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E-commerce rules: The game changer of Consumer Protection Act, 2019

The Consumer Protection Act, 2019 (CPA 2019�) enacted by the Parliament recently came into force on 20th July 2020 with the newly notified Consumer Protection (E-Commerce) Rules, 2020 that were notified on July 23rd, 2020 replacing the almost three-decade-old Consumer Protection Act, 1986 (“CPA 1986”) is the much-needed legal mechanism to tackle the several challenges that are often faced by the consumers especially in online transactions. The act has also introduced several bodies such as Central Consumer Protection Authority (CCPA), the Central Consumer Protection Council, and the three tiers of consumer courts at the district, state and national level. In effect, the new provision aims to provide an easier redressal to the consumers, protect their rights, to keep a thorough check on the functioning of e-commerce entities and for preventing unfair trade practices in e-commerce and direct selling.

Key Features of the Rules
  • The government has issued eight draft rules under the Consumer Protection Act, 2019
  • The act establishes various bodies such as the Central Consumer Protection Council, Central Consumer Protection Authority (CCPA) and advisory councils at the district, state and national level. The rules also specify the qualifications, selection process, method of appointment, tenure, removal of the members and so forth.
  • The draft rules set out the liabilities, obligations and duties of e-commerce entities and that of the sellers.
  • The rules are applicable to both models of e-commerce entities i.e. marketplace and inventory models. However, the rules do not distinguish between the liabilities of the two.
  • The Consumer Protection (E-commerce) Rules, 2020 are mandatory and are not advisories.

Authorities established under the Act
The central government established various bodies including a regulator, and adjudicatory bodies and advisory councils at the district, state and national level. The Draft Rules prescribe the composition, qualifications, method of appointment, term and removal of the members of these bodies.

The bodies established under the act are:
Central Consumer Protection Authority:
The purpose of this body is to supervise violations of consumer rights, unfair trade practices and selling of deceptive products. The body comprises of a chairperson, five central commissioners and five regional commissioners. The selection is chaired by Niti Aayog members and two secretaries of the central government. The tenure is of five years or 65 years of age, whichever is earlier and the removal of the members maybe done on the basis of insolvency or on recommendation of an inquiry committee for offences, misuse of position etc.

Central Consumer Protection Council:
The purpose of this body is to advise on promotion and protection of consumer rights and further consist of up to 36 members including a Chairperson, a Deputy Chair, Two MPs, two state ministers (by rotation), and Consumer Affairs Secretary with a term of three years.

District Commission (Jurisdiction on disputes up to one crore rupees):
The commission of this body comprises of President and at least two members out of which at least one must be a woman. The term is of five years or until 65 years of age, whichever is earlier. One-time re-appointment is further permitted.

State Commission (Original jurisdiction of one to ten crore rupees and appeals from District):
This committee consists of a President and at least four members. It also it states that not more than 50% of members can be from a judicial background and at least one member must be a woman. The term is of five years or until 67 years of age, whichever is earlier. One-time re-appointment is further permitted.

National Commission (Original jurisdiction above ten crore rupees and appeals from State):
This Commission will comprise of four to 11 members, at least one of which must be a woman. The term is of four years of until 70 years of age; whichever is earlier for the President and four years or 65 years of age; whichever is earlier for the other members.

Liabilities of E-commerce entities
Section 2(16) of the act defines e-commerce as:
"e-commerce" means buying or selling of goods or services including digital products over digital or electronic network. The Draft Rules define an “e-commerce entity” as an entity, in India or abroad, which conducts e-commerce business either through: 1. Inventory-based model- where the entity owns the inventory and sells it to consumer directly, or 2. Marketplace model, where entity acts as a technology platform facilitating transactions between buyers and sellers.

As per the rules the liabilities of the entities include duties such as not to influence the prices of product as stated by the seller, not to adopt unfair methods to influence consumer decisions, fix the terms of the contract between the entity and the seller or service provider, to record counterfeit products by sellers and of deceptive products, ensure that advertisements for marketing of goods and services are consistent with their actual characteristics and usage conditions and to specify warranty and safety information of the goods and services listed for sale.

Liabilities of sellers include having a written contract with the e-commerce entity, providing mandatory safety and warranty and shelf life information, and bearing responsible for warranty or guarantee obligations of goods and services sold.

Duties of E-Commerce entities
  1. According to draft rule 2(c) the entity should be incorporated under the Companies Act, 1956 or the Companies Act, 2013 or a foreign company covered under section 2 (42) of the Companies Act, 2013 or an office, branch or agency in India as provided in Section 2 (v) (iii) of FEMA 1999
  2. It has become mandatory to provide details of:
    • Legal name of the company,
    • Geographical addresses of the headquarters and offices,
    • Name and details of the website,
    • All contact details like e-mail address, fax, landline, and mobile numbers of customer care, and
    • Contact details like e-mail address, fax, landline, and mobile numbers of grievance officer.
  3. The entity should fix terms of contract with the seller relating to return, refund, exchange, warranty/guarantee, delivery, mode of payments, grievance redressal mechanism etc. to enable consumers to make informed decisions.
  4. To ensure that the advertisements for marketing of goods or services are consistent with the actual characteristics, access and usage conditions of such of goods or services.
  5. To ensure that personal information of customers is protected, and that such data collection and storage and use comply with provisions of the Information Technology (Amendment) Act, 2008.
  6. To affect all payments towards accepted refund requests of the customers within a period of maximum of 14 days.
  7. If the e-commerce entity is informed by the buyer about any counterfeit product being sold on its platform, and is satisfied after due diligence, it shall notify the seller and if the seller is unable to deliver any evidence that the product is genuine, it shall take down the said listing and notify the consumers of the same
The new changes have brought a much-needed mechanism to widen the scope and reach of protection to consumers and buyers. With the establishment of regulatory and advisory authorities the process for consumer disputes resolution is now easier since the act increases the pecuniary jurisdiction of the committees, attached mediation cells, increased the members of the commissions, imposed higher penalties etc. The act has brought several new transformations and modifications that provides legal mechanisms to hold not only the entities accountable but also their counterparts such as the sellers, the manufacturers, the service providers, etc.

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