Update: The ministry of corporate affairs has said that the Competition Commission of India(CCI) is going to look into the anti-competitive conduct of online retailers. The retailers under scrutiny are Flipkart India, Amazon Seller Services,  Vector e-commerce, Jasper Infotech and Xerion Retails. The government has also asked the serious fraud investigation office to file prosecution under the provisions of the Companies Act, 1956 and the Indian Penal Code against Goldquest International and its group company Questnet Enterprises and Abcindya Networks. The statement added that investigation reports with respect to Unipay2U group of companies and Speakasia Online are under examination. The department of consumer affairs is also considering inclusion of necessary safeguards for protection of rights of consumers of technology-based marketing e-commerce, telemarketing etc as part of the proposed amendment in the Consumer Protection Act, 1986. (Link here)

The Ministry of Finance said in a written reply to the Lok Sabha on Friday that only 9 complaints regarding fraud committed by e-commerce companies have been received by the Indian government, and action has been taken in each case. A copy of the government statement is included below.

Three observations, based on the Ministry’s statements:
1. The e-commerce industry is hiding its problems very well: warranties not being honored, fake goods, non-delivery of products, delivery of bricks, wood and empty boxes. It’s there, but not reported.

2. The complaints mechanism must be broken: 9 complaints is a remarkably low number, given the number of complaints we see online about fake goods or goods not delivered. Some examples: here, here and especially the fake Rolex case, here. The list appears to be related to police complaints only, and even then, this is a remarkably small number. Do most people give up, or do e-commerce companies deal with the issue before someone can file a complaint?

3. Regulation is nigh, but not specifically for e-commerce: Just 9 complaints, and Minister of State for Finance, Jayant Sinha, appears to suggest that action can only be initiated when a case of fraud is registered by a Law Enforcement agency. Importantly, “the Government has also initiated steps for incorporating sufficient provisions for protection of consumers of online shopping/e-commerce under Consumer protection Act, 1986.” However, there is “no proposal for a separate regulatory framework for e-commerce under consideration.”

Note that given the lack of liability enjoyed by online marketplaces, consumers can be left in a regulatory no-mans-land. We’d explained that situation here.

Also read: our coverage of Consumer Protection issues related to E-Commerce.

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Ministry of Finance on: Frauds Committed by E-Commerce (source)

Government have been receiving complaints regarding the frauds committed by e-commerce companies. The number of complaints registered and number of complaints on which action has been taken during the last two years, State-wise is as under:

e-commerce-frauds

Presently there is no proposal for a separate regulatory framework for e-commerce under consideration. Directorate of Enforcement conducts investigations under Foreign Exchange Management Act, 1999 (FEMA) and Prevention of Money Laundering Act, 2002 (PMLA). Such investigations are carried out as and when any credible information, including those relating to frauds committed by e-commerce companies, is received. Action under PMLA can be initiated in appropriate cases where a case of fraud by an e-commerce company is registered by some other Law Enforcement Agency. Keeping in view the increased number of online fraud/cheating cases, the Government has also initiated steps for incorporating sufficient provisions for protection of consumers of online shopping/e-commerce under Consumer protection Act, 1986.