Moneycontrol PRO
Upcoming Event:Attend Algo Convention Live, 2 Days & 12+ Speakers at best offer Rs.999/-, exclusive for Moneycontrol Pro subscribers. Register now!

Draft e-commerce rules: Companies express concern on proposed fallback liabilities clause

E-commerce companies say that the proposed fall-back liability is akin to making a mall owner responsible for a defective product sold by a shop in the mall.

June 29, 2021 / 11:52 AM IST
Companies are worried about the draft Consumer Protection (E-Commerce) Rules, 2020, issued by the government on June 22.

Companies are worried about the draft Consumer Protection (E-Commerce) Rules, 2020, issued by the government on June 22.

The government’s proposal to make companies like Amazon and Flipkart liable for a seller’s negligence or failure to deliver will kill the objective of being a facilitator, e-commerce companies and market experts said.

Companies are worried about the draft Consumer Protection (E-Commerce) Rules, 2020, issued by the government on June 22.

"A marketplace e-commerce entity shall be subject to a fall-back liability where a seller registered on its platform fails to deliver the goods or services ordered by a consumer due to negligent conduct, omission or commission of any act by such seller in fulfilling the duties and liabilities in the manner as prescribed by the marketplace e-commerce entity which causes loss to the consumer," the draft says.

The document defines a marketplace as barely an e-commerce entity which provides a technology platform to facilitate transactions between buyers and sellers.

"You cannot attach responsibility without the scope of work," said a senior executive of a leading e-commerce company requesting anonymity.


"The marketplace handles the payments. We can take one more step which is the liability to reversing it. But thereafter, the marketplace has no role in transactions except what has been stated," he added.

Among other things, the existing liabilities mandate marketplaces to ensure that the descriptions, images, and other content pertaining to goods on their platform provided by the sellers is accurate. They are also required to provide the name of the seller, their country of origin, geographic address and customer care number.

What-is-fall-back-liability (1)

However with the new set of drafts, the government is trying to ensure that consumers do not get a raw deal while purchasing products online.

While even today on most of the occasions leading e-commerce companies like Amazon and Flipkart have a hassle free way of arranging for a refund or exchange in case the customer finds issues with the products ordered online. But the government is trying to ensure that there's a foolproof mechanism even as the marketplaces feel they cannot be held liable for the wrong done by sellers who sell on their platforms.

According to experts and investors the marketplaces can also ensure that the goods sold on their platforms are legal and the sellers are following the law of the land.

"A marketplace can take away the real estate from the seller. They can ensure delisting of sellers if need be," said an investor requesting anonymity

Of late the government seems to be in a tiff with the e-commerce companies. In a recent remark Commerce and Industry Minister Piyush Goyal said leading e-tailers were flouting laws of the land adding that many of their practices were against the interest of consumers and these new sets of rules are drafted with an aim to protect consumer interests.

However people are finding it difficult to accept if marketplaces will have enough power to interfere in the relationship between a customer and a seller beyond a certain point.

"A mall owner cannot be held responsible for the defective product sold by the stores," said K Ganesh, entrepreneur and promoter, BigBasket, Portea Medical, HomeLane.

"They can at best ensure that the items sold online are legal and things like drugs, tobacco or alcohol are not sold on their platforms. Other than that specific product fall back liability it is unfair to expect. It will get difficult for them to survive," he added.

Marketplaces make money by charging sellers a commission to list and sell their products through the online channel. The commission varies from one category to another and can have a wide range starting from 4 percent all the way to 30-35 percent.

"Definitely they shouldn't be 100 percent absolved of liabilities but things like deficiency of service or refund cannot be counted as their responsibility. If they start doing that, they become the seller themselves," said Ganesh.

The government has asked the stakeholders to respond to the draft by July 6.

Download your money calendar for 2022-23 here and keep your dates with your moneybox, investments, taxes

Priyanka Sahay
first published: Jun 29, 2021 10:51 am
ISO 27001 - BSI Assurance Mark