The electronic commerce (e-commerce) or e-commerce legal problems business in India has gone a long way since its inception and is fast expanding throughout the world. The sector has evolved, and many new firms have entered the market. India is seen as a lucrative market for these e-commerce companies. Online business is quickly becoming a popular trend, thanks to the advancement and growing usage of online media. Every fifth or eighth firm operates online and engages in e-commerce. However, just because you’re online doesn’t mean you’re immune to legal issues. E-commerce is a broad term that encompasses a wide range of online commercial operations involving a wide range of products and services. It is a type of commercial transaction in which the participants communicate electronically rather than through physical exchanges or direct physical touch, as is the case with more traditional commercial procedures.
Definition of E-Commerce
“The use of electronic communications and digital information processing technology in business transactions to create, transform, and redefine relationships for value creation between or among organizations, and between organizations and individuals.”
E-commerce, to put it simply, is the practice of conducting business using electronic means. However, there is no universally accepted definition for the phrase, and different organisations have given it varied meanings. Though performing e-commerce may appear simple and cost-effective at first, there are a number of legal considerations and considerations that an e-commerce firm must evaluate and keep in mind before beginning its operations.
While governments all around the world have been struggling with these difficulties, it appears that meaningful answers are still a long way off. The challenges that arise may be divided into two categories: “CORE” legal difficulties that apply to all types of enterprises and “OTHER” legal concerns that are specific to each sector.
Rules & Regulations for E-commerce in India
E-records and e-signature, which are the first stages in facilitating e-commerce, are legally recognised under the Indian Information Technology (IT) Act. The Ministry of Electronics and Information Technology (MeitY) has established suitable standards for suitable security practices and processes, as well as for sensitive personal data and information, as a result of this Act. The Consumer Protection Act of 2019, which regulates concerns such as unfair commercial practices and deceptive ads, will be enforced by the watchdog, which will be managed by a chief commissioner. E-tailers must disclose facts on return, refund, exchange, warranty and guarantee, delivery and shipment, forms of payment, and grievance resolution mechanism, as well as the ‘country of origin’, under the new Consumer Protection (E-Commerce) Rules, 2020.
The e-commerce regulations would apply to all electronic shops selling products and services to Indian consumers, regardless of whether they are based in India or elsewhere. Penalties will be imposed on e-commerce businesses that do not follow the guidelines. The regulations apply to aggregator markets like Amazon and Flipkart, as well as inventory-led models where the merchant controls the goods. It’s worth noting that, according to the government’s FDI rules for the e-commerce industry, 100 percent FDI through the automatic route is authorized in the marketplace model of e-commerce, but not in the inventory-based model.
One vendor or their group firms cannot account for more than 25% of sales made through an e-commerce entity’s marketplace. The seller’s name, address, and other contact information should be included in the marketplace model goods/services made available for sale electronically on the website. Payments for sales may be provided by the e-commerce firm in accordance with Reserve Bank of India requirements under the marketplace model. Similarly, in the marketplace model, the seller is responsible for any warranty/guarantee of products and services supplied. E-commerce entities providing a marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain a level playing field.
Legal Issues Associated with E-commerce
There are various legal issues associated with E-Commerce businesses as well. And if these issues are not taken care of in time, they can lead to serious problems for your business. Described below are some of the common legal issues an e-commerce business faces.
The ability for parties to make genuine and legally enforceable contracts online is at the heart of e-commerce. As parties replace paper documents with electronic equivalents, basic problems arise about how e-contracts may be made, performed, and enforced. The Information Technology Act of 2000 governs contractual elements of electronic record use, including attribution, acknowledgment, dispatch time and location, and reception. The IT Act, however, should be read in connection with the Indian Contracts Act, 1872, because it is just an enabling Act. The Contract Act requires three key factors for the formation of every contract. There must be an offer, which must be accepted without alteration, and there must be some kind of remuneration for the contract. E-contracts would benefit from these elements.
However, a difficult question that law often arises: How do we know whether the offeree has ACCEPTED the offer?
Additionally, this will require certain types of contracts and the impossibility of determining the true consumer’s age, with the standard age to enter into contracts set at 18. As a result, it’s critical that an online business portal considers this possibility and includes a form on its website saying that the person with whom it’s dealing or entering into an e-contract has reached the age of majority.
