THE EVOLUTION OF E- COMMERCE REGULATIONS IN INDIA: A LEGAL PERSPECTIVE

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This article has been written by Khushi Mishra, a 3rd year law student from Deen Dayal Upadhyay Gorakhpur University.

Table of Contents

ABSTRACT

India’s e-commerce sector has expanded rapidly, evolving in response to technological advancements, market demands, and social changes. After COVID-19 it is increasing rapidly. E-Commerce refers to a digital marketplace where enterprises engage in the buying and selling of goods and services over the internet. One such habit is online shopping. In contrast to other sectors, the e-commerce industry has experienced significant profit and growth as a direct result of the pandemic. Websites like amazon, etc are developing and achieving high level of success. Customers can now bypass traditional queues to transfer money, the way of online transaction has emerged. Generative and predictive AI represent cutting-edge technologies that are fundamentally transforming the e-commerce landscape. Anyone can participate in ecommerce anywhere they can establish a network connection, However, as people says ‘Too much of anything is harmful’. The rising investment of consumers in the e-commerce sector has led to a surge in cybercrime, thereby exposing significant vulnerabilities within Indian cybercrime legislation.

The legal framework governing e-commerce encompasses the Information Technology Act, Copyright Act, Consumer Protection Act, Tort, Intellectual Property Rights, and laws pertaining to dispute resolution.

THE PROCESS OF E-COMMERCE

A shopper opens their web browser to visit the homepage of a store’s website online.
The shopper looks through the product catalogue on the website and picks out items they want to buy.
After the selection of product, it goes in the cart and the site provides bill after filling the ship address for purchase and delivery.
Then the shopper enters their phone number and transaction id or credit card number the order is completed at the customer server site, and hence a digital receipt provided to the customer.

ADVANTAGES OF E-COMMERCE

Buying or selling procedure is faster.
Online sites are open 24/7.
Interactions are very easy.
Easy to start and setups.
Its easy for the customers to select their favourite product while staying anywhere in their comfort place.

DISADVANTAGES OF E-COMMERCE

We can’t touch the product personally.
Many people don’t have internet connection.
There is a possibility of cybercrime.
Delivery of wrong or defected products.

TYPES OF E-COMMERCE BUSINESS

B2B (BUSINESS TO BUSINESS):

An enterprise that engages in the sale of goods or services to another business entity. The part of the internet that helps businesses work with their partners in areas like marketing, sales, production and support. It revolves around the transactions and interactions between an organization and its various partners.

B2C (BUSINESS TO CONSUMER)

An enterprise that provides goods and services directly to individual consumer. It pertains to any enterprise that markets its products or services to customers through online channels. These websites present product information in an online catalogue and maintain that data within a structured database. In additions with online banking, travel, services and health information.

C2C (CONSUMER TO CONSUMER)

A person who enterprises goods or services to another person. This kind of e- commerce involves online marketplaces and auctions, especially in specific businesses can bid for what they need from different suppliers.

C2B (CONSUMER TO BUSINESS)

A person who markets their own products or services to a business or organization.

E-CONTRACT

An e-contract is a legally binding agreement established between online between two or more parties through electronic mode, such as email or software that perform tasks or processes without direct human intervention, it involves a minimum of two electronic agents capable of recognizing the terms of the contract. The fundamental principles of traditional contracting, along with their associated remedies, are equally applicable to all forms of contracts. It facilitates the creation and negotiation of transparent contracts for online transactions and services, benefiting both consumers and businesses. These are valid and can be enforced if they meet certain legal requirements, they are just as binding as regular paper contracts.

TYPES OF ONLINE CONTRACTS

There are four types of e-contracts:

Shrink-wrap contracts- A shrink- wrap contract is a standardized agreement that accompanies a product, typically enclosed within its packaging. By utilizing the product, the consumer consent to the terms provided within the accompanying documentation.
Click-wrap contracts- In click-wrap contracts, a person shows they agree by checking an ‘I agree’ box. There’s usually a scroll box where they can read the terms and conditions before agreeing.
Browser wrap contract- In browse-wrap contracts, a person agrees to the terms just by using the website, even if they don’t explicitly check a box or click anything to show their agreement.

