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e-Commerce Rules: Companies have to comply or move Indian courts, say legal experts

A lobby group of the United States Chamber of Commerce, US-India Business Council’s (USIBC’s) objection to India’s proposed amendments to the e-commerce rules have stirred up a controversy with trade bodies such as the Confederation of All India Traders (CAIT) condemning the lobby group’s statements.

However, it has also brought forthwith the question of what would happen if e-commerce entities, which now face stricter regulation because of the proposed rules, do not comply with it. It is important to see this from the prism of the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, and what have been the effects of non-compliance with the rules for certain social media platforms. Twitter, for instance, has been involved in a tussle with the Indian government over this issue for about a month now, and WhatsApp has moved an Indian court challenging the rules.

MediaNama reached out to a few legal experts regarding the possible outcome of non-compliance to the e-Commerce Rules 2020, and they all had a similar point to share: Yes, the rules bring in stricter regulation for e-commerce entities, and are in some aspects similar to the IT Rules 2021. However, companies have to either comply with the Rules whether they like it or not (because a rollback is unlikely) or move the courts for a solution.

However, first, before we go into the matter in detail, what do the proposed e-commerce rules say and why was it opposed by USIBC?

The proposed rules include

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  • New rules to address abuse of FDI regulations
  • The establishment of a grievance redressal mechanism,
  • New display and labelling criteria for foreign goods
  • Data protection for customers, among other things.

These changes came in response to “several representations from aggrieved consumers, traders, and associations complaining against widespread cheating and unfair trade practices being observed in the e-commerce ecosystem,” the government stated in a press release.

According to a report by Reuters, the US lobby group said that the rules are a cause for concern and will result in a ‘stringent e-commerce regime’. Some of the rules are similar to those that apply “for social and digital media companies … and will result in a more stringent e-commerce regime,” Reuters reported USIBC as saying. Apart from this, the USIBC also reportedly said that India’s proposals “preclude (e-commerce) platforms from owning vendors,” and that the proposed changes “includes several concerning policies, including significant limits on platforms’ ability to organise sales and handle grievances.”

CAIT slams USIBC, calls their objection ‘utter desperation’

The CAIT, which has been rallying the Indian government for a long time to take action against e-commerce entities such as Amazon for anti-competitive practices and so on, had welcomed draft rules that were released a few days ago. Hence, when reports of USIBC’s objection to the rules came to the fore, the traders’ body did not take it lightly.

This is what CAIT said: “The uncalled for intervention of USIBC shows utter desperation of Amazon & Walmart likes US Companies which are part of this lobby group, as they have understood that their sinister game of controlling and dominating e commerce and retail trade of India will soon be over and they are trying to block initiative for implementation of draft rules. DPIIT for bringing a new. However, the 80 million strong business community of India will ensure that such much awaited reforms in e commerce landscape should take place as soon as possible.”

Apart from that, these are a few salient points that CAIT made regarding USIBC —

  • USIBC should have advised companies like Amazon and Flipkart to follow and comply with Indian laws
  • The intervention of USIBC shows that both Amazon and Walmart are trying to embargo proposed rules

In case of a tussle, courts will be the final arbiter; rollback of rules unlikely: Legal experts

Consumer Protection (E- commerce) Rules, 2020 brought to the fore a paradigm shift in the way e-commerce entities works have to function in the days to come with their arbitrariness in check. Understandably, USA based trade bodies, such as USIBC, are against the implementation of the revised Rules. However, since they are running their business activities in India, it is imperative upon them to comply with them till the Rules in place, whether they like it or not. Only a Court of law would be the final arbiter, if approached — Siddharth Jain, co-founding partner of PSL Advocates and Solicitors

Echoing a similar opinion, Pratyush Miglani, Managing Partner in the Miglani Varma & Co – Advocates, Solicitors and Consultants said, “Even as the US-India Business Council has opposed the rules, a rollback is highly unlikely. In fact, the similarities between the Intermediary Rules and the e-commerce rules show that the government seems to be bringing all internet-based companies at a uniform level of regulation, and well within its control.”

‘Compliances proposed to align e-commerce entities with changing times’

With the current digitalisation of the world, the current rule is an effort of the Indian government to expand the scope of the e-commerce sector by proposing an amendment to the definition of what constitutes an e-commerce entity, said Kritika Seth, Founding Partner of Victoriam Legalis. Seth said that the introduction in the rules of a requirement for e-commerce entities to register with DPIIT and other compliances “is to put e-commerce entities in alignment with the changing times and the changing laws.”

“The Government is going one step ahead and providing greater liability of the e-commerce entities by referring provisions of Competition Act, 2002, wherein the concept of the related party and associated enterprises, fall-back liability, etc., are being introduced thus compelling e-commerce entities to re-evaluate their business models,” Seth said.

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Miglani also said, “On the liability front, e-commerce companies will now be liable if a seller on their platform fails to deliver the promised goods or services to the consumer, causing such consumer a loss. While the same is a good step in the direction of preserving consumer interests, e-commerce companies may be hit badly as a result thereof. Likewise, the provision that associated enterprises, i.e., any enterprises having a stake of 10 per cent or more in the e-commerce company, cannot be listed as sellers on their platform is also set to hit companies such as Walmart and Amazon.”

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