E- Commerce Website and Their Liabilities in India

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 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 harbour 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, web hosting service providers, search engines, online payment sites, online auction sites, and online marketplaces.

According to Section 79 of, 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 on 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 the 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 the 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.

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’ favour, and restrained the defendants from displaying, advertising, selling, and facilitating repackaging of the plaintiffs’ products, except 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 should meet the due diligence requirement, failing which the benefit of safe harbour 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 harbour 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 apply to –

• (i) all goods and services bought or sold over the 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 –

• mandatory providing of seller details,
• publicly available undertaking by the seller to e-commerce platform regarding authenticity of the product,

• 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,
• if the trademark owner desires, the e-commerce platform shall not list any trade-marked good without prior approval,
• appointment of a grievance officer exclusively to deal with the complaint of the consumers,
• financial disincentives for sellers if found to be selling counterfeit products,
• Information relating to return, refund, exchange, warranty and guarantee, delivery and shipment, modes of payment, and grievance redressal mechanism,
• Information on available payment methods, security of those methods, any fees or charges payable by users, the procedure to cancel regular payments, charge-back options and contact information of the relevant payment service provider.

Conclusion

E-commerce rules aim to bring transparency in providing 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 the e-commerce entity.

The Rules seek to put a 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 the possibility of unfair trade practices by large sellers.

Overall, with the surge in e-commerce activity especially today, the Rules are a step to provide consumers with 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.

Footnotes

1.My Space Inc. vs Super Cassettes Industries Ltd. on 23 December, 2016

2.Christian Louboutin Sas vs Nakul Bajaj & Ors on 2 November, 2018

3.Amway India Enterprises Pvt. Ltd. vs 1Mg Technologies Pvt. Ltd. & Anr. on 8 July, 2019

By: Shruti Mittal, Law Center II, Faculty of Law, University of Delhi