ESSENTIALS OF A VALID CONTRACT

OFFER: An offer must be presented for each e-contract to establish the basis of agreement.
ACCEPTANCE: Acceptance of the proposal is needed. Before it’s approved, the proposal cannot be changed or taken back.
LAWFUL CONSIDERATION: A lawful consideration is must.
COMPETENCY OF THE PARTIES: The parties must possess the legal capacity to engage in a contract.
FREE CONSENT: The consent must be clear and open agreement from everyone involved. In online contracts, especially when the people aren’t communicating directly, the click through process ensures that everyone agrees willingly and fairly.
LAWFUL OBJECT: The contract must contain a lawful purpose.
POSSIBILITY OF PERFORMANCE: A contract must be clear and straightforward, with no confusing parts, and it should be something that can actually be carried out.

LAWS RELATING TO E-COMMERCE

INTELLECTUAL PROPERTY RIGHTS (IPR)

A significant legal challenge in India’s burgeoning e-commerce sector is safeguarding intellectual property rights. Online businesses in India need to make sure their products and commerce business can be held responsible for selling products that violate someone else’s rights.

To mitigate issues related to intellectual property rights, e-commerce businesses can implement several straightforward measures. They should check their suppliers any products carefully, keep an eye out for any products that might break these rights, and set up a strong system to handle any IPR violations. To minimize the risk of intellectual property disputes, e-commerce businesses should ensure they obtain the necessary permission for utilizing ideas and inventions, while adhering to all applicable laws and regulations.

Two prominent concerns in this arena are proliferation of counterfeit goods and patent disputes.

COUNTERFIET GOODS

The rise of e-commerce has facilitated the distribution of counterfeit products, often at a scale that tradition retail could not support. These are fake products. Platform such as Amazon, Flipkart and various online marketplaces provide a low barrier to entry for sellers, which enables widespread sale of counterfeit goods.

Easy Access for Sellers: Online e- commerce platform allow many sellers to set up shops quickly, which can lead to increase in counterfeit goods.
Identifying Infringers: identifying who is selling counterfeit goods can be difficult because sellers often hide their identities, which makes it tough for brands to take action.
Platform Liability: Different laws apply to online platforms regarding their responsibility for counterfeit goods. At some places, these platforms may not be held accountable for what seller posts, making it hard for brands to fight back.

PATENT DISPUTES

Patent disputes occur when one company claims another has used its patented technology without permission. It involves:

Technology Innovations: Many online businesses rely on new technologies like payment systems or website features.
Licensing Conflicts: Some businesses think they are allowed to use certain technologies but end up infringing on patents. Misunderstandings about licenses can lead to costly lawsuits.
Protective Measures: To avoid disputes, companies often file patents for their innovations. This helps them protect their ideas but can also create a crowded patent landscape where many claims overlap.

CONSUMER PROTECTION

This law gives consumers the right to get goods and services that are of good quality and to be treated fairly and honestly by businesses. The law also allows consumers to complain about problems and get compensation for any losses they may have suffered. If there is a dispute, consumers can take legal action against e-commerce businesses if they believe their rights have been violated, which can lead to expensive legal fees and potential losses for the business, along with harm to their reputation.

Consumer Rights

The legislation emphasizes the right to information, the right to choose, and the right to seek redressal. Online platforms must provide clear information about products, return policies, and data protection.

Central Consumer Protection Authority

It was established under the Consumer Protection Act,2019, to strengthen consumer rights and promote fair trade practices in India. It oversees and enforces compliance with consumer protection laws, allowing consumers to file complaints against e-commerce entities for violations.

