ABSTRACT
Consumers need to trust and put confidence in e-commerce businesses while purchasing goods and services. This research paper analyses the changing consumer protection laws and their evolution in India. It also examines key legal regulations governing E-Commerce transactions. This paper emphasizes the significance of strong consumer protection laws by analyzing existing laws and emerging trends in depth. It explores the challenges of cross-border transactions and the requirement for unified International standards to handle them properly. It also discusses case studies on consumer protection laws and effective consumer protection practices developed by leading E-Commerce companies. This paper also addresses how blockchain and artificial intelligence can improve E-Commerce’s consumer protection mechanisms.
Keywords: Consumer, E-Commerce, Data protection, Cross-border.
INTRODUCTION
The technological advancements and the Covid-19 lockdown have led to a rise in online businesses or E-Commerce businesses. The term E-Commerce or Electronic Commerce is a subset of E-Business which refers to the exchange of goods and services via computer networks, laptops, cell phones, tablets and other electronic devices used for it. It is primarily applied in Business-to-Consumer (B2C) transactions. Electronic data interchange (EDI) was first used in E-Commerce in the 1960s for document transfers. Since then, the retail industry has undergone a significant transformation, driven by the companies like Amazon. eBay, Flipkart, etc. Because of this, traditional stores have to embrace new technologies to stay competitive.
E-commerce impacts the global economy and brings about a transformation in the nation. It contributes to the nation’s sales growth which raises exports and production, ultimately leading to increased growth. As E-Commerce makes it easier and faster to conduct transactions, it contributes to an increase in International trade by providing access to global markets. Especially in the ICT sector, it opens up new investment opportunities. Due to the jobs it creates in the knowledge industry, Information technology, and communication field, the unemployment rates in the country are reduced and higher salaries also raise people’s standard of living, which in turn changes how the market is structured. Consumers have also benefited greatly from the expansion of E-Commerce since it offers more convenience, a larger assortment of goods, affordable prices, and people can buy goods from any corner of the world. The primary benefit of this is that people can access the services 24/7.
Any business goal is to serve its customers. As E-Commerce grows, so do the concerns about various issues arising due to online businesses. As E-Commerce platforms gather so much personal information, hackers find them to be appealing targets. This can lead to numerous data breaches and improper use of customer’s personal information which would undermine the customer’s confidence. For example, millions of Facebook users were impacted by a significant data breach that occurred in 2018. It was the biggest data breach in the 14-year history of Facebook.[1] Phishing, identity theft, and phony websites are just a few fraud schemes that can target online transactions. In E-Commerce businesses, customers are unable to physically inspect the product’s quality before buying it. Due to this, they might end up with subpar or counterfeit goods. Advertisements that contain false information can mislead customers about the features, benefits, or quality of products. In 2014, the Federal Trade Commission (FTC) alleged the cosmetics company L’Oréal USA, Inc. for using misleading advertising regarding its Lancôme Génifique and L’Oréal Paris Youth Code skin care products.[2] Online businesses also face significant risks when it comes to returns and reimbursements because they mainly depend on the accuracy of product descriptions and customer trust. Customers who cannot physically inspect products before making a purchase rely on ratings and reviews, which may be manipulated or untrustworthy.
To overcome these difficulties it is the moral duty of the businesses to safeguard the interests of their customers. Therefore there arose a need to establish consumer protection laws in India to solve these problems to encourage ethical behavior and foster confidence in the online marketplace to protect the rights of the consumers. It is important to safeguard the consumers from unfair and restrictive trade practices adopted by the seller of goods and services. Robust consumer protection fosters a safe and trustworthy environment for online shoppers which drives stability and growth of the country’s e-commerce sector.
RESEARCH METHODOLOGY
This research paper uses the doctrinal method which is a secondary method. This research paper has used data from various previous research papers, official government websites, academic journals, and news articles.
