Navigating Legal Frontiers: E-commerce Challenges and Regulations in India

Author: Shruti Mittal [3rd year LL.B  Faculty of Law, University of Delhi]

Introduction
E-commerce has been revolutionizing the way business is done in India since almost a decade
now. The Indian E-commerce market has been evaluated to grow to $200 billion by 2026, by
51 per cent annually, the highest in the world. Most of the growth for the industry has been
due to the penetration of internet and smartphone in the remotest of areas. Interestingly, these
e-commerce platforms have not only managed to garner the attention of the urban populace,
but of those living in the semi-urban and rural areas of India.
But with the growing popularity of e-commerce platforms, challenges in the form of
counterfeiting which affects both brand owners and consumers have come to the forefront, and
therefore, these platforms are repeatedly put under the scanner for their role in the menace
created by fake products sold on their platforms.

Electronic Commerce
E - commerce refers to the buying and selling of goods and services through online platforms
rather than traditional brick-and-mortar businesses, malls, or kirana stores. Online platforms
are used in e-commerce to sell things where the items are displayed and made available for
purchase. A customer who wants to purchase the item enters the website (online platform)
and browses through the various available options, the consumer then identifies the product
he wishes to purchase, places an order, and upon delivery of the product, makes the payment.

Information Technology Act and Liability of Intermediaries
Certain provisions of the Information Technology Act 2000 provide a safe harbor to E-
commerce platforms. According to Section 2(1)(w) of the IT Act, an intermediary is any
person who receives, stores, transfers, or provides any service with respect to a specific
electronic record on behalf of another person. This definition includes telecom service
providers, network service providers, Internet service providers, webhosting service
providers, search engines, online payment sites, online auction sites, and online
marketplaces. According to Section 79, IT Act, an intermediary cannot be held liable for any
third party information, data, or communication link made available or hosted if (a) its
function is limited to providing access to a communication system over which information can

be made accessible by third parties is transmitted or temporarily stored; or (b) the
intermediary does not— (i) commence the transmission, (ii) choose the receiver of the
transmission, and (iii) choose or modify the transmitted information; (c) the intermediary
observes due diligence while discharging its duties under this Act and also observes such
other guidelines as the Central Government may prescribe in this behalf.
In addition, the Act states that the provisions above, which grant a safe harbour, will not
apply if - (a) the intermediary conspired, abetted, or assisted, whether by threats, promises, or
other means in commission of the unlawful act; (b) on obtaining actual knowledge, or on
being notified by the appropriate agency or the Government that any information, data, or
communication link residing in or attached to a computer resource, managed by the
intermediary, is being used to commit the unlawful act, the intermediary fails to swiftly
remove or disable access to such material on that resource without vitiating the evidence in
any manner.

Judicial Scrutiny of Section 79 of the IT Act
The courts scrutinized the said provision to determine the responsibility of intermediaries in IP
matters in Myspace Inc. v. Super Cassettes Industries Ltd 1 , the High Court of Delhi noted that
Section 79 granted a measured benefit to the intermediaries, liability can be imposed on the
intermediary if they had actual knowledge of the infringement and not just general
knowledge.
In Christian Louboutin SAS v. Nakul Bajaj & Ors 2 ,the Delhi High court observed that e-
commerce platforms which actively conspire, abet or aide, or induce commission of unlawful
acts on their website cannot go scot free. The protection given to intermediaries is not
absolute and if they are involved in the process of initiating the transmission, selecting the
receiver or modifying the information contained in the transmission, then they may lose any
exemption given under the above provision.

1. 1 My Space Inc. vs Super Cassettes Industries Ltd. on 23 December, 2016
1. 2 Christian Louboutin Sas vs Nakul Bajaj & Ors on 2 November, 2018
1. 3 Amway India Enterprises Pvt. Ltd. vs 1Mg Technologies Pvt. Ltd. & Anr. on 8 July, 2019

Recently, in Amway India Enterprises Pvt. Ltd. v. 1Mg Technologies Pvt. Ltd. & Anr 3 , a dispute
between Direct Selling Entities (Plaintiffs) and e-commerce websites (Defendants) came up,
wherein a Single Judge of the Delhi High Court ruled in plaintiffs’ favor, and restrained the
defendants from displaying, advertising, selling, and facilitating repackaging of the plaintiffs’
products, except of those sellers who provide written consent of the plaintiffs for listing their
products. During an appeal by Amazon, Snapdeal and Cloudtail (Appellants) against the
aforesaid interim injunctions, the Delhi High Court noted that the appellants must show
compliance with Section 79(2) of the IT Act and show that they do not - initiate the
transmission, select the receiver of the transmission and do not modify any information
contained in the transmission since they provide services in addition to access. The appellants
also contended that the customers initiate the transmission and they neither select the receiver,
nor modify any information. The court also held that Section 79 of the IT Act ensures that no
liability is imposed on the e- commerce websites for non- compliance and/or violation of law
by a third party, i.e. the seller. The court disagreeing with the Single Judge’s view held that
these websites shall meet the due diligence requirement, failing which the benefit of safe
harbor provision will not be available to them, and observed that there is a prima facie merit in
the appellants’ contention that as online marketplaces they provide value-added services; not
diluting the safe harbor granted. The jurisprudence revolving around intermediary’s liability
is constantly evolving in India and finality on the same is awaited.

Consumer Protection (E-Commerce) Rules, 2020
The measures under this policy applies to - (i) all goods and services bought or sold over digital
or electronic network including digital products, (ii) all models of e-commerce, including
marketplace and inventory models of e- commerce, (iii) all e-commerce retails, including
multi-channel single brand retailers and single brand retailers in single or multiple formats, and
(iv) all forms of unfair trade practices across all models of e-commerce.
The measures enumerated under this policy among others, are –
(i) mandatory providing of seller details,
(ii) publicly available undertaking by the seller to e-commerce platform regarding
authenticity of the product,

(iii) option of registration for trademark owner with the e-commerce platform to get a
notification by the platform in case a trade-marked product is uploaded for sale,
(iv) if the trademark owner desires, the e-commerce platform shall not list any trade-marked
good without prior approval,
(v) appointment of a grievance officer exclusively to deal with the complaint of the
consumers,
(vi) financial disincentives for seller if found to be selling counterfeit products,
(vii) Information relating to return, refund, exchange, warranty and guarantee, delivery and
shipment, modes of payment, and grievance redressal mechanism,
(viii) Information on available payment methods, security of those methods, any fees or
charges payable by users, procedure to cancel regular payments, charge-back options and
contact information of the relevant payment service provider.

Conclusion
E-commerce rules aim to bring in transparency in provision of information and disclosure by
the e-commerce platforms to the consumers. A careful scrutiny of the rules makes it amply
clear that the Government has sought to cover every aspect of e-commerce entity. The Rules
seek to put check on the practice of preferential treatment accorded to some sellers. These rules
provide space and equitable treatment for individual and small sellers on such platforms and
also rule out possibility of unfair trade practices by large sellers. Overall, with surge in e-
commerce activity especially today, the Rules are a step to provide consumer’s a redressal
mechanism for their grievances against e-commerce platforms and prescribe best practices to
be followed by e-commerce platforms for benefit of consumers.