cybercrime. 

3.    What is the modern law of e-commerce?

The modern law of e-commerce is recognised internationally under the UNCITRAL Model Law on Electronic Commerce (1996). There are more than 100 states that have implemented the legislation of model laws. The model intends to provide transparency in inter-border trade business, eliminate discrimination and functional neutrality of technology. Furthermore, the UNCITRAL Model Law on Electronic Signatures (2001) governs the use of digital signatures on electronic platforms involved in business transactions..

4.    What are the popular modes of e-commerce?

On the basis of marketing strategies implemented by Business organisations,  there are popular modes of e-commerce which are

1.  Business to Business (B-B)
2. Business to Consumer (B-C)
3. Consumer to Consumer (C-C)
4. Consumer to Business (C-B)

5.    What are the advantages of e-commerce in India?

The popularity of e-commerce is rising as it provide lots of advantages to consumers. Some of these are: 

1. Promotes commercial transactions beyond the limitations of geographical locations. 
2. Provides unique identity, helping to combat competitions
3. Facilitates easy marketing 
4. Contacting consumers with easy modes
5. Reaches out to targeted audiences and raises interactions. 
6. What are the disadvantages of e-commerce in India?

    E-commercial platforms have disadvantages as well. Some of these are:

1. Lack of personal touch
2. Serving bad quality of goods and services
3. Online scams and payment fraud
4. Improper representation