REVIEW OF LITERATURE
The literature on Consumer Protection laws in India explores various important decisions and case laws. The Parliament passed the Consumer Protection Act, 2019[3] and the Consumer Protection (E-commerce) Rules, 2020 which governs consumer protection in E-Commerce. The unfair trade practices are highlighted in the cases of Avon Beej Company v. Anoop Singh[4] and Horlicks Ltd. v Zydus Wellness Products Ltd.[5]
ANALYSIS
Evolution of Consumer Protection Laws in India
In the 1800s, the barter system prevailed with minimal needs and no market competition. The Industrial Revolution introduced markets, competition, and a surge in goods. As trade intensified, the law of supply and demand governed, but regulations on buyer-seller relationships were lacking. This allowed traders to monopolize markets, often without oversight unless serious offenses occurred. The global consumer movement emerged due to the exploitation under the Caveat Emptor rule, where traders prioritized profit over consumer welfare. Wealthy nations like the US and the UK led in recognizing the need for consumer rights protection, prompting the enactment of numerous laws, shifting the state’s responsibility to safeguard consumers. Developing countries like India also prioritized consumer protection, aligning with this global trend.
The UN General Assembly issued a resolution in 1985 highlighting the importance of consumer protection in the 20th century. It resulted in the establishment of guidelines aimed at promoting and advancing the field of general consumer education. They stated that the governments had an obligation to protect the interests of all consumers. On April 9, 1985, the General Assembly unanimously adopted these guidelines, which referred to consumer rights as a “chapter of human rights”. These recommendations catalyzed numerous laws that were drafted in various nations. One such piece of Indian legislation was the Consumer Protection Act of 1985. World Consumer Rights Day is celebrated annually on March 15th, the day when the 35th US President John F. Kennedy announced four consumer rights. They are right to safety, right to be informed, right to be heard, and right to choose. Three more rights were later added by the International Organization of Consumer Unions (IOCU). In ancient times in India, Manumriti described the social, political, and economic aspects of society in antiquity. The ancient lawgiver Manu also wrote about moral business conduct. He gave an explanation of the code of conduct and the penalties for breaking it. For instance, he said, “A commodity mixed with another must not be sold (as pure), nor a bad one (as good), not less (than the property quantity or weight)”. The least severe penalties were for adulterating pure goods, shattering gems, or incorrectly boring (them).
After some time, the Consumer Protection Act, of 1986[6] was passed in India in which six consumer rights were declared. In the entire world, it is considered to be one of the most outstanding pieces of consumer protection law. A tripartite system of consumer courts was established, comprising National, State, and District levels along with distinct government departments dedicated to consumer affairs. The six consumer rights were:
- Right to Safety
- Right to be Informed
- Right to Choose
- Right to be Heard
- Right to seek Redressal
- Right to Consumer Education
The primary objective of the revisions made to the UN General Assembly’s 1989 guidelines on consumer protection and its 2015 modification was to increase public awareness of the different goods and services. In 2015, India began implementing major changes to the Consumer Protection Law and incorporating best practices from other countries, based on the previously mentioned information. Afterwards, on July 8, 2019, the Consumer Protection Bill was introduced to Parliament in a completely revised form. The Lok Sabha approved it on July 30, 2019, and the Rajya Sabha approved it on August 6, 2019. The Bill became the Consumer Protection Act, 2019 on August 9, 2019, when the President of India granted his assent.[7]
Significant advancements in consumer rights and protections have been made in India, as evidenced by the Consumer Protection Act of 1986, the Consumer Protection Act of 2019 and the Consumer Protection (E-Commerce) Rules 2020. The 2019 Act brought more extensive measures that addressed modern problems like digital transactions and E-Commerce. Unlike the 1986 Act, which lacked a proper regulator, the Consumer Protection Act, 2019 established the Central Consumer Protection Authority (CCPA) to handle complaints and disputes about unfair contracts. Low-cost and private services were not included in the 1986’s scope. On the other hand, the 2019 Act broadened its purview and included telecommunications, housing development, and all purchases for consideration which excluded personal and gratuitous services.