2. Privacy and Data Protection
The privacy of its users is a vital factor for every e-commerce company. Individuals and organisations can easily get personal and sensitive information thanks to breakthrough technology and a lack of safe processes. When it comes to internet enterprises, privacy is a big concern that may lead to issues for both the company and its consumers. Consumers exchange personal information with companies via the internet and expect the sellers to keep it private. When an e-commerce firm caters to customers in other countries, those countries may have laws that render the e-commerce corporation accountable for infringing the privacy rights of the foreign customer. For example, if Company A in India collects personal data from a European Union customer and distributes it to firms in the United States, it may be accountable for infringing on the customer’s privacy rights. When it comes to internet enterprises, privacy is a big concern that may lead to issues for both the company and its consumers. Consumers exchange personal information with companies via the internet and expect the sellers to keep it private.
3. Intellectual Property Rights
All trademarks and copyrights for the items, words, and symbols to be utilised must be protected. India, on the other hand, has a well-defined legal and regulatory framework for the protection of intellectual property rights. Furthermore, the regulations have yet to be entirely updated for total efficiency in the virtual world. For example, there is no law against the misrepresentation and abuse of domain names.
Using content from another firm while creating material for your e-commerce website might be a serious legal issue. This might mark an end to your e-business. There are several royalty-free websites that allow you to access their information and photos. You may utilise those websites to generate online content for your company’s website.
E-commerce websites are often built and administered by third companies that are experts in the sector. A third party is frequently in charge of the material. Thus, unless the parties agreement expressly states that IP rights are protected, there is a risk of trademark, copyright, or patent infringement on an online platform.
4. Jurisdictional Issues
In India, there is a scarcity of jurisprudence on questions of jurisdiction in the e-commerce sector. Due to the occurrence of several transactions, resolving disputes in the B2C sector is particularly difficult. Aside from the design of the corporate structure, judgments must be made on the jurisdiction in which the corporate structure should be located since this will decide the scope of any responsibility that may emerge against the website. Apart from the form of the corporate structure, decisions must be taken on the jurisdiction in which it should be based since this will determine the scope of any liability that may arise against the website.
This means that you can be sued in a foreign court even if you are not physically present in that nation, as long as your website has just a minimum connection to that nation. As a result, a business should include an applicable choice of law and forum provisions in its online contract, identifying the jurisdiction to which the contractual parties would be subject. In general, much local legislation allows for a long-arm jurisdiction, which means that the execution of such local laws has extraterritorial applicability if an act or omission has resulted in some illegal or adverse consequence inside the country’s territory.
Customers will find the e-commerce legal issues marketplace to be a pleasant experience due to the ongoing evolution of laws, rules, and regulations. Even if the regulations on e-commerce enterprises become more severe, this will ensure their growth and larger investments. The constant development of laws, rules, and regulations will make the e-commerce legal difficulties marketplace a pleasant experience for customers. Even if the restrictions are becoming more restrictive for e-commerce firms, this will secure their development and higher investments. In the midst of this legal turmoil, India is one of the few countries in the world to have enacted e-commerce legislation. However, much more is necessary to adequately control the tangled network. Effective risk management strategies paired with correct legal documentation would tremendously help e-commerce enterprises.
“Though the Internet is a goldmine, without adequate legal protection it could become a landmine.”
1. Aashit Shah and Parveen Nagree, Legal Issues in E-Commerce, Nishith Desai Associates, available at- http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Legal_issues_in_eCommerce.pdf
2. Didar Singh, “Electronic Commerce: Issues for the South” Trade-related Agenda, Development and Equity, Working Paper, South Centre, October 1999, p. 4.
3. Farooq Ahmad Mir, EMERGING LEGAL ISSUES OF E-COMMERCE IN INDIA, International Journal of Electronic Commerce Studies, available at- http://academic-pub.org/ojs/index.php/ijecs/article/view/976
4. Narendra Kumar, Legal Issues Pertaining to E-Commerce, EnterSlice, available at- https://enterslice.com/learning/e-commerce-legal-issues/
5. PSA Legal Counsellors, Legal Issues In E-Commerce, Mondaq, available at-https://www.mondaq.com/india/it-and-internet/299686/legal-issues-in-e-commerce-think-before-you-click
Narendra Kumar, Legal Issues Pertaining to E-Commerce, EnterSlice, available at- https://enterslice.com/learning/e-commerce-legal-issues/
“A. Didar Singh, “Electronic Commerce: Issues for the South” Trade-related Agenda, Development and Equity, Working Paper, South Centre, October 1999, p. 4.
Aashit Shah and Parveen Nagree, Legal Issues in E-Commerce, Nishith Desai Associates, available at- http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Legal_issues_in_eCommerce.pdf
Supra note 1.
Sakshi Singh, E-Commerce Laws and Regulations In India, LawSearch, available at- https://vakilsearch.com/advice/e-commerce-laws-and-regulations-in-india/
Supra note 3.
Supra note 5.
Supra note 3.
This article has been written by Yashi Singh, 2nd Year B.A. LL.B student at Maharashtra National Law University, Mumbai.