Online shopping is increasing significantly with consumers purchasing products and services via e-commerce websites.
In this article, you will discover everything you need to know about e-commerce including its inception, history, different types, consumer protection rules and the latest Covid-19 guidelines.
E-commerce is a business model which involves transactions taking place on the internet. Companies that sell their products or servies online are e-commerce stores or online businesses.
E-commerce was invented and pioneered in 1979 by Michael Aldrich. He connected his television to a computer using his telephone line. While it was unlike e-commerce as we know it today, his idea sparked the idea of shopping without visiting a physical store.
In 1994, Jeff Bezos founded Amazon as an online store selling over one million different books at launch. When PayPal was founded in December 1998, it simplified the shopping experience for customers as credit cards were easily accepted. With the addition of Shopify, WordPress, and similar platforms in the 2000’s, businesses could build their ecommerce stores with little to no development skills necessary. By 2008, online sales made up 3.4 percent of all sales which shows industry growth. In 2014, it was estimated that there was around 24 million online stores worldwide. Fast forward to 2020 and the knowledge gap is closing very quickly between beginners and more advanced e-commerce professionals, thanks to the ever increasing websites and online resources, available at the click of a button.
There are four widely known e-commerce models:
Shopping has long ago moved from malls to online shopping and many of us have either heard of, or used services of the following companies:
The majority of people prefer online shopping to procure products and services. However, many consumers are unable to get the right replacements for defective goods.
EU E-Commerce Rules
The EU has made it easier and safer for European consumers to shop online no matter where they are in the EU. To realise the full potential of eCommerce, the EU has worked on:
UK E-Commerce Rules
If you are running an e-commerce business in the UK, some of the most important laws and regulations you should be familiar with are the Electronic Commerce (EC Directive) Regulations 2002, the Consumer Protection (Distance Selling) Regulations 2000, the Data Protection Act 1998 (DPA), and the Privacy and Electronic Communications (EC Directive) Regulations (PECR).
India E-Commerce Rules
In India, the central government has created the Consumer Protection (E-Commerce) Rules, 2020 with the intent to make e-commerce companies and sellers more accountable and responsible to consumers.
The prime highlight of the rules is the mandatory display of “country of origin” on the products. This will serve two purposes that:
a) It makes manufacturers and sellers more accountable to consumers; and
b) It accords right protection to consumers.
All electronic retailers (registered in India or abroad) who are offering goods and services to consumers based in India will come under the ambit of rules. All such electronic retailers are to be bound by the rules in conduct of e-commerce business – Any margin of error by the electronic retailers in compliance with rules attracts penal action under the provisions of Consumer Protection Act, 2019.
The focal point of consumer protection rules is to provide adequate protection to consumers from the atrocities of e-commerce companies/manufacturers and to bring more clarity on responsibilities of e-commerce companies and sellers.
Enactment of laws without ambiguity will make it easy for law enforcement, simplify compliance part for the stakeholders and promote business interest of e-commerce companies/sellers along with preserving consumer rights.
The consumer protection rules are properly aligned to demarcate the variance amid the business models of e-tailing (inventory-based and online marketplace) to clearly reflect the direct responsibility of e-commerce companies based on their business model to customers.
Another noteworthy aspect is the designation of online businesses as “intermediaries”.
In the position of “intermediaries” these online businesses will be relieved of certain product liabilities. This prospect will channelize the liability associated with products directly to sellers.
Consumer protection rules have mandated that the responsibility of handling matters associated with defective/deficient goods/services will be on the shoulders of sellers.
It is the duty of sellers to rectify the defects in products/services or replace such defective products/services in case defects cannot be rectified.
It is mandatory for e-commerce businesses and sellers to develop a dedicated team of grievance officers to address the issues of consumers in a timely manner without lag in response and conflict resolution time.
Consumers are relieved of worries about the liability aspect of defective products as the sellers will bear the liability for defects in products.
Display of reasonable details of seller along with place of origin on products will make it convenient for consumers to make proper due diligence about the seller prior to making a decision to purchase or not to purchase the products.
E-commerce businesses will not be under pressure anymore to take corrective action for defects in products – Further, E-commerce businesses are at liberty to cut their association with sellers who have provided defective products to consumers.
E-commerce players have to display an array of information in relation to products/services for sale to facilitate the consumers to make an informed decision. Such information may include:
a) Total price of goods and services offered;
b) 'Expiry date' of goods;
c) Break-up of other charges;
d) The 'country of origin' of goods and services;
e) Mode of payment;
f) Delivery and shipment;
g) Grievance redressal mechanism; and
h) Return, refund, exchange, warranty and guarantee related to products.
The COVID-19 crisis is likely to have long-lasting effects on e-commerce. There has been a shift in demand from brick-and-mortar retail to e-commerce The COVID-19 crisis has increased the share of e-commerce in total retail.
It is the duty of the seller to provide all requisite information related to products/services to e-commerce companies to display on their websites for consumer benefit. All inventory e-commerce entities are prohibited from posting a review under the disguise of consumer about quality of product with any false or misleading information. Promotional acts of e-commerce businesses should be in synch with the actual attributes of products/services. E-commerce businesses are strictly mandated not to snub to take goods (sold or agreed to sold) from consumers by showing any unreasonable causes.
Industry players are of opinion that it is advisable to extend the application of rules from the current date to some future date as the majority of companies are in process of reviving their businesses from economic wrath created by the covid-19 crisis.
Another concern highlighted by experts is that engagement of grievance officer could be an economic burden/obligation on small business players as these players could be forced to allocate separate funds for maintaining grievance officers.
It is reiterated by the government officials from consumer department that these rules are carefully crafted and finalized after consultations with all concerned stakeholders without leaving any latitude for any conflict of interest with the overall e-commerce policy.
The rules are rightly aligned without any chaos and will strike right balance amid consumers, e-commerce business and sellers as position of each party is clearly distinguished under these rules.
The new covid-19 consumer protection rules will make e-commerce sellers more accountable and responsible to consumers. This will prevent e-commerce companies from indulging in any deceptive practices to fool consumers about the quality and functionality of products. In addition, this will also ensure that the concerns of consumers are resolved in a time bound manner by sellers and e-commerce companies; and preserve the economic interest of consumers.
Bhumesh is the Managing Partner of Corp Comm Legal, an Indian law firm. He is ranked among the Top 100 Indian corporate lawyers. He is advising domestic and foreign companies on M&A, joint ventures, corporate - commercial issues. Besides, he has written a book on Drafting of Commercial Agreements, has a couple of books in pipeline and trains students and professionals on Drafting Skills and corporate laws. He writes regularly on legal, business & other issues and is a guest faculty lecturer with educational institutes. Bhumesh holds a Bachelor of Laws (LLB) from the University of Delhi and a further qualification in International Law and Legal Studies from College of Law, York.