Consumer Rights in E-Commerce
Right to information
With the use of “accurate and transparent” information, Indian consumers are entitled to know about the products and services they wish to purchase under the terms of the Consumer Protection Act, 2019. Misleading advertising of goods and services is defined in Section 2(28) of the Consumer Protection Act, 2019. By Section 10 of the Act, the Central Authority, also referred to as the Central Consumer Protection Authority is being established to regulate matters concerning deceptive advertisements that infringe upon the rights of consumers. This helps to protect consumers’ interests, improve decision-making, and promote transparency by outlawing dishonest business practices. According to the Legal Metrology Act, 2009[8] and the Legal Metrology (Packaged Commodity) Rules, 2011, e-commerce companies must follow these rules to guarantee that mandatory information about goods is displayed on online platforms in the same manner as it is on physical packages. False information can be attributed to importers, dealers, manufacturers, or sellers and E-Commerce platforms can be held responsible for failing to display necessary information.[9]
Right to privacy and auto protection
Indian E-Commerce companies have to manage several risks related to breaking local laws and regulations. Because non-compliant businesses might not follow necessary data protection standards, they are more susceptible to cyber security breaches. A company’s reputation can be damaged and customer’s trust might be eroded by non-compliance. The Information Technology Act, 2000[10] (IT Act) governs internet use and Electronic Commerce in India. E-Commerce and information exchanges are now recognized by law much like traditional paper-based transactions because of the IT Act as it gives validity to electronic transactions. Also, digital signatures are equivalent to handwritten signatures according to the IT Act. This Act has provided a list of cybercrimes and associated penalties which include hacking, privacy violations, identity theft, etc. The IT Act establishes guidelines for data protection specifically requiring companies to use reasonable security measures (Section 43A). The Controller of Certifying Authorities (CCA), who supervises the issuance of digital signatures and makes sure that standards are adhered to, plays a crucial role.[11]
The Digital Personal Data Protection Act (DPDPA), 2023[12] effective since August 11, 2023, requires Indian E-Commerce businesses to manage user data responsibly by adhering to strict data protection standards. This law mandates that companies, referred to as Data Fiduciaries, get people’s consent before processing their data. For example, if a company Uber or Ola has to access the data about the driver and the customers. Therefore, while obtaining personal information, they must give thorough notice and set up efficient grievance redressal procedures, such as designating a Data Protection Officer.[13]
Right to redress and remedies
With the increasing usage of E-Commerce companies and online transactions, Online Dispute Resolution expedites the resolution of disputes. ODR is a digital extension of Alternative Dispute Resolution (ADR) techniques such as Arbitration, Mediation, and Negotiation. Through direct conversation the use of support tools and quick digital communication, parties engage in negotiation to resolve problems and issues. Mediation uses a human mediator to facilitate technologically assisted online talks and arbitration involves presenting claims to an unbiased private tribunal that issues a ruling. The National Consumer Helpline[14] was established in 2005 to assist and empower consumers by serving as a safe place for complaints and inquiries about goods and services. The Integrated Consumer Grievance Redressal Mechanism (INGRAM)[15] the program was introduced by the Department of Consumer Affairs in August 2016. Its goal is to enhance the National Consumer Helpline by creating an online website for raising awareness and resolving consumer concerns.
Right to Security
According to the Consumer Protection Act, 2019 they have the right to expect safe goods and services. The E-Commerce companies need to make sure that the goods they sell, must adhere to safety regulations and do not harm customers. Section 20 of the CPA gives the Central Consumer Protection Authority the power to order the cessation of unfair practices. In light of the urgent need to safeguard consumers India’s Ministry of Consumer Affairs, Food and Public Distribution unveiled the Consumer Protection (E-Commerce) Rules, 2020 while growing instances of online fraud, a lack of transparency, and unfair business practices in a quickly growing sector.
Regulatory Framework and Enforcement in India
Consumer Protection Act, 2019
Improved rights and protection for Indian consumers is the goal of the Consumer Protection Act, 2019 that supersedes the previous Consumer Protection Act, 1986. The new act emphasizes principles, efficient redress procedures, data and payment security, and transparency in information disclosure. It aims to provide the customers in E-Commerce with the same level of protection as in traditional commerce, advocating for clear and accurate information about products and services and fostering fair contracts. It incorporates these principles, enhancing protection in the evolving digital marketplace.
