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Changes in the rules for e-commerce companies

Published: 28th Jun, 2021

The government has proposed changes to the e-commerce rules under the Consumer Protection Act, 2019 to make the operation framework more stringent.


The government has proposed changes to the e-commerce rules under the Consumer Protection Act, 2019 to make the operation framework more stringent.


Key changes proposed in the e-commerce rules

  • The rules are issued by the Ministry of Consumer Affairs.
  • These rules are proposed to change the Consumer Protection (e-commerce) Rules 2020.

e-commerce entity

  • An e-commerce entity is a company incorporated under the Companies Act, 1956 or the Companies Act, 2013.
  • A foreign company covered under clause (42) of section 2 of the Companies Act, 2013  or an office, branch or agency outside India owned or controlled by a person resident in India under the Foreign Exchange Management Act, 1999.
  • Consumer Protection (e-commerce) Rules 2020
  • No e-commerce entity shall adopt any unfair trade practice, whether in the course of business on its platform or otherwise.
  • Every e-commerce entity shall establish an adequate grievance redressal mechanism. It shall appoint a grievance officer for consumer grievance redressal.
  • Every e-commerce entity shall ensure that the grievance officer acknowledges the receipt of any consumer complaint within forty-eight hours and redresses the complaint within one month from the date of receipt of the complaint.
  • No e-commerce entity shall impose cancellation charges on consumers cancelling after confirming purchase unless similar charges are also borne by the e- commerce entity, if they cancel the purchase order unilaterally for any reason.
  • No e-commerce entity shallmanipulate the price of the goods or services offered on its platform in such a manner as to gain unreasonable profit.
  • The rules seek to ban “specific flash sales” by e-commerce entities.
  • The specific flash sales limit the consumer choice.
    • It prevents a level playing field.
    • It does not ban conventional e-commerce flash sales.
  • It also introduced the concept of “fall-back liability”.
    • According to this, e-commerce firms will be held liable in case of loss to the customer.
  • It also restricts e-commerce companies from “manipulating search results or search indexes”.
  • It also protects the personal information of the consumer.
  • Any online retailer will first have to register itself with the Department of Promotion for Industry and Internal Trade (DPIIT).
  • Any entity having 10 percent or more common ultimate beneficial ownership will be considered an “associated enterprise” of an e-commerce platform.
  • It also mandates e-commerce companies to appoint a grievance officer, a chief compliance officer, and a nodal contact person “for 24×7 coordination with law enforcement agencies”.
  • To share information with a “government agency which is lawfully authorized for investigative or protective or cybersecurity activities.

India’s e-commerce Industry

  • India e-commerce will reach US$ 99 billion by 2024.
  • It is growing at a 27% CAGR over 2019-24.
  • Since 2014, the Government of India has announced various initiatives, namely
    • Government eMarketplace (GeM)
    • Open Network for Digital Commerce (ONDC)
    • The Consumer Protection (e-commerce) Rules 2020
    • National Retail Policy
    • Under the Digital India movement, the Government launched various initiatives like Umang, Start-up India Portal, Bharat Interface for Money (BHIM),etc
    • FDI in E-commerce marketplace model to up to 100% (in B2B models)

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