The Consumer Protection Act, 2019 & E-Commerce

Now, goods or services which are sold through digital means like websites, marketplace, e-commerce platforms will be regulated by the Consumer Protection Act. 

Organisations selling handicrafts/ handloom products online, online artisan collectives/marketplaces, educational or other learning platforms are all impacted by this new law. Let us look at some of the implications this new law on online sales by such organisations – both for profit and not-for profit.

Key Changes Brought About By CPA

• Definition of consumer widened to include e-commerce consumers 

• Applies to online transactions, direct selling, tele-shopping & multi-level marketing – on retail & market-place model

• Does not apply to services of a person carried out in personal or professional capacity

• Complaints  

• consumer can file complaints at consumer forum at their place of residence/work;

• earlier complaints could be filed only at the place of seller’s registered office;

• complaints can be filed electronically;

• hearings through video-conferencing allowed. 

• Pecuniary limits of Consumer Forums Increased

• District forums - complaints upto INR 10 million;

• State forums - complaints from INR 10 million - INR 100 million;  National forum - complaints exceeding INR 100 million. 

•  Central Consumer Protection Authority set up as a nodal authority for consumer protection.

• Product liability ·  

• imposed on product manufacturer, product service provider & product seller.

• liable under product liability action.

• no liability if the product has been misused, altered or modified, 

• Unfair Trade practices 

• includes sharing of personal information given by consumers in confidence

• robust data protection measures necessary

•  Punishment for misleading advertisements

• monetary fine up to INR 1 million on a product manufacturer/endorse

•  imprisonment for up to 2 years

• Consumer Protection (E-Commerce Rules), 2020 Provides certain obligations of e-commerce entity (discussed in next section)

Obligations of E-Commerce Entities under the Consumer Protection (E-Commerce Rules), 2020

• E-commerce entities to be a company under the Companies Act 

• Legal name of the entity, headquarters, contact details etc.to be displayed.

• Explicit consent of consumer for buying goods/services to be recorded.

• Automatic consent in the form of pre-ticked boxes would not suffice.

• No manipulation of prices can be done. 

•  Prohibition on discrimination between consumers of the same class. 

•  Grievance redressal (direct online sale or through marketplace)

• A dedicated officer for grievance redressal to be appointed

• Contact details needs to be prominently displayed.

• Grievance Officer to acknowledge receipt within 48 hours & close compliant within a month

• Ticketing system for tracking complaints to be adopted. 

•  Marketplace e-commerce entities to obtain an undertaking from the online sellers that the information regarding their product/service displayed on the platform is genuine and accurate and corresponds to the actual good or service. 

• Restrictions imposed on cancellation charges

FAQs

1. Can Non-profits (Trust/Society/Co-operative Society/Sec 8 company/Liaison Office of Foreign Charity) be a consumer?

Yes - One important feature of the applicability of consumer protection law is that one has to be a `consumer’. It is essential that goods are being `sold’ for a consideration, in order to qualify as a consumer.

Therefore all non-profit entities that purchase goods or services for  its own consumption or use are entitled to protection as consumers under the CPA. 

2. Can Non-profits (Trust/Society/Co-operative Society/ Sec 8 company/Liaison Office of Foreign Charity) be an e-commerce entity?

If a non-profit online seller/e-commerce entity, provides goods or services free of cost, then the same shall not be covered under the consumer protection act.

A non- profit company selling goods of handicraft/handloom workers, online whether independently or on an e-commerce marketplace should comply with applicable provisions under the CPA. 

To engage in providing e-commerce, the seller must be a company. This is to be noted by handicraft/handloom collectives selling online.

3. Are educational institutions like schools liable to comply with the CPA?

Yes. Courts have time and again held that pre-schools, schools, colleges and universities are amenable to the jurisdiction of consumer courts. However there are nuances or specific aspects of education that are not necessarily a service and therefore, it is best to consult a lawyer to understand applicability.

4. Are ed-tech companies providing online learning solutions an e-commerce entity?

Yes – any entity providing services online will have to comply. An EdTech platform which engages external faculties or a school which engages guest faculties to offer courses on their platform, should have written arrangement with the service providers to do the same.  

5. What are the obligations of e-commerce entities under the CPA?

They are liable for the quality of the product/service

Must appoint a grievance officer & display mechanism for redressal of complaints

Personal information of customers collected should be protected against leakage

Misleading advertisements to be avoided

6. I am an individual providing personalised services/products through my website/ social media page. Am I an e-commerce entity under the Act? 

That depends - activities carried out by a natural person in personal capacity not being part of any professional or commercial activity undertaken on a regular or systematic basis. Therefore, if the services or products are sporadic and not conducted in a systematic or organised manner, you are not covered by the rules. However if it is an organised trade in your name, then you will be bound to comply.

Do consult a lawyer for answers on compliances and obligations specific to your situation. Remember that non-compliance under the CPA attract monetary fines as well as imprisonment.