Consumer Protection (E-Commerce) Rules, 2020
The Ministry of Consumer Affairs introduced the Consumer Protection (E-Commerce) Rules, in 2020 to address issues related to E-Commerce and digitization. These rules apply to single-brand retail trading and they cover all goods and services including digital goods across a range of E-Commerce models including marketplace and inventory models. The regulation seeks to stop unfair business practices in online sales. They do not; however, apply to people engaging in personal activities that are not a regular part of their professional or business endeavors. Furthermore, International E-Commerce companies that provide goods and services to Indian consumers are covered by the extra-territorial extension of the E-Commerce Rules.[16]
Functions of CCPA
In the Consumer Protection Act, 2019 under Section 10(1), the Union Ministry of Consumer Affairs has announced the creation of the Central Consumer Protecting Authority (CCPA). Under its initiative, in response to complaints or at the request of the government, the CCPA will have the power to look into infringements of consumer rights and unfair business practices. The CCPA, which has its headquarters in Delhi and possibly regional offices, is a lean organization with a Chief Commissioner and two Commissioners (one for goods and one for services). A Director General will oversee the Investigation Wing and District Collectors will have the authority to look into complaints of the consumers as well.[17]
Challenges in Consumer Protection
Among the many difficulties faced by E-Commerce companies and customers are shopping cart abandonment and cyber security threats. Online fraud can result from hackers gaining access to sensitive personal data, such as bank account details, through insecure websites. Vendors suffer large losses when shoppers start a transaction but stop short of finishing it. This phenomenon is known as shopping cart abandonment. More difficulties arise with cross-border E-Commerce, which links buyers and sellers internationally. Dealing with Foreign brands and languages, not knowing if the product will be delivered as promised, unanticipated expenses like customs duties and shipping fees, adhering to local regulations, and being unclear about consumer protection, redress options, and the enforcement of legal remedies in the seller’s jurisdiction are a few of these. This creates problems with jurisdiction and makes cross-border enforcement inconsistent. The inability of consumers to understand their rights and the procedures for participating in E-Commerce transactions makes handling complaints difficult. Effective adherence to consumer protection laws necessitates educating consumers about their rights.
Case Studies
In the case of Avon Beej Company v. Anoop Singh[18], Anoop Singh, the complainant bought paddy seeds from the company after being assured of their superior quality. Singh’s crop yield was low even with the use of appropriate agricultural techniques; only 60% of the crop was successful, presumably because of subpar seed. Singh stated that there was a service shortfall, but the company pointed the finger at Singh’s poor seed management. However, according to a report from agricultural experts that the court reviewed, 31% of the seeds were “off-type” and not of the promised variety. This finding confirmed the seeds were not pure. The State Commission’s decision to find the seeds defective and rule in Singh’s favor was upheld by the court based on this spot inspection report. Therefore, the court did not interfere with the State Commission’s order, upholding Singh’s entitlement to compensation under the Consumer Protection Act, of 1986.
In the case of Horlicks Ltd. v Zydus Wellness Products Ltd[19], Zydus airing a TV ad criticizing Horlicks Ltd. products, the Delhi High Court relied on well-established guidelines from earlier rulings, including Pepsi Co. Inc. v. Hindustan Coca Cola Ltd., 2003[20]. The method, purpose, and plot of the commercial are important considerations in cases of disparagement in advertisements, as this precedent-setting case demonstrated. Using these criteria, the court concluded that Zydus’s advertisement might have misled customers because it lacked hard evidence of the product’s quality. The court noted that viewers’ perceptions are greatly influenced by electronic media and stressed the importance of shielding consumers and the complainant’s reputation from irreversible harm caused by deceptive advertising.
There are some effective consumer practices implemented by leading e-commerce companies. One recent example of this is the way that Amazon has simplified its product listings, offering numerous images, thorough descriptions, and user reviews to assist customers in making well-informed purchases. Additionally, they make sure customers are aware of the entire cost before completing their purchase by prominently displaying prices at the checkout stage, including any applicable taxes and shipping fees. Furthermore, Amazon’s return policy is simple to understand and provides hassle-free returns for qualified items within a given period, thereby boosting customer satisfaction and confidence.
