New Consumer Protection Policy: Changes in E-commerce business in India

The E-commerce industry in India has seen massive growth and potential in the past one decade.


The E-commerce industry in India has seen massive growth and potential in the past one decade. Moreover, the manner of conducting business has been transformed by this new model. The E-commerce industry in India is set to further grow to an estimated US$ 200 billion by 2026 from US$ 38.5 billion in 2017, which is a huge jump in terms of industry growth. And most of this growth has been encouraged by the boom in the internet and smartphone industry. The current digital transformation in India and all over the world, has increased the structure and need for E-commerce platforms immensely.

The increase in the growth of the smartphone industry along with the boom of the 4G network and the increased consumer wealth in the nation has only propelled a massive growth within the E-commerce market. The India E-commerce industry is set to grow to at least US$ 200 billion by the year 2026 from US$ 38.5 billion in 2017, which in itself is a huge accomplishment for the Indian economy.

Government initiatives
The Government of India has been actively establishing several platforms for the growth of the E-commerce industry. Several initiatives such as Digital India, Make in India, Start-up India, Skill India and Innovation Fund has been set up to bring forth the much expected boom within this industry. A few of the main initiatives undertaken by the Government for such promotion of the E-commerce industry is as follows:
  • The Government e-Marketplace (GeM) signed a Memorandum of Understanding (MoU) with the Union Bank of India for the promotion of a cashless, paperless and transparent payment system to propell an array of services in October 2019.
  • Further, the Government of India released the Draft National e-Commerce Policy in February of 2019 to encourage FDI in the marketplace model of E-commerce in India.
  • Moreover, for increasing the participation of foreign players within the E-commerce industry, the Indian Government increased the limit for FDI in the E-commerce marketplace model up to 100 per cent.
  • Further in August 2018, the Indian Government announced that it had been working over the second draft of the E-commerce policy, which incorporated more inputs from several other stakeholders within the industry.
  • The India Government allocated Rs 8,000 crore (US$ 1.24 billion) in the Union Budget of 2018-19, to the BharatNet Project for further provision of broadband services to 150,000-gram panchayats in the country.
  • Moreover, heavy investment made by the Government in establishing the fiber network for 5G will help boost E-commerce in India by a large margin.
The new Consumer Protection (E-Commerce) Rules, 2020

The government has, as on 24th of July, 2020 notified certain new rules for all e-commerce companies which include certain aspects like the display of the name of the “country of origin” for the requisite product and several other changes. Furthermore, the government has stipulated clearly that any non-compliance with these new rules shall immediately attract penal action as well. These new rules are called “The Consumer Protection (E-Commerce) Rules, 2020”. They shall be made applicable on every electronic retailer who is registered in India or abroad but is supplying goods to the Indian market. Further, any violation of the new rules shall attract penal action under the Consumer Protection Act, 2019.

Features of the New Rules

The new rules have defined certain new regulations which need to be complied with by all e-retailers. These have been summarised below:
  • According to the new rules, the e-commerce industry sellers will have to display the total price of the goods and services offered for sale along with the break-up of other charges.
  • The sellers are also required to mention the “expiry date” of all such goods offered for sale and the “country of origin” of these goods and services which is necessary for ensuring that the consumer is given adequate protection and is able to make a proper decision before purchasing such products.
  • The rules state that all such E-commerce sellers must display information with regards to the details of any return, refund, exchange, warranty as well as the guarantee, delivery and the shipment along with any other such information which could be important for the end users to make an informed decision regarding the goods.
  • All E-commerce sellers who offer goods and services through such a marketplace must necessarily all the above mentioned details over the e-commerce website and platform to make sure that they comply with all the rules for the protection for the consumers.
  • All such e-commerce entities are not permitted to impose any "cancellation charges" in case of any cancelled orders by any consumer after the confirmation of the order unless the same sellers are ready to pay a similar charge in case of any cancellation of orders from their side as well.
  • No e-commerce seller is permitted to "manipulate the price" of any of the goods and services offered over their platforms in order to to gain any unreasonable profit which could result in the discrimination of consumers of the same class or make any arbitrary classification of consumers which violates their rights under the Act in any manner.
  • All e-commerce entities are required to provide information on all the available payment methods, the security of the same payment methods, any fees or charges payable by the users along with the contact information, amongst other details of the relevant payment service provider as well.
  • All e-commerce entities are now required to effectively display to its users every important detail about the seller which includes the name of their business and whether they registered or not for the safety of the consumers. Furthermore, they are also required to display the sellers' geographic address, customer care number along with any rating or other aggregated feedback about such sellers according to the new rules.
  • The e commerce industry sellers are also required to provide a ticket number for every complaint lodged, through which the consumer is able to track the status of the complaint as well.
  • The new rules do not permit any inventory e-commerce entity to "falsely represent itself as a consumer and post reviews about goods and services or misrepresent the quality or the features of any goods and services" whatsoever.
  • All inventory e-commerce entities also must ensure that the advertisements used for the marketing of goods and services are consistent with the actual characteristics, access and usage conditions of such goods or services in every manner possible.
  • The rules mention that no inventory e-commerce entity is permitted to refuse to take back any goods or withdraw or discontinue services purchased or agreed to be purchased, amongst others, subject to various conditions, as mentioned clearly.
  • It has been notified under the New Consumer Policy, 2020 that these rules have been finalised after undertaking several informed inputs from the Department for Promotion of Industry and Internal Trade, to ensure that they do not contravene any e-commerce policy in any manner.

The E-commerce industry in India has had a direct impact over all micro, small & medium enterprises (MSME) in India as they provide a means for the financing, technology and training for the same which results in a favourable cascading effect over every other industry too. The Indian E-commerce industry has only witnessed an upward growth trajectory which is expected to surpass the US in order to become the second largest E-commerce market in the world by the 2034. This has been made possible due to the constant endeavours to improve the functioning of this industry and make sure that consumer remain protected at all costs. The technology enabled innovations like digital payments, hyper-local logistics, analytics driven customer engagement and digital advertisements are also set to result in a further boom within this industry. Furthermore, such growth in the E-commerce sector will also boost employment, increase revenues from exports, increase tax collection by ex-chequers and provide better products and services to customers in the long-term as well. The sudden increase in the use of smartphones in the country is further expected to rise by 84 per cent to reach 859 million by 2022.

This only means that the E-retail market is set to continue growing strong in the years to come and thereby establish India as the foremost E-commerce market in the world.

Contact Us