Understanding The Challenges In The Digital Marketplace

With a rapid growth of e-commerce in India, online frauds have also taken a rise, affecting millions of consumers[1]. The main drawback which pulls back the growth of the e-commerce industry is expansion of the fraudulent activities within the industry. Both consumers and retailers are the victims of these fraudulent transactions. It is a criminal cheating which takes place on the purchase of any product or services from the online platform through any electronic gadget with an intension of monetary benefits.

The easy availability of personal data is the key reason which makes it easy for the crime to take place which has been increased form the last few years. Consumer provides their personal data on the online platform for purchasing any product or services which are used by the fraudsters who hacks the details which can be the name, address, mobile number and can extend to details of the credit card or debit card of the consumers.

57% of the frauds in India are through the online platforms which are boosting due to the absence of physical verification and easy manipulation of the e-mail IDs, which are used for committing such frauds. Understanding the multifaceted nature of the fraud in the e-commerce market is essential for the consumers to prevent such criminal consequences with them.

The fraud can extend to identification theft and payment fraud to account takeovers and phishing schemes which threatens both the seller and the consumer. Through insightful analysis and real world examples this blog sheds light on various aspects of e- commerce fraud which would allow the readers to understand the complexity and challenges which are commonly faced in the digital market.

What is E-Commerce Fraud?

It is a form of fraud that is done online, targeting e-commerce platforms. It is an illegal activity that is mostly conducted during an online transaction involving deceptive practices aimed at exploiting vulnerabilities in online shopping, leading to financial loss, identity theft, or other damages to users of the platform. This fraud is committed by obtaining unauthorized access to personal and financial data and misusing it. It not only results in monetary loss but can also damage the reputation of companies and online marketplaces.

E-Commerce Protection

In the battle to protect private data and prevent e-commerce fraud, knowledge is power. Many measures can be employed to prevent fraud by implementing:

• Fraud detection tools
• Machine learning algorithms
• Consumer education initiatives
• Secure payment gateways

Types of E-Commerce Frauds

• Identity Theft: A serious crime committed by collecting and using someone's personal data, including Social Security numbers, credit card numbers, and bank account details without the person's permission. Methods used include:
  • Phishing and social engineering (fake emails, websites, or calls)
  • Data breaches
  • Dumpster diving
  • Skimming
  • Impersonation
• Phishing Fraud: A prevalent cybercrime where attackers impersonate trusted firms to manipulate individuals into providing confidential information such as banking credentials, login details, or credit card numbers through:
  • Malicious text messages
  • Emails
  • Fake websites
  The Delhi High Court clarified the concept of phishing in the case of "National Association of Software Communication (NASSCOM)."
• Spamming Fraud: The unsolicited sending of bulk messages via email, flooding inboxes and posing severe risks to victims.
• Gift Card Fraud: An emerging threat in the digital world, where scammers misuse gift card systems for illicit activities through:
  • Card skimming
  • Tampered cards
  • Phishing
  • Social engineering
• Cybersquatting: An unethical practice involving registering, trafficking, or using a domain name in bad faith for monetary gains through:
  • Trademark infringement
  • Typo-squatting
  • Brandjacking
  • Ransom domains

Law Regulating E-Commerce Frauds in India

In India, e-commerce frauds are regulated through various laws and regulations to protect consumers and prevent such frauds. The primary legal framework includes:

• Information Technology Act, 2000 (IT Act):
  • Section 43: Penalizes unauthorized access to computer systems, including e-commerce platforms. Anyone gaining unauthorized access or causing damage can be held liable for penalties.
  • Section 65: Penalizes individuals who knowingly conceal, destroy, or alter any computer source code.
  • Section 66: Deals with computer-related offenses where unauthorized access is gained. It includes:
    • 66(A) – Sending offensive messages
    • 66(B) – Dishonest receipt of stolen communication devices
    • 66(C) – Identity theft and cheating by personation using computer resources

Hotel Le Meridien, Pune Case:
This is a very famous case of the hotel of Pune 'Le Meridian' who was found guilty to cheat with its customers. This crime took place by swiping card to make payment by the customers and the cashier used to make a duplicate card through the copied details with magnetic strips. The cashier was liable for making 33 duplicate cards.

Shri Umashankar Sivasubramaniam v. ICICI Bank (Petition No. 2462/2008)
In this case the plaintiff, Shri Umashankar lost Rs. 6.46 lakhs through phishing by receiving a mail from ICICI Bank asking him to reply with his personal details or his account would be non-existant. After he sent the reply, he witnessed a transfer of Rs. 6.46 lakhs from his account.

Consumer Protection Act, 2019
The Consumer Protection Act 2019 empowers the consumers of India. It deals with the mechanism of redressing complaints related to e-commerce transactions which ensures the consumers with their rights. This act has been enacted to strengthen consumer rights and protect them from the cyber fraud.

The CPA 2019 defines E-Commerce and distinguishes between service providers and product sellers in the digital space. E-Commerce platforms are considered as product sellers under the act which deals with the consumers who faces any harm or damages caused to the user due to a defective product brought online and it also talks about the compensation from both the seller and also the platform. The act also prohibits misleading advertisements and the e-commerce platforms are liable for producing any misleading or false claims on their platform.

The CPA 2019 also talks about unfair trade practices which includes deceptive practice in e-commerce transactions too. If a consumer faces harassment or financial losses due to such unfair trade practice, they can seek legal recourse. The act also establishes consumer disputes redressal commissions at the district, state and national level. 

Preventions To Avoid E-Commerce Fraud
Prevention of e-commerce fraud is a necessity in today's digital world. The consumers shall always stick to well-known and reputable e-commerce websites and always check the customer reviews and ratings of sellers and the products which would provide the genuine feedback of the prior experienced customers. The customers shall always beware of unrealistic deals which usually lures the victims by providing unrealistic low prices to entice the customer.

The consumer must use a secured payment gateway like credit cards or trusted payment methods to avoid direct bank transfers or sharing financial information over chats or emails. Two Factor authentication adds an extra layer of security to the accounts and the consumers must keep the software updates to remove any malicious intervention.

The seller also must be aware of the fraud and save their website by securing the website through implementing SSL certificates, using encryption methods and updating the e-commerce platform's software to protect the consumer data and also provide prompt customer support to address customer concern issues.

Conclusion:
In the digital landscape, vigilance, awareness, and proactive measures are crucial for both consumers and businesses to combat e-commerce fraud and cybercrime. Consumers must exercise caution by using trusted platforms, verifying sellers, and adopting secure payment methods. Staying informed about emerging scams enhances their safety online.

Businesses, in turn, must implement robust security measures like SSL certificates and fraud detection systems while ensuring employee training and responsive customer support. Addressing e-commerce fraud in India requires collaboration among law enforcement, regulatory bodies, and stakeholders. While legal frameworks like the Consumer Protection Act and IT Act provide safeguards, education and awareness remain key to prevention.

End Notes:

1. Section 43, IT Act 2000: Penalty for damage to computer, computer system, etc.
2. Section 65, IT Act 2000: Tampering with computer source documents.
3. Section 66, IT Act 2000: Hacking with computer system.

• Sheen Kaul, 'History and Development of Consumer Protection Laws in India' (Legal Bites - Law And Beyond, 19 June 2020) accessed 21 June 2021.
• National Association Of Software Communication (NASSCOM) v. Ajay Sood and Others, 119 (2005) DLT 596.
• Sumanjeet, The state of e-commerce laws in India: a review of Information Technology Act, 52 Int. J. Law Manag. 265–282 (2010).

Written By: Rupsa Mukherjee