SUGGESTIONS AND CONCLUSION
Many important elements need to be prioritized to increase consumer trust and guarantee fair trade practices in e-commerce. To ensure transparency, businesses must first provide accurate online descriptions and reviews of their products. International and regional collaboration is also necessary to handle violations of consumer protection laws that occur across borders and to oppose unfair business practices. To protect user’s financial information, secure payment options like digital wallets and credit/debit cards that use encryption techniques must be available. Creating customer service channels that are responsive is essential to promptly address questions and grievances as well as providing easy-to-use processes for refunds, returns, and dispute resolution. Regardless of the payment method chosen, guaranteeing safe product delivery and dependable after-sale services further improves the dependability and security of online transactions. Artificial Intelligence and Blockchain technology can help to strengthen e-commerce consumer protection mechanisms by improving security and transparency. AI-driven chatbots can provide individualized customer care, instantly resolving customer issues and raising satisfaction levels
When it comes to protecting the rights and interests of online shoppers, consumer protection laws are essential. Customers and businesses can trust each other because they guarantee accountability, justice, and transparency in transactions. Since E-Commerce is constantly changing, new issues must be addressed and consumer protection against fraud and exploitation must be provided by these laws.
Name: Vedvati Charudatt Sadawarte
College Name: Maharashtra National Law University, Nagpur
[1] Facebook Security Breach Exposes Accounts of 50 Million Users, The New York Times, https://www.nytimes.com/2018/09/28/technology/facebook-hack-data-breach.html(last visited on 10 June, 2024)
[2] Kristen Wegrzyn, L’Oreal Settles FTC Charges Alleging Deceptive Advertising, https://www.skininc.com/business/regulatory/news/21891234/loreal-settles-ftc-charges-alleging-deceptive-advertising (last visited on June 10, 2024)
[3] Consumer Protection Act, 2019, No. 35, Acts of Parliament, 2019 (India)
[4] Avon Beej Company v. Anoop Singh., (2020) SCC 212
[5] Horlicks Ltd. v. Zydus Wellness Products Ltd., (2020) SCC 873
[6] Consumer Protection Act, 1986, No. 68, Acts of Parliament, 1986 (India)
[7] Bharat Kumar, Evolution of Consumer Rights around the Globe and in India, https://www.legalserviceindia.com/legal/article-2065-evolution-of-consumer-laws-around-the-globe-and-in-india.html (last visited on June. 10, 2024).
[8] Legal Metrology Act, 2009, No.1, Acts of Parliament, 2009 (India)
[9] Daskha Jha, E-commerce and Consumer Protection: Critical Analysis of Legal Regulations, https://heinonline.org/HOL/LandingPage?handle=hein.journals/injlolw10&div=170&id=&page (last visited on June. 12, 2024).
[10] Information Technology Act, 2000, No.21, Acts of Parliament (India)
[11] E-Commerce Laws and Regulations in India, Burgeon Law, https://burgeon.co.in/blog/e-commerce-laws-and-regulations-in-india/ (last visited on June.11, 2024).
[12] Digital Personal Data Protection Act, 2023, No.22, Acts of Parliament, 2023 (India)
[13]How Will India’s DPDP Act Impact E-Commerce Businesses? Ardent, https://www.ardentprivacy.ai/blog/how-will-indias-dpdp-act-impact-e-commerce-businesses/ (last visited on June.11, 2024).
[14] Integrated Grievance Redressal Mechanism (INGRAM) https://consumerhelpline.gov.in/ (last visited on June. 10, 2024)
[15] What is INGRAM? https://consumerhelpline.gov.in/about-portal.php (last visited on June.10, 2024)
[16] Daksha Jha, E-commerce and Consumer Protection: Critical Analysis of Legal Regulations, https://heinonline.org/HOL/LandingPage?handle=hein.journals/injlolw10&div=170&id=&page (last visited on June. 12, 2024).
[17] Explained: Central Consumer Protection Authority (CCPA), https://www.civilsdaily.com/news/explained-central-consumer-protection-authority-ccpa/ (last visited on June. 12, 2024)
[18] Avon Beej Company v. Anoop Singh., (2020) SCC 212
[19] Horlicks Ltd. v. Zydus Wellness Products Ltd., (2020) SCC 873
[20] Pepsi Co. Inc. v. Hindustan Coca Cola Ltd., (2003) SCC 802