Emerging Trends of E-Commerce & Challenges to the Consumer Protection Act, 1986

By A Gowri Nair & K.M. Aiswarya, School Of Legal Studies, CUSAT

Editor’s Note: Today, there are no boundaries in the business world. Technology has cured the problems posed by geographical limitations. Business is largely being conducted online, where buying and selling is taking place through the electronic medium. E-commerce is preferred due to a variety of reasons that include  affordability, wider range of products and services and convenience involved in the transaction. However, at the same time, there are concerns like privacy of data, online identity theft and sometimes, the products ordered do not conform to their actual description. In these situations, the consumer is often left without remedy because of jurisdictional issues in cyberspace. This calls for changes in the Consumer Protection Act where there are mechanisms for information sharing between buyers and sellers, easy dispute resolution mechanisms and protection of sensitive information.” 

Introduction 

The world is moving from the traditional economy that focused on physical manufacturing of goods to the new economy that concentrates more on knowledge and information than anything. Electronic commerce or e-commerce is an important facet in this regard.

E-commerce brings forth a tougher business competition, leads to creation of new marketplaces, faster transactions, and rapid growth in technologies. E-commerce can be generally understood as a system or a method of conducting business through electronic media rather than through conventional physical means.

E-commerce is defined as, “the use of electronic transmission medium to engage in exchange, including buying and selling of products and services requiring transportation, either physically or digitally, from location to location.”[i]

It is preferred over conventional methods as it provides convenient access to products that may otherwise not be accessible and leads to efficient transactions for both consumers and e-retailers. Further, e-commerce has made possible low-value cross-border transactions on a scale that previously was unimaginable.

E-commerce has received huge popularity because of the automation technique used by it. Due to ease in transactions, the number of e-consumers is growing at high rate and within a very short period it will defeat physical consumer.[ii]

Today, e-commerce is affecting business. Electronic business not only exchanges information between buyers and sellers of goods, but also provides support and services to consumers. More consumer demands appear on the Internet than any other mediums today. It demonstrates that the internet has a huge potential to grab many customers in a short amount of time, which in turn can become a target market for growing firms. Internet has changed the economy so much that most of the business activities today are carried out online.

In general the rights of a consumer as provided by domestic legislations like Sec. 6 of Consumer Protection Act, 1986 are also available to electronic consumers because no special condition has been laid down in most of the consumer laws regarding applicability or non-applicability of electronic transactions.

The right of physical consumers and e-consumers are equal in theory but different in operation or enjoyment due to difference in the nature and place of business or medium of business. Few unique practical problems like place of business, jurisdictional issues, non-availability of common dispute resolution system etc., certainly require special measures that are not provided in the existing consumer legislations.

Considering these aspects strong protective mechanisms are required to be set up. Moreover, beside the government’s responsibility to protect e-consumers, we being consumers/customers and Internet users are also responsible for keeping our e-commerce healthy and safe so that e-business can be more reliable in the future.

Advantages of E-Commerce

Numerous reasons can be attributed for this exponential growth and change in consumer patterns. Some of those reasons are:-

  • Affordability
  • Convenience
  • Availability
  • Wider Choice
  • Better Bargain
  • Speedier And Cheaper Shopping

The number of people becoming e-consumers is increasing day-by-day and the risk to which they are exposed is also on the rise. These problems make protective measures indispensible and require speediest protective mechanism.

Drawbacks of e-Commerce

We see electronic commerce as a profoundly pro-consumer development. It offers consumers a range and variety of products, and a source of relevant information with which consumers can protect their own interests, although it has some drawbacks as well:-

1. Online Identity Theft and Phishing: Online identity theft is the practice of pretending to be someone else on the Internet. The purpose can range from quite harmless activities to a criminal activity like stealing someone’s personal information for one’s own financial gain. Usually it involves phishing or online fraud for a person’s banking information and using that to order goods or transfer money to another bank account. There is no specific legal framework that covers situations where one purchase goods on Internet by electronic transactions.

In India though the Government has promoted e-commerce aggressively, focusing especially on the delivery of services, yet legal controls for online sale of goods have yet to catch up with those for conventional shopping. The Internet allows people to mimic legitimate business more convincingly, reach potential victims efficiently, elude detection by maintaining anonymity, and frustrate enforcement officials by locating (or relocating when detected) in remote jurisdictions that have no relevant law or no serious enforcement.

2. Privacy concerns: The Internet and its ability to marshal and sort vast amounts of information, without the online consumer even knowing is a new and potent threat to traditional privacy values.

