An E-commerce company has to comply with IT act 2000, Indian contract act, Foreign Investment Regulations, banking and financial laws, Licenses from RBI to provide services. Changes in these acts directly affect the e-commerce business of a company. There have been many changes in these laws over the last ten years. Some were celebrated by the Goliaths of the industry, others by their counterpart Davids. The laws that regulate e-commerce still needs to evolve but the major changes that happened in the last ten years are-
- Amendments to the IT act 2000– IT act is the primary law in India dealing with cybercrime and electronic commerce. In 2008, it was amended to extend its range to all kinds of communication devices and computer resources. It made mobile commerce very easy as it provided a legal framework that eliminated the confusion regarding the interpretation of laws around the same. It also provided a more exhaustive coverage of the various cyber crimes by including other crimes under the law. IT act 2008 also ensured effective enforcement of the laws. Network service providers were also not eligible to the third party data accessible to them with some exception to the rule.
- Allowing 100% FDI to the marketplace model of e-commerce– This came as a shocker to the two giants of Indian e-commerce. Earlier it was that no FDI in B2C e-commerce meant that foreign-funded companies such as Flipkart couldn’t operate under an inventory-led model. An inventory-led model means that the e-commerce marketplace can hoard the goods in its inventory and directly sell them without any need for the suppliers. But, Amazon and Flipkart found a way around that too. Cloudtail India Pvt Ltd.(a joint venture between former Infosys CEO N.R Narayana Murthy’s Catamaran Ventures and Amazon Inc.) contributes nearly 40% to the company’s sales. For Flipkart, it’s WS Retail Services. Snapdeal was very happy when this law stated that “no one vendor on the marketplace should be allowed to contribute more than 25% of the company’s overall sales”. Our giants have to find some other way or they can just follow the rule for once. FDI in B2C e-commerce is permitted but there are 3 but’s.
- Products should be manufactured in India,
- A brick and mortar store can go online if it offers single brand retail,
- An Indian manufacturer can sell its own brand products(multiple brands) which should be manufactured in India and at least 70% of product in-house and other 30% from other Indian manufacturers.
- Warranty Laws– Initially, the warranty on the products was the responsibility of the website and there was a lot of confusion around it. This year, it was clarified that “Any warranty/guarantee of goods and services sold will be the responsibility of the seller. Post sales, delivery of goods to the customers and customer satisfaction will be the responsibility of the seller.” This certainly resolves the marketplace of any legal responsibility in the case of the warranty or even if the delivered product is a bar of soap instead of a cellphone.
- Discounts- “E-commerce entities providing marketplace will not directly or indirectly influence the sale of goods and services and shall maintain level playing field”. No more Big Billion days. Even earlier marketplaces couldn’t directly influence the prices, but they indirectly persuaded the sellers to lower their prices to the amount they wanted. They paid them the compensation later. This was celebrated by the local retailers as they don’t have the foreign funding to compensate themselves.
- RBIs Intervention-Setting up of approved certified agencies which can issue digital certificates for online transactions. This was done to remove the security concerns related to net-banking which is an important part for the e-commerce. RBI also realised that the foreign e-commerce companies are circumventing laws, which is causing losses to the exchequer. E-commerce definitely lack transparency. This makes regulation difficult to enforce and to change.