When it was first released in 1995 through dial-up connections, the Internet grabbed the globe by storm. Technology has advanced significantly since then. The conventional method of selling items has been replaced with an electronic one that is more efficient and intuitive than the previous one. Because of the enormous shift in technology, the government has decided to put certain legislative barriers in place for this economic model. FSSAI Introduces Central License for ‘E-commerce’ Food Business under Ecommerce Laws. The obligatory e-commerce laws that exist in India will be discussed in this article.
The legal definition of an e-commerce business is a business that sells goods and services online. E-commerce, according to the Organization for Economic Cooperation and Development (OECD), is a business model that relies on open standard-setting processes such as the Internet to develop non-proprietary protocols.
E-commerce refers to the trading of physical and digital goods and services via electronic platforms and networks, as defined by the Foreign Direct Investment policy.
In layman’s terms, an e-commerce company does business digitally rather than through traditional channels. This includes all retail activities done through online channels, such as item purchases, service requests, payment facilitation, and supply chain management.
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Overview of India’s E-Commerce Sector’s Growth
E-commerce is a game-changing business concept that has had a significant influence on India’s economy. It’s also seen as the “Digital India” of the future. The capacity of major companies in the Indian market to adjust to changing circumstances is critical to their long-term success. While a few businesses took advantage of the situation by creating an online presence, many others were unable to keep up with the trend and finally went away due to fierce competition.
Government, retailers/manufacturers, travel services (airlines, Indian Rail, bus operators), entertainment service providers, and others are currently key stakeholders in the e-commerce regime; enablers of the online business sector such as financial intermediaries, logistics providers, call centres, social networking sites, and others help facilitate transactions online.
Government-backed initiatives such as Digital India, Startup India, promotion of the “cashless economy,” allocation of funds for the BharatNet Project, and the Reserve Bank’s and the National Payment Corporation’s (NPC) introduction of UPI have all contributed to the growth and success of the country’s online business sector.
Other reasons, such as the ongoing promotion of web-based services, which has expanded knowledge of their accessibility, have resulted in a large influx of clients. However, as the number of consumers grows in this environment, different law enforcement agencies are being forced to integrate some e-commerce rules to support fair trade practices.
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FDI policies apply to e-commerce legislation
According to the Indian FDI Policy, there are two types of internet business:
The marketplace-oriented model of e-commerce entails an e-commerce business supporting an IT platform on the electronic network to act as a mediator between trading partners.
Furthermore, the marketplace provides a venue for diverse vendors to interact with consumers and sell their wares. Furthermore, the marketplaces charge vendors a commission in exchange for their services.
Model of Inventory
The inventory-oriented e-commerce model denotes an online venture in which a product inventory is controlled by an online businessman and sold directly to end-users. Similarly, an e-commerce business that sources straight from brands and stocks is referred to as a seller.
A notable example of an inventory-based approach is Myntra, an online portal.
It’s important to remember that, under the Government’s FDI in the e-commerce regime, 100% FDT via automatic route is permitted in the e-commerce sector. FDI, on the other hand, is not permitted under the inventory-based approach.
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Traditional business models have been supplanted by electronic equivalents, which include:
- Business to Business
- Business to customers
- Customers to customers
- Customer to Business
- B2B: In a B2B business, one sells their products to an intermediary buyer, who then sells them to the final end-users. Distribution services, digital services, procurement services, and other services are all consolidated in business-to-business e-commerce. A wholesaler can place an order on the company’s portal and sell it through physical retail locations.
- B2C: In a business-to-consumer approach, the manufacturer deals directly with customers. Without the use of a marketplace or a middleman, the end-user may choose an item and make an order on the company portal.
- C2C: Popular portals such as Quickr and OLX enable end-users to communicate their requirements and obtain them from one another without having to deal with a third party. E-commerce has made it possible for strangers to do business and deliver goods without having to fill out any paperwork.
- C2B: A newer variant of traditional commerce models, the C2B model is the inverse of traditional commerce models. End-users enable services to companies, therefore securing their existing market position. This may be seen on an internet forum where people exchange product development ideas with entities or facilitate their knowledge, which is subsequently used for marketing.
As suggested by the ‘Consolidated FDI Policy Circular 2015,’ the government has approved 100 per cent foreign direct investment via automatic route in the B2B e-commerce industry under the FSI policy. Furthermore, in the B2C e-commerce system, no foreign direct investment is permitted. However, FDI in B2C e-commerce is authorized in the following scenarios:
- A company has the right to market its Indian-made goods through an internet store.
- A single-brand retail firm that operates through brick-and-mortar locations is permitted to conduct retail trade operations through e-commerce.
