ANALYSIS OF THE CONSUMER PROTECTION (E-COMMERCE) (AMENDMENT)RULES, 2021

Abstract:

The Ministry of Consumer Affairs, Food, and Public Distribution published the Consumer Protection (E-commerce) (Amendment) Rules, 2021 in the Gazette of India on 17th May 2021 with the rules coming into force from the same day. Consumer Protection refers to protecting the interests of the buyer or users of goods as well as services against unfair practices of the sellers and manufacturers or the market in general. The current Act that is in place in India to safeguard consumer interests is the Consumer Protection Act, 2019. The Act also empowers the Central Government of India to make new rules for consumer protection and prevention of unfair trade practices on e-commerce platforms in the form of Consumer Protection (Amendment) Rules. The 2021 Rules were made with the intent of substituting rule 4 sub-rule (1) of the Consumer Protection (E-commerce) (Amendment) Rules, 2020. The substitution was done to increase the scope of applicability of the Act by bringing within its purview even those companies or branches which are located in foreign countries but are fully owned by Indian residents and requiring them to appoint nodal officers or senior officers to ensure compliance to the Consumer Protection Act as well as Rules. This amendment was a much-needed step to ensure compliance with the domestic laws of the country as well as the interests of the consumers who purchase from e-commerce companies and branches that come under the scope of the Act. At the same time, the 2021 Rules were not able to address all the shortcomings and vagueness that existed in the 2020 Act which was also required. Moreover, the change brought by the 2021 Rules has not been described in detail leaving many aspects to the interpretation of the companies and could make the customers vulnerable to exploitation.

Keywords: Consumer Protection (E-commerce) (Amendment) Rules, 2021, Consumer Protection Act, 2019, Central Government, nodal officers.

INTRODUCTION:

Consumer Protection is a concept that has evolved over many years and decades to finally address that consumers have rights and that they need to be safeguarded against wrongful practices of the manufacturers and sellers. Previously, the concept that was followed was ‘caveat emptor’ which means ‘let the buyers beware’ but it has shifted to the current one of ‘caveat venditor’ which means ‘let the seller beware’ that places more responsibilities and liabilities on the sellers that did not exist before[1]. This has been done by enacting various legislations and one of the most important steps that led to this change was the Consumer Protection Act, 1986[2] which finally prescribed what extensive methods of redressal were available to address the grievances of the consumers. This Act has been amended many times and the one that is followed currently is the Consumer Protection Act, 2019. Section 101 of the Act further empowers the Central Government to make rules in the form of measures for consumer protection against unfair trade practices.[3] The 2020 Rules brought about many changes and additions to the Act by finally addressing the obligations and liabilities of the sellers on the online marketplace and regulating their influence on pricing and other mechanisms. But, the 2021 Rules brought only one change to the 2020 Rules which has widened the scope of the Act by requiring even those branches and offices owned abroad by Indian residents to appoint nodal officers for ensuring compliance with the Act.

CHANGES BROUGHT BY THE CONSUMER PROTECTION (E-COMMERCE) (AMENDMENT) RULES, 2021:

The Consumer Protection (E-Commerce) Rules, 2021, have come into effect from May 17, as issued by the Ministry of Consumer Affairs, Food and Distribution and published in the Gazette of India. As per these Rules, rule 4 sub-rule (1) of the 2020 Rules will be substituted in the manner that it will not contain any sub-clauses. Also, the new sub-rule by the government requires the e-commerce entities and companies to appoint a nodal officer or an alternate senior designated functionary who is a resident of India to ensure compliance with the Consumer Protection Act and the Rules made thereunder. The rules apply to e-commerce entities registered in India, as well as those registered abroad[4] but only those foreign ones that are fully owned by Indian Residents or offering goods and services to Indian consumers and supplying to Indian markets.

These rules apply to all e-commerce entities incorporated under the Companies Act, 1956 or under the Companies Act, 2013 or a foreign company covered under clause (42) of section 2 of the Companies Act, 2013 or an office, branch, or agency outside India owned or controlled by a person resident in India as provided in the Foreign Exchange Management Act, 1999. This, in simpler terms, means that it applies to all domestic companies registered under the Companies Act, any foreign company incorporated under any foreign law that conducts business in India through any mode, and also any office, branch, or agency that exists in a foreign country but is wholly owned or controlled by a resident in India.

This new rule will require e-commerce entities like large MNCs and other businesses that conduct their economic activities in India as well as abroad to appoint nodal officers to comply with consumer laws. If they violate any of the provisions they will attract penal action as prescribed under the Consumer Protection Act, 2019.

COMPARISON WITH THE CONSUMER PROTECTION (E-COMMERCE) RULES OF 2020:

The Consumer Protection (E-commerce) Rules, 2020 were introduced on 20th July 2020 by the Central Government in order to keep a necessary check on the online marketplace and ensure that the consumers were not vulnerable to exploitation on the same. The Rules were the first of its kind dealing with e-commerce in detail, that was introduced with the intention to regulate the online marketplace and brought about various changes like placing a lot of responsibilities and obligations on the part of the seller like better disclosure of information and other rules regarding pricing and cancellations. Similar to the 2021 Rules, it also contained the provision requiring the appointment of a nodal or alternate senior functionary for ensuring compliance with the Act and Rules. The manner in which the two Rules are distinguished is with regards to the enlargement of the scope of the applicability of the Consumer Protection Act and Rule and the requirement of appointing a nodal officer. The 2021 Rules have also included such “offices, branches or agencies outside India that are owned or controlled by a resident in India” to appoint a nodal officer as opposed to the 2020 Rules which required “offices, branches or agencies located in India owned by people outside India” to appoint nodal officers. This change is because the definition of a person resident in India was shifted from “sub-clause (iii) of clause (v) of section 2” in the 2020 Rules, to “sub-clause (iv) of clause (v) of section 2 of the Foreign Exchange Management Act, 1999” in the 2021 Rules.

SHORTCOMINGS OF THE 2021 RULES AND FAILURE TO PROVIDE CLARITY ON THE CONSUMER PROTECTION (E-COMMERCE) RULES, 2020:

The 2021 Rules have specified that the e-commerce entities are required to appoint a nodal officer or an alternate senior functionary who is an Indian resident, to ensure compliance with the provisions of the Act and the Rules made thereunder. However, very few further details regarding the same have been mentioned. So, there is no clarity regarding what are the required qualifications to be considered for appointment to the post and also what their basic responsibilities or liabilities will comprise. Additionally, what needs to be done to satisfy this requirement in practice and by when is unclear, all of which are similar to the shortcomings of the similar provision in the 2020 Rules.

The 2020 Rules had a lot of provisions that were not adequately described and also required an amendment to clarify what needed to be done. These include no specifications about what would classify as an adequate grievance redressal mechanism, whether these Rules apply to B2B (Business to Business) platforms, what are the kinds of digital products online that may not fall within the scope of these Rules[5], and many more. These issues should also have been addressed in the Amendment as when everything has moved to the online platform due to the pandemic, there is more of a need now to understand the laws and responsibilities regarding the same. Failing to address these shortcomings in the 2021 Rules further makes the consumers vulnerable to exploitation and unfair practices as the provisions are left to the interpretation of the companies and they can manipulate the same in their favor to serve their own interests.

CONCLUSION:

The 2021 Rules did bring about a significant change regarding the type of e-commerce entities that are required to appoint a nodal officer or an alternate senior designated functionary for better compliance with the Consumer Protection Act and Rules. At the same time, it has failed to elaborate on the qualifications, responsibilities, and liabilities of the nodal officer as well as by when the same has to be implemented, extending which the companies will attract penal action under the Consumer Protection Act. Further, these Rules should have also contained other provisions and amendments to the 2020 Rules as it was also vague and devoid of details regarding various provisions and measures to be taken. There needs to be some clarity regarding all these to regulate the e-commerce entities and prevent them from interpreting things in their favor and exploiting the loopholes existing in the present Rules which can lead to consumer right violations.

[1] Trideep Raj Bhandari, Caveat Emptor or Caveat Venditor: Where are We Heading?, Legal Service India, ( May 20, 2021, 10:40 a.m.), http://www.legalserviceindia.com/articles/caveat1.htm.

[2] Consumer Protection Act, 1986, No. 68, Acts of Parliament, 1986(India).

[3] Sushil Kumar Antal, Inclusion of E-commerce under New Consumer Protection Act, 2019, TaxGuru, (May 20, 2021, 11:00 a.m.), https://taxguru.in/corporate-law/inclusion-e-commerce-consumer-protection-act-2019.html#:~:text=Further%2C%20Section%20101%20of%20the,direct%20selling%20under%20Section%2094.

[4] PTI, Govt asks e-commerce companies to appoint nodal officer for compliance with consumer protection rules, Financial Express, (May 20, 2021, 2:00 p.m.), https://www.financialexpress.com/industry/sme/govt-asks-e-commerce-companies-to-appoint-nodal-officer-for-compliance-with-consumer-protection-rules/2255255/

[5] Arun Prabhu, Harish Sekar, Anirban Mohapatra & Suvojit Halder, Consumer Protection E-Commerce Rules: Need for More Clarity, Cyril Amarchand Mangaldas Blog, (May 20, 2021, 04:30 p.m.), https://corporate.cyrilamarchandblogs.com/2020/08/consumer-protection-e-commerce-rules-need-for-more-clarity/