DATA PRIVACY AND SECURITY

The growth of e-commerce in India has led to worries about data privacy and security. Businesses must take steps to protect their customers personal and financial information, like using encryption technology and secure servers. The Indian government has created several laws to help protect people’s data privacy and security. E-commerce businesses in India need to follow certain rules and take steps to keep their customer’s personal information safe. Consumers may pursue legal action against the business if they believe their data has been improperly utilized. To reduce the risk of IPR disputes, e-commerce businesses must secure proper IPR clearance.

ISSUES ASSOCIATED WITH E- CONTRACTS

Security of systems- The security of system is mandatory because the information like passwords, personal information which are stored on the servers of the firms, are very crucial to protect. The hackers, malware, and Trojan horses or the people present inside the organisation can misuse the software of the company.
Privacy- The privacy may result in two main privacy concerns which is data abuse and unauthorised access to sensitive data.
Online Identity-Internet transactions frequently transpire between unfamiliar parties, raising concerns regarding the individual’s identity. As well as their capacity, authority and competence to enter into the contract.

TORT LAW ANALYSING E-COMMERCE

E-commerce can be examined through the lens of tort law, which shows issues such as negligence, product liability, and misrepresentation. Legally articulated, it constitutes a breach of duty independent of the contract, thereby creating a civil cause of action for which compensation may be sought. It is used by maximum every person during COVID 19 which creates many complications for the civil causes.

TORT OFFENCES AND CLAIMS IN E-COMMERCE

Cyber defamation- Businesses or individuals may file claims if false statements harm their reputation in online platforms. Punishment of defamation as imprisonment for a term which may extend to three years and with fine.

Misrepresentation- If a business provides false or misleading information about a product or service, consumers may seek compensation for damages incurred.

Negligence impact e-commerce businesses in various ways like;

Lability Issues: If an e-cobusiness fails to provide adequate security for customers data or delivers defective products, it may face lawsuits for negligence.
Loss of Trust: Instances of negligence, such as poor customer service, failure to address complaints, or data breaches, can erode consumer trust, which lead to negative reviews and loss of customer loyalty.
Financial Loss: Businesses may incur costs related to compensating affected customers, which impact profitability and following incidents of negligence, companies might face higher premiums for liability insurance.
Loss of Market Share: If competitors are perceived as providing better service or security, negligence can lead to a decline in market share as customers switch to more reliable alternatives.

Product Liability- E-commerce companies can face claims for selling defective or dangerous products that cause injury to consumer. Here are the key aspects;

Liability claims; E-commerce can be held liable for injuries pr damages caused by defective products they sell, regardless of whether they manufactured the products. This includes issues related to design defects, manufacturing defects, or inadequate warnings.
Cost of Litigation: Legal battles over product liability can be costly involving attorney fees, court costs, and potential settlements or judgements.
Customer Retention: Once trust is lost, it can be challenging to regain customer loyalty, impacting long-term sales.
Increased Compliance Efforts: E-commerce businesses may need to implement stricter quality control measures and compliance protocols to mitigate risks.
Market Positioning: Companies that prioritize safety and quality may use their strong product liability practices as a competitive advantage, attracting safety-conscious consumers.

Invasion of Privacy- Unauthorized use or sharing of consumer data can result in tort claims related to privacy violations.

This analysis shows that, while there are many laws about defamation, they are not linked and are scattered. This can lead to misunderstanding and confusion. Denial of access to any of these elements hindered the consumer’s ability to navigate the website effectively, and this lack of options stem not only from restricted access to the website also includes a long list of terms and conditions.

CASE LAWS

Super Cassettes Industries Ltd. Vs Myspace Inc. and Anr.

FACT

MySpace is a platform that allows users to share content, including copyrighted material owned by T-Series. Tensions started in 2007 when T-Series tried to negotiate licenses for its content with MySpace wanted T-Series to join its rights management program instead. T-Series claimed that MySpace was violating its copyrights in two ways: directly and indirectly. They argued that this infringement was hurting their earnings from royalties.

While the case was ongoing, the court granted T-Series an injunction to take down the infringing content. In MySpace appeal the court disposed off the matter related to copyright.

