Consumer Protection (E-Commerce) Rules, 2020: An Analysis

[Sumit Kumar Gupta is a 4th year student at the West Bengal National University of Juridical Sciences]

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. 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.”

The rapid popularity and acceptance of e-commerce have brought about a paradigm shift in the realm of marketing and trading in India. 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. 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, 2020.

Consumer Protection (E-Commerce) Rules, 2020

The 2020 rules provide an exhaustive list of stakeholders encompassing e-commerce entities, sellers, e-commerce inventories and marketplace e-commerce entity. The rules introduced some sweeping changes by enlarging the scope of regulation to goods and services bought or sold over the digital or electronic network including digital products, all models of e-commerce which include inventory e-commerce business, e-commerce retail sector and any form of unfair trade practices occurring in all models of e-commerce. A cursory glance of the rules would amply demonstrate that the interest of the consumers has been placed at a higher pedestal. The rules make it mandatory for e-commerce platforms to display the total price of goods or services offered for sale, which will also include a proper break-up of other charge levied by these entities. They are also obligated to mention expiry date, country of origin, and the like, to enable the consumer to make an informed decision before buying any product or service.

Further, the rules have stipulated a clear-cut definition of all the relevant entities related to e-commerce. They have also delineated the duties and liabilities of each entity involved in an e-commerce transaction. In the following section, the author will outline the duties of each entity involved in the e-commerce transaction.

The primary issue faced by the consumer revolved around the poor redressal mechanism provided by these entities. The new rules have imposed an obligation on these entities to appoint a grievance officer exclusively to deal with the complaint of the consumers. In addition, the particulars of that officer would be displayed at the appropriate website. Further, every e-commerce platform would be obligated to appoint one nodal person to ensure the compliance of entity with the provision of the rules. The rules also take note of issues such as arbitrary cancellation charge levied on the customer if the order is cancelled. They mandate that these entities are not allowed to levy the cancellation charge from the customers unless the e-commerce entity also undertakes to bear similar charges if it unilaterally cancels the order placed by the customer for any reason whatsoever.

The issue of consent has often been a point of contention in transactions related to e-commerce. The rules have made it explicitly clear that the consent of the customer would only be recorded if the consent arising therein is explicit and affirmative. The rules have forbidden entities to record an automatic consent, a practice that has been followed entities for some time. The issue of quality and the matching of the goods displayed on these platforms has also been a bone of contention between e-commerce entities and the consumers. Towards this end, e-commerce platforms have been obligated to secure an undertaking from the sellers regarding the correct description and image of the goods.

Interestingly, the rules have also made the contact between the consumer and the seller much more direct than the previous position. Earlier, e-commerce platforms acted as a bridge between the sellers and the consumers and these entities did not share information regarding the seller to the consumer. But, with the rules, the e-commerce entities are bound, upon a request made by the consumer in this regard, to disclose the detail of the seller for better dispute resolution mechanism.

There have been disputes between the seller and the consumer regarding the return of goods and subsequent refunds. Earlier, consumers were forced to accept a replacement for defective goods and were not able to return and process the refund procedure. The new rules map out such a dispute and clearly establishe that the sellers cannot refuse to refund the consideration in case the goods or services turn out to be defective, do not match with the correspondent item on an e-commerce platform or that the delivery got delayed. The seller is also bound to appoint a consumer grievance officer in order to redress complaints clearly and effectively. Similarly, the rules also delineate the duties and obligations of inventory e-commerce entities that align with the requirement mentioned for sellers and marketplace e-commerce entities.

Concluding Remarks

The 2020 rules clearly strike a delicate balance between the obligations of the marketplace e-commerce entities and sellers on the platform. Every e-commerce player has been entrusted with the responsibilities to follow the set rules while conducting business on an e-commerce platform. The legislature also ensured mandatory compliance by providing that any contravention of the provision of rules would attract the provision of the Consumer Protection Act, 2019.

A perusal of the rules makes it abundantly clear that the Government has, indeed, sought to cover every aspect of e-commerce entity. However, there has been conspicuous absence of limited liability partnerships from the definition of e-commerce entities enumerated in the rules. This might leave a grey area as to whether an e-commerce business can be conducted by limited liability partnerships, which are entirely owned and controlled by Indian residents. This question needs further elaboration either by the judiciary or by the legislature.

Nonetheless, the rules provide a minimal scope for ambiguities arising and consumers have been entrusted with the abundance of information, thus enabling them to make an informed decision. This resurrection of the Consumer Protection Act blended with Consumer Protection (e-commerce) Rules, 2020 has set the tone for a more robust and vibrant framework for e-commerce sector in India.

Sumit Kumar Gupta

About the author

1 comment

  • In India, ecommerce has entered hot waters.

    Recently, the Government proposed certain new rules for the sector.

    Citing the need to act against “widespread cheating and unfair trade practices”, the new rules set the stage for an even more stringent regulatory regime.

    Unsurprisingly, companies have come out against the “exhaustive and confusing” amendments, warning that they would hurt sellers and hurt their business models.

    What are the proposed new rules for ecommerce players in India? What reservations do companies like Amazon, Flipkart and the Tata Group have against them?

    Click link to read:


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