3. Online Jurisdiction: Internet is a communication medium without geographical or national boundaries. But the consumer protection legislations are predominantly based on national and local boundaries. To be protected under the present laws in India at the time of electronic shopping, the first thing an e-consumer needs to ensure is that all the parties involved in the transactions are based within national boundaries where his municipal consumer protection laws apply.

Because electronic commerce respects no borders, cooperation and coordination in international law enforcement, using domestic legislations for protection often becomes difficult.

4. Insecurity: It is pertinent for consumers to note that all computer systems cannot be one hundred percent secure; there is always a degree of risk involved in using the Internet for buying goods. Thus, it requires a strict and user-friendly law, which not only provides the security at the time of shopping, but also protects the interest of the e-consumer post transactions.

Finally, there is a subject no one should neglect. The electronic commerce revolution, for all its promise, may widen the divide between the haves and have not’s, between nations and even within nation states. As we celebrate the promise of the digital revolution, we must also acknowledge the threat it poses to individual welfare and to the stability of international order.

Measures For the Protection of E-Consumer

In this electronic age there is a need to protect consumers’ interest and following are the areas of central importance for the effective protection of e-consumers.

1. Correct Information

An informed consumer is self sufficient to look after her/his own interests than an uninformed consumer. Appropriate information on the products is very important for e-consumers as that can help them to assess the benefits and risks of entering into a particular transaction. If the consumer is already aware of such information, then there will not be unnecessary disappointments; hence subsequent disputes will be avoided.

Appropriate information on the products acts as a substitute for the real-life ‘touch-and-feel’ that occurs during offline transactions. Thus legal regulations requiring e-retailers to provide detailed information about their products, the sales process, etc. is not particularly arduous for the e-retailers. They should provide information about the following:

  • E-Retailer- This should include the information regarding the e-retailer’s identity, place of registration, physical location, and contact details, postal address, e-mail address and telephone number. This information allows them to assess the reliability of the e-retailers.
  • Product: Sellers must provide an accurate and appropriately detailed, description of the product, its characteristics, uses, limitations, compatibility, as well as the need for services and maintenance, the price of the product, including applicable taxes and surcharges, all costs itemized, the applicable currency, warranties and guarantees, any after-sales services.
  • Sales Process: The rules governing the sales process are very difficult to understand for a consumer. E-retailers should provide information about the sales process like the technical steps to be followed to conclude a transaction, the delivery time and method, order tracking system in place, payment process, parties’ rights to cancel, terminate or retract, as well as applicable refund, exchange and returns possibilities and about the security measures applied to the transaction.
  • Terms of the Contract: Sellers must provide their consumers with the terms of the contract expressed in clear, unambiguous and simple language.
  • Information about the use of Consumer’s Personal Data: At minimum, e-consumer protection must require e-sellers to provide existing and potential consumers with detailed information about how it collects data, who will have access to the data and how the data will be kept safe etc.
  • Confirmation of the Transaction: E-retailers should provide consumers with a prompt confirmation of the transaction as soon as the order has been placed. That confirmation should contain information acknowledging that the order has been accepted and information regarding expected delivery time. Furthermore, the confirmation should be printable and possible to store in electronic form.

 2. Fair Contracts

Some consumers simply do not think that the terms and conditions are legally binding and most consumers are poorly equipped to understand the significance of the terms of the contracts they enter into. Consciously or subconsciously, they rely upon the legal system to protect them from unfair contractual clauses.

Many standard contracts contain complex legal clauses, such as choice of forum clauses and exclusion clauses that consumers may struggle to fully comprehend. As a result, they generally do not read the terms and conditions of the contracts they enter into. Further, consumer protection laws have created consumers who do not take the time to seek to protect their interests.

 3. Adequate Regulation of Unconscionable Conduct

Satisfactory consumer protection regulations must adequately protect consumers against unconscionable conduct by sellers. A further concern arises relating to the lack of power of consumers to negotiate terms.

  • It should be ensured that e-sellers do not use sales processes that confuse consumers into accepting unreasonable terms.
  • Consumer protection should contain special rules protecting consumers who have limited legal capacity and their guardians, as it is impossible to know whom you are contracting with.

4. Adequate Regulation of Product Quality and Suitability:

The sold products must meet adequate quality and safety standards. If the consumer has mentioned the purpose for which a product has to be used then, e-retailer should only deliver products suitable for the purpose described by the consumer. Also, products provided must correspond with any descriptions provided by the retailer.

 5. Cancellation/Return/Refund Policies

Merchants should provide information to consumers about their cancellation, return, and refund policies, including the time after entering into a binding obligation after which an available cancellation, return, or refund may be made. If there is no cancellation, return, or refund right, this should be stated prior to completion of the transaction.

6. Fair Dispute Resolution

A multi-facetted approach is necessary to ensure a fair resolution of a dispute between an e-retailer and an e-consumer. Law should provide consumers with fair, timely, and affordable means to settle disputes and obtain redress. Thus it must provide consumers with a realistic avenue for taking legal action against the seller/service provider, but with the alternative or prior step of a more appropriate dispute resolution system.

  • First, to be effective, a consumer protection scheme must ensure that the consumer, in an e-commerce transaction, can take legal action at her/his place of residence or domicile.
  • Second, the consumer in an e-commerce transaction should always be allowed to rely upon the consumer protection provided by their country of residence or domicile.

An adequate access to advice and assistance where they can take legal action is essential for consumers. This requirement can be satisfied by a governmental department or agency working with consumer protection questions. Alternative Dispute Resolution System is becoming popular nowadays. It has been adopted by corporate houses to resolve their disputes outside courts with less strict rules and lower costs. The provision for ADR system should also be encouraged by legislation protection e-consumers right.

Recommendations

Technology develops faster than law and it will continue to be one step ahead of law. Thus electronic transactions in the present set up are full of insecurities and uncertainties because of absence of proper legal mechanisms. To cope up with the technological advancement we have to take the help of technology; as Charles Clark once remarked ‘The answer to the machine is in the machine’.[iii] Indeed, the perfect reply to the technological abuses is the application of technological innovation.

Since existing consumer laws of India are unable to protect e-consumers’ rights properly, the consumers have to be more cautious about the use of e-market. They should remember and observe following at the time of electronic dealings for smoother and safer transactions over Internet.

  • E-mail addresses can be set up fraudulently, and so sending users details encrypted by e-mail are still no guarantee of security. Sending details via a web site form provides some extra security because of the more exacting requirements for registration of Internet sites.
  • Keep all the details of purchases by printing the invoice. If user needs to complain at a later date, these pages will provide the information needed.
  • Accounts should not be kept open after transaction for a long time as this gives hackers an opportunity to hack the password or relevant information from users PC or destroy user’s important information.
  • Never purchase things from a new website or portal when there is reasonable chances of suspicion.
  • Whenever possible customers should always opt for Cash-on-Delivery option rather than using credit cards or debit cards. This helps in protecting them against fraud.

Conclusion

The problem of consumer protection in the framework of e-commerce has gained a huge amount of consideration both from academicians and policy-makers. The governments as well as inter-governmental organizations have come up with various frameworks to deal with e-commerce and e-consumers.

But a review of existing legal framework shows that it has failed to address e-consumer needs. It has not been able to protect the consumers form infringement of their rights. The Consumer Protection Act, 1986 specifically excludes from its ambit the rendering of any service that is free of charge. If an online platform is not charging the users, the CPA may not apply. Thus India is in need of consolidating the law to deal with all above-mentioned situations so that the electronic consumers’ right can be protected properly.

 

Edited by Kudrat Agrawal

[i] Greenstein, Marilyn and Todd M. Feinman, Electronic Commerce: Security, Risk Management and Control. USA: McGraw-Hill Companies, Inc., 2000.

[ii] An article: The Biggest E-commerce trend of 2003 by Laura Rush at http://commerce.internet.com.

[iii] Charles, Clark, The Answer to the Machine is in the Machine, in: P. Bernt Hugenholtz (ed.), The Future of Copyright in a Digital Environment, The Hague: Kluwer Law International, p. 139.

One Reply to “Emerging Trends of E-Commerce & Challenges to the Consumer Protection Act, 1986”

  1. It is a very helpful and informative article for e-buyers
    e-commerce websites just act as intermediary, yet taking the reins in their hands. some of the e-commerce websites are not truly fair and particularly in respect of refund, unnecessarily keeping buyer’s money on-hold for an indefinite period. My experience says that there should be some definitive laws/acts for e-buyers or e-consumers protection so that a e-consumer may not suffer in the hands of e-commerce websites and uncertainty of getting back money in the event of non-delivery of products by the seller. e-consumers should get advantage to file case with e-consumer court in his own place and not in the place where the corporate office of e-commerce and seller’s shop is located.
    I shall request you to write articles on how to fight back money kept on-hold by eCommerce sites.
    Not only that eCommerce sites does not show their email address even to registered user, thereby restricting contact by buyers. Only means of communication is phone call. Some problem are beset with
    contact over phone are network problem of establishing connection, business on the part of customer care personnel, inaudibility, and weakness of hearing on the part of call receiver.

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