The Bureau of Indian Standards (BIS) recently released the “E-Commerce- Principles And Guidelines For Self-Governance” (“Guidelines”) which are directed towards e-commerce platforms laying out a list of expectations and procedures to ensure the best interests of the consumer and all stakeholders involved in the e-commerce business. The Guidelines have been released on 20th January 2025 for inviting comments from various stakeholders with regard to the Guidelines to be submitted by February 15, 2025.
These Guidelines were made under the supervision of the Ministry of Food and Consumer Affairs. The Guidelines are divided into four parts, 1) Pre-Transaction principles, 2) Contract Formation Principles, 3) Post-Transaction Principles, and 4) General Principles.
We will have a look at this draft and analyze the possible implications over various entities which are engaged in the e-commerce business.
Applicability
The Guidelines seem to apply to “E-commerce Entities” who further have to ensure certain obligation in relation to “sellers”.
“E-Commerce Entity” refers to a company or organization that operates an electronic commerce platform, such as an online marketplace or web store, where buyers can purchase products or services from third-party sellers. Entity includes those online platforms that are run by companies like Amazon, for example, Amazon India, Amazon Market, etc., are entities even though they are run by the parent company Amazon.
“Sellers” are defined as any persons engaged in the commercial placement of a product, such as importers, distributors, manufacturers, lessors, and even service providers, but exclude sellers of immovable property, providers of professional services where products are incidental, financial intermediaries, and certain passive lessors (a person who leases a product, without having a reasonable opportunity to inspect and discover defects in the product).
Pre-Transaction Principles
Under 4.2.1 (Registration), the E-Commerce Entities are required to ensure that sellers establish their identity, including legal name, contact info, business locations, key personnel, and financial info as needed. Further, a rigorous KYC process is required to be established for all third-party sellers or service providers, each time they are onboarded, and a KYC checklist is required to be published prominently on the platform.
Under 4.2.2 (Listing Products), the E-Commerce entities are required to ensure that each product has comprehensive details (like title, Seller contact, ID, images, etc.) to enable consumers to assess the product. They must also require Sellers to (i) categorize products accurately for the ease of the customer, (ii) indicate shipment mode whether fulfilled by Seller directly or fulfilled by the Logistics Partner, (iii) prevent listing of counterfeit/fraudulent products, and (iv) submit listings for internal review before it is made live.
Further obligations for relevant information related to the products are required under Section 4.2.3 (Disclosure of Relevant Information).
Under Section 4.2.4 (Display of Product/Service Information) the manner of presentation of such information is laid out. The E-Commerce Entity must ensure that all product details are visibly presented. High-resolution images or videos have to be included, and in the case of imported goods, the importer’s details must be disclosed. The entities must further display seller-provided information without modification, within a set space limit, and ensure compliance with laws like the FSSAI Act and Consumer Protection Act. Such displays must include a product overview (title, price, features), social proof (reviews, ratings), similar product suggestions, and other human assistance options.
Disclosures are to be provided appropriately by the E-Commerce Entities for each stage of consumer decision-making, ensuring prominence and readability. All such information should be sufficient for all such information is sufficient for identification of the legal operating entity, consumer communication, effective grievance redressal as per Consumer Protection Act, 2019, and adequate fulfillment of orders, returns, and guarantees.
Contract Formation Principles
Section 4.3 of the Guidelines talk about contract formation principles between E-Commerce Entities and its consumers. The E-Commerce Entities are required to obtain explicit consumer consent for purchases, avoiding pre-ticked checkboxes or automatic approvals.
Consumers should have the ability to review and modify transaction details, including pricing, delivery charges, and return policies, before making a final commitment. A clear confirmation point must be indicated, where the transaction is formally completed, followed by an order confirmation or receipt.
E-Commerce Entities must also provide transparent cancellation, return, and refund policies, ensuring consumers are fully informed of any applicable charges or conditions. They must maintain accurate transaction records and allow consumers to access them as required by law. Secure payment methods should be offered, with safeguards against fraud and compliance with financial regulations. For subscriptions or recurring payments, consumers must be informed of terms, given the option to cancel at any time, and required to provide explicit consent for any changes. Additionally, cash-on-delivery refunds must be processed as per the consumer’s preferred method.
Post-Transaction Principles
Under Section 4.4.1 (Merchantability), the E-Commerce Entities have to ensure that products are easy to return, exchange, or refund if they are defective, counterfeit, or fail to meet the given purpose. Additionally, clear timelines for claims have to be disclosed for return, exchange, or refund, with extended timelines for counterfeit goods.
Under Section 4.4.2 (Dispute Redressal) the E-Commerce Entities have to comply with the Consumer Protection Act, 2019, and related rules to address consumer grievances and disputes effectively.
Under Section 4.4.3, the E-Commerce Entities are required to notify consumers of deliveries in a timely manner, using multiple channels like SMS or Email, and further they must provide tracking information (for knowing the status of such deliveries).
General Principles
There are various general principles listed out in the Guidelines under Section 4.5 (General Principles) which lay out important points in relation to functioning of E-Commerce platforms, such as:
- Sale of Banned Products: They have to ensure that sellers do not sell banned products by monitoring listings, conducting background checks, and enabling consumers to report violations.
- Data Protection: They are required to comply with data protection laws, using personal data only for transactions and ensuring no misuse of such personal data for other purposes.
- Unsolicited Commercial Communication: They must obtain consumer consent for all commercial communications, including non-transactional ones, and offer opt-out options from such communications.
- Fair Business Practices: They must treat all sellers equally, avoid preferential treatment, allow third-party service providers to register freely, and refrain from influencing pricing or inventory.
- Anti-Counterfeiting Measures: They must prevent counterfeit products by implementing policies, allowing rights owners and consumers to report violations, and ensuring timely notification to sellers and authorities.
- Representations on Goods: They must avoid making misleading or deceptive representations about the quality and fitness of products; disclose relationships with sellers if any representation is made.
- Unfair Trade Practices: They must not coerce consumers into transactions, and allow freedom of choice between bundled or individual services with fair pricing.
- Advertisements: Advertisements or sponsorships must be clearly distinguished from other content, such as editorial comments or independent reviews.
- Correct Representations: Product descriptions, images, and content must be ensured to be accurate; and action must be taken against sellers for inaccuracies and regularly review seller representations.
- Fairness of Consumer Reviews: E-Commerce Entities must adhere to