Introduction
The increased demand for e-commerce platforms is driven by factors such as convenience, variety, and ease of use for consumers. During and after COVID-19, the e-commerce sector experienced rapid growth as people with internet access recognized the benefits for both buyers and sellers.
The expansion of online markets and e-commerce activities has made it easier for small businesses to reach their target markets and for consumers to make purchases more easily and broadly. In response to the growing need and expansion of e-commerce, the Indian government has adapted and evolved its legal framework to regulate the sector.
Regulations governing E-commerce
- Information Technology Act, 2000 (“IT Act”)
Various provisions under the IT Act govern the functioning of e-commerce. Section 84A of the IT Act imposes a duty on the Central Government to promote e-governance and e-commerce, ensuring the secure use of electronic means.
The Code outlines mandatory guidelines for e-commerce websites, requiring them to post privacy policies, user agreements, returns and refund policies, along with other supporting policies on their sites. Additionally, these entities must display their registered name and address prominently on their websites to ensure consumers are aware of their rights and can seek grievance redressal or recourse in case of disputes. This Code formalizes and standardizes practices for e-commerce entities, facilitating ease of business within the industry.
- Consumer Protection Act, 2019 and Consumer Protection (E-Commerce) Rules, 2020
The Ministry of Consumer Affairs, Food and Public Distribution has recently issued the Consumer Protection Act, 2019 (CPA 2019), and the Consumer Protection (E-Commerce) Rules, 2020 (E-Commerce Rules). The CPA 2019 brings significant updates to the 1986 consumer protection law to tackle issues unique to the digital and e-commerce era. The E-Commerce Rules establish a framework for regulating the online marketing, sale, and purchase of goods and services.
The E-Commerce Rules do not apply to individuals engaging in transactions in a personal capacity, not on a regular or systematic basis for professional or commercial activities. Consequently, natural persons involved in occasional consumer-to-consumer or business-to-consumer transactions may be excluded.
Additionally, the E-Commerce Rules have extra-territorial applicability, covering e-commerce entities not established in India but systematically offering goods and services to Indian consumers.
- Foreign Direct Investment (FDI) Policies
India’s FDI policy regulates foreign entities aiming to enter and operate in the e-commerce sector to protect Indian manufacturers, sellers, and e-commerce companies. According to the latest FDI policy of 2020, foreign entities can enter the Indian market with certain restrictions and operational guidelines. They can do so through automatic routes but are limited to the business-to-business (B2B) e-commerce model, meaning they can only make online purchases from and sales to Indian sellers, not directly to customers. Thus, foreign entities can only operate as marketplace e-commerce in India.
These guidelines are designed to benefit the Indian e-commerce sector and protect domestic markets from being dominated by foreign companies, ensuring organic growth for emerging Indian sellers and e-sellers.
- Legal Metrology Act, 2009
The Legal Metrology Act provides guidelines for measuring and packaging products in India and specifies labeling requirements. It applies to products sold both in physical stores and online. Additionally, the Legal Metrology (Packed Commodities) Rules, 2011, mandate that e-commerce entities disclose specific information about products displayed online, including the name of the manufacturer, importer, packer, dimensions, constituents, place of origin, and more. These disclosures are required to help consumers make informed purchasing decisions online.
- Drugs and Cosmetics Act, of 1940
It regulates the manufacture, sale, and distribution of drugs and cosmetics in India, and also specifies labeling requirements for these products. These provisions directly affect the sale of products both in physical stores and on online platforms.
- Competition Act, 2002
The Competition Act, 2002 identifies specific aspects of the e-commerce ecosystem that may raise competition concerns. These include exclusive agreements between online retailers (e-tailers) and sellers, predatory pricing through deep discounts on online platforms, and clauses related to platform neutrality and parity. Sections 3 and 4 of the Act, which address anti-competitive agreements and abuse of dominant position, respectively, are applicable to e-commerce platforms as well.
- Indian Contract Act, 1872
The Contract Act governs the validity conditions of contracts formed through electronic means, including communication and acceptance of proposals, revocation, and contract formation among consumers, sellers, and intermediaries. Additionally, the terms of service, privacy policies, and return policies of any online platform must constitute legally binding agreements.
Electronic contract formations are addressed under the Information Technology Act, 2008, with Section 10A of the Information Technology Act, 2000 specifying the validity of contracts entered through electronic modes. It ensures that contracts formed via electronic communication, acceptance, revocation, or acceptance are not deemed invalid solely due to the use of electronic means. For further details on the enforceability of electronic contracts, please refer to our previous discussion on this topic.
Conclusion
The rapid growth of the e-commerce industry reflects increasing public acceptance, but it has also highlighted legal concerns that the country’s legal system has been addressing. Currently, there is no specific codified law comprehensively governing e-commerce, resulting in a fragmented legal landscape. Companies operating in this sector must carefully consider the specific circumstances under which laws apply.
To succeed in e-commerce, enterprises need a deep understanding of the legal framework and potential challenges they may face, along with effective risk management strategies. Moreover, regulation of the e-commerce sector is highly dynamic and consists of scattered statutory provisions.
FAQs
What is the current status of e-commerce in India?
E-commerce in India is experiencing rapid growth and transformation. The sector has seen a significant boost due to increased internet penetration, smartphone adoption, and digital payment solutions. Major players like Amazon, Flipkart, and Reliance’s JioMart dominate the market, while niche and local platforms are also gaining traction. The COVID-19 pandemic accelerated e-commerce adoption across various demographics. The government’s Digital India initiative and improvements in logistics infrastructure have further supported this growth. However, challenges remain, including competition with traditional retail, regulatory hurdles, and concerns over data privacy and security. The sector continues to evolve with innovations in social commerce and quick commerce.
When did e-commerce start in India?
E-commerce in India began in the late 1990s. The first significant milestone was the launch of B2B portal IndiaMART in 1996. In 1999, K. Vaitheeswaran founded India’s first e-commerce website, Fabmart.com (later rebranded as Indiaplaza). The 2000s saw the emergence of major players like Flipkart (2007) and Snapdeal (2010), marking the industry’s rapid growth phase.
Which is the largest e-commerce company in India?
Currently, Flipkart is considered the largest e-commerce company in India. Founded in 2007, it was acquired by Walmart in 2018 for $16 billion. Flipkart leads in market share, followed closely by Amazon India. However, the landscape is competitive and dynamic, with other significant players like Reliance’s JioMart, Tata’s BigBasket, and Meesho rapidly expanding their presence.
What is the rank of India in e-commerce?
As of 2024, India ranks among the world’s fastest-growing e-commerce markets. It’s typically placed in the top 10 globally, often around 8th or 9th position. The exact rank can fluctuate based on different metrics and studies. India’s e-commerce sector is projected to continue its rapid growth, potentially moving up in global rankings in coming years.
Add a Comment