JUDGEMENT

The two-judge bench made a progressive decision, considering the challenges faced by online platforms like MySpace. They decided that a vague order could lead to MySpace shutting down in India, which would make the situation worse. They also found that a previous injunction against future works was invalid since the Copyright Act only applies to existing content, not to works still being created.

Regarding the first issue, the judges concluded that simply using protective tools does not mean MySpace had actual knowledge of copyright infringement. The automated modification of content did not involve any manual checks. According to Section 51(a) (ii) of the Copyright Act, someone can only be liable if they were aware of or had reasonable grounds to believe there was a violation. Expecting MySpace to provide specific URLs of infringing content was seen as unreasonable, as it could lead to the removal of content even from authorised users. This could also threaten free speech, as even small parts of a post could be taken down. The judges determined that MySpace lacked specific knowledge about the infringing content.

India’s safe harbour principle is more aligned with the UK’s Electronic Commerce Directive than with the USA’s Digital Millennium Copyright Act. Section 79 of the Information Technology Act only allows restriction under Section 79(2) and Section 79(3) because it did not initiate the content transmission and followed due diligence by having terms of service and privacy policy.

On the third issue, the judges affirmed that sections 79 and 81 of the IT Act and Section 51 of the copyright Act should be interpreted together for fair outcomes. They ordered SCIL to provide a specific list of URLs for infringing content, which MySpace must remove within 36 hours of being notified. MySpace was also instructed to set up methods to track any advertising revenue earned from infringing content to help calculate future damages.

SHREYA SINGHAL vs UNION OF INDIA

FACT

In 2012, Shaheen Dhada and Rinu Srinivasan were arrested by Mumbai Police. This happened after some members of the Shiv Sena Party called for a shutdown in Maharashtra following the death of their leader, Bal Thackeray. The girls had posted comments on Facebook that upset some people. Public aggression was at its peak.

PETITIONERS ARGUMENT

They argued their freedom of speech has been limited by Section 66A of the IT Act.. They filed a petition.

The right of freedom of speech and expression, protected by Articlem19(1)Indian Constitution, is violated by Section 66A of the IT Act 2000.

The petitioners argued that the reasonable restrictions mentioned in Article 19(2) don’t apply to causing annoyance or similar behaviours.

They pointed out that Section 66A focuses only on certain forms of communication, which violates Article 14 and 21.

The petitioners also claimed that this section gives authorities too much power to interpret it as they wish.

JUDGEMENT

The courts decided that terms used in the law can be unclear, and what might upset one person might not upset another. Because of this, how people understand these terms is based on personal opinion. The court found that Section 66A goes against the right to free speech.

CONCLUSION

The evolution of e-commerce regulations in India reflects balancing act between fostering innovation and ensuring consumer protection. Over time, the government has introduced various frameworks addressing consumer rights, data protection, and competition, culminating in the drafts of the Digital Personal Data Protection Data Protection Bill and guidelines for e-commerce platforms. These developments aim to enhance transparency, secure transactions, and create a fair marketplace.

Moving forward, ongoing dialogue among stakeholders, including businesses, consumers and policymakers, will be crucial to adapt regulations to the fast-paced digital landscape, ensuring that they remain relevant and effective in promoting sustainable growth and safeguarding interests.

The Policymakers should

Implement tax credits or subsidies for companies adopting green technologies and practices.
Enforce stricter regulations on emissions and waste management to promote environmental responsibility.
Invest in infrastructure for renewable energy sources and offer grants for research in clean technologies.
Launch campaigns to educate the public on sustainability, minimizing waste and waste and resource consumption.

The businesses should

Design products for longevity and recyclability, minimizing waste and resource consumption.
Communicate sourcing practices clearly to consumers, emphasizing ethical and sustainable methods.
Pursue certifications like LEED or Energy Star to validate environmental commitment and attract eco-conscious consumers.
Educate employees about sustainability practices and encourage innovative ideas for reducing environmental impact.
Partner with local organizations to support sustainability projects and enhance corporate social responsibility.

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