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Consumer Protection (e-commerce) Act amended to support domestic business

Ministry of consumer affairs, food and public distribution, has amended the Consumer Protection E-commerce Rules 2020. They mandated e-commerce firm to ban few flash sales, share information with enforcement agencies and new registration rules for online retailers. Local traders, SMEs and sellers are describing this change as a purifying act that will foster inclusive development. 

The e-commerce firm abuses its market dominance, financial size, dependency, technological advantage, and structurally destroying potential businesses and entrepreneurs. Recently the CCI ordered an investigation on Flipkart and Amazon’s conduct of business after local sellers complained about malpractices and preferential treatment. 

Governments of the European Union, Germany, France, USA, Britain are all one by one suing and fining big tech companies for malpractices, monopoly, deceptive advertising and preferential treatment.

What are the provisions of the new act?

The new provisions require e-commerce companies to register with the Department of Promotion for Industry and Internal Trade DPIIT. The mandate has asked the companies to share information with government agencies, these agencies are authorised by law for investigation and enforcing protective cyber security activities for identity verification. 

The governments have also banned specific and back to back flash sales in lieu of preventing e-commerce firms from taking unfair advantage of vast data collected through their business as they limit customer choice. Flash sales are sale organised by e-commerce firms where prices are very low initially, offering high discounts for a limited period of time, say one hour. So the companies with extensive data on consumers can exploit it to earn more profit and harm rivals. 

Flash sales have unimaginable and unachievable low prices and it may not profit the e-commerce giants today, but it latches the consumer to them, thereby ensuring profits in the long run. Small traders cannot afford losses in the short term and hence exit the business; when too many small firms exit business, e-commerce firms become a monopoly. This method is also known as predatory pricing. The enforcement agency can investigate and prosecute e-commerce companies for offences under the law for cyber security incidents. 

In a nutshell, this means that the e-commerce companies cannot hide behind the name ‘privacy’ to conduct business and favour a few sellers. 

The government has asked e-commerce companies to produce the required information within 72 hours of order. To produce timely information ministry has asked e-commerce companies to appoint a grievance officer, chief compliance officer and a nodal contact person who will be available at the beck and call of law enforcement agencies. 

So no more excuses where e-commerce company says they don’t have the workforce to procure sought information.

For identity verification, the ministry under consumer protection e-commerce rules 2020 has asked the company to provide information of domestic and foreign online retailers who provide services and goods in India. Failing to comply with this act attracts a penalty under the consumer protection act 2019. 

The new rules aim to stop by-passing the law and are applicable to all goods and services bought and sold online. To cover every e-commerce model, the definition has broadened itself to cover archetypes, including marketplace and inventory models, multi-channel single-brand retailers and single-brand retailers. 

The Centre has asked e-commerce firms to mention the name and details of importers, these firms also have to provide information of alternate sellers to customers to provide an equal business opportunity for domestic goods. After all well being of domestic players is more important than e-commerce giants.

All these provisions are in line with the IT intermediary rules which has attracted a ruckus between Centre versus Twitter and WhatsApp which was challenged in Delhi High Court.

What are IT intermediary rules 2021?

These rules were enforced to deal with social media and over-the-top OTT platforms, the rules are framed to exercise powers under section 87 of the information technology act 2000 and provides a code of ethics for digital media. The ad hoc committee of Rajya Sabha reported a surge in pornography post on social media that has affected children and society. 

The ad hoc committee recommended tracing the first originator of the content to crack down on such activities. All the video streaming apps will be bought under this to be censored for offensive content. The social media intermediaries have to appoint a grievance redressal officer, chief compliance officer to procure sought information by law enforcement agencies. 

The safe harbour provisions under section 79 of the IT Act will not apply to the social media intermediaries, meaning they will not be saved from prosecution for content posted on their platforms if they don’t appoint statutory officers. The intermediaries have to remove or disable content access within 24 hours of a complaint by an individual or person on his/her behalf. The act has also prohibited the intermediaries from publishing information that harms security, sovereignty, public order, foreign relations and integrity of the country or any information which is prohibited by law.

OTT platforms are asked to categorise their content into U, U/A and A. Publishers that print news on digital media are required to comply code of conduct given by the Press Council of India. In the case of Twitter, since it has not complied with the appointment of statutory officers, it will lose its safe harbour status under section 79 of the IT Act and be liable for prosecution. This happened after the incident where a Muslim man was beaten up, and the video went viral on Twitter. The FIR, which was filed following the incident also included Twitter in it. 

In February Twitter was also asked to block thousands of tweets related to farmers protest because the Centre found those tweets are spreading misinformation about farmer genocide which affected public order, but Twitter did not block those tweets on the grounds that it did not violate Twitter’s policy.

 According to section 69 of the IT Act, the Central and state governments can issue directions to intercept or decrypt digital information if sovereignty, integrity, security of India et cetera are compromised; hence non-compliance has terrible consequences.

Whatsapp also went to the Delhi High Court challenging the new IT intermediary rules which asked WhatsApp to trace the first originator of the content. WhatsApp believed that tracing chats to the first originator would break end to end and encryption and harm people’s right to privacy. The government in response to WhatsApp’s lawsuit said the right to privacy provided under article 21 is subject to reasonable restrictions as every other fundamental right is. 

What is expected now?

Competition Commission of India has started an investigation into the conduct of Flipkart and Amazon. They have enough room to prove that these two e-commerce firms create a monopoly, which will attract heavy fines. France fined alphabet‘s Google for €220 million for favouring few businesses on its online platform. 

European Union has fined Google for preferential treatment in digital advertising business for €8 billion. The German competition regulator has also initiated an anti-trust investigation into Google, including the Google News showcase. The French anti-trust office fined amazon for illegal data theft for €135 million. 

The United States of America has appointed Lina Khan as the federal trust chair who would initiate and continue anti-trust investigations into the big tech firms – Apple, Google, Amazon and Facebook. Senators have introduced tailor-made bills that would limit the powers and dominance of these firms to restore balance and competition in the market.

In the coming years, we will see a shift from the dependence of business and intermediaries on Google and other platforms towards a more inclusive business model.

         

    

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Aishwarya Ingle

I am a person who believes in freedom of human mind. A free mind is highly creative and imaginative. Imagination is not a cloth that is to neatly folded in a box, but it is fire. It can light an entire jungle or a single matchstick, it depends upon the free environment.

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