- An online retail site allows an Indian producer to sell its unique brand products. On account of value, the Indian manufacturer would be the investee company, the owner of the Indian-based brand and manufactured in India, with a minimum of 70% of its products in-house and a maximum of 30% from Indian-based manufacturers.
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The following laws apply to e-commerce:
- Electronic and digital networks include a network of computers, television channels, and any other internet programs that are utilized automatically, such as extranets, websites, cellphones, and so on.
- E-commerce marketplaces will be able to conduct B2B transactions with registered vendors on their web platform.
- Support services such as logistics, warehousing, order fulfilment, payment collection, call centre, and other services may be facilitated by an e-commerce platform.
- The inventory, or things offered for sale, is not under the authority of e-commerce firms that facilitate a marketplace. Only an inventory-based approach allows for such ownership.
- An e-commerce company will not enable a single vendor or its related organizations to account for more than 25% of sales made through its platform.
- The important data of the vendors should be provided in the marketplace model, where offerings are made accessible for sale digitally on the web portal. The seller will be responsible for post-sale activities such as item shipment to end-users and customer satisfaction.
- In the marketplace model, the e-commerce firm may offer payment for the sale, as long as the RBI’s rules are followed.
- Similarly, in the marketplace model, any guarantee/warranty of outdated products and services will be the seller’s responsibility.
- Electronic commerce Businesses that facilitate the marketplace will not have any influence on the sale price of products and services and will follow fair trade practices.
Ecommerce laws as per Payment and Settlements Systems Act, 2007
A ‘payment system,’ according to the legislation, facilitates payment transactions between the payer and the recipient. Furthermore, it may involve clearing, settlement service, or payment, or any combination of these, but it does not include a stock exchange. By complying with the RBI’s online payment requirements, an e-commerce firm can be classified as a payment system. Furthermore, having a Nodal account to settle the merchant’s payment on its online channel is a legal requirement for an intermediary collecting payment digitally.
Labelling and Packaging Guidelines for Ecommerce Businesses
Any online company should meet the labelling and packaging requirements outlined in the following statutes:
- Drugs and Cosmetics Act, 1940
- Food Safety and Standards Act, 2006
- Legal Metrology Act, 2009
Every online business is required to provide basic information about the items that are planned to be sold to the general public under the Legal Metrology Act, 2009, read with the Legal Metrology (Packaged Commodities) Rules, 2011. They provide information such as weight, size, and other attributes seen on the product’s homepage.
E-commerce laws related to Sales, shipping, refunds, and returns
On July 1, 1930, the Indian Sale of Goods Act came into force. Mercantile law allows for the creation of contracts in which the seller agrees to transfer ownership of the products to the buyer in exchange for a fee. It is applicable throughout India. Items sold to the customer must be sold for a predetermined price and within a certain time frame, according to this Act. The Act was renamed the Sale of Goods Act, 1930, when it was amended on September 23, 1963. This Act’s principle also applies to enterprises with an online presence.
The Indian Contracts Act, 1872, as amended by the Information Technology Act, 2000
Regulates the validity of contracts formed by digital methods, as well as communication and acceptance of proposals, revocation, and contract creation between end-users, sellers, and intermediaries.
Furthermore, any digital platform’s terms of service, return policies, and privacy rules must be legally enforceable agreements. Furthermore, the law has yet to include provisions relating to. Furthermore, the statute has not been updated to address the lack of online signatures. Furthermore, certain sorts of contracts will be required, as well as the inability of verifying the real consumer’s age, with the normal age to engage into contracts set at 18.
What are the e-commerce laws’ Intellectual Property Issues?
All copyrights and trademarks for the items/symbols/text/ intended to be utilized must be protected under applicable IPR laws. However, India’s intellectual property legislation still does not cover the whole e-commerce industry. Except for a few legal rulings, there are no strong mechanisms to limit unlawful use of domain names and other virtual assets.
Issues of Jurisdiction in the E-commerce Environment
In our nation, there is a scarcity of jurisprudence on problems of jurisdiction in the web-based business sector. Due to the many transactions, resolving disputes in the business-to-customer sector can be difficult. They also include ordering, delivery arrangements, and payment collection through digital means. Much domestic legislation, in general, allow long-arm jurisdiction, wherein the execution of such laws has extraterritorial applicability if an act has had some unlawful impact within the nation’s territory.
Despite the legal barriers stated above, the e-commerce industry still needs a long-term legal structure that can encompass all elements of it. Unfair commercial practices are growing at an alarming rate within the e-commerce system. The Indian government is taking proactive efforts to limit such risks by implementing necessary legislation and concentrating on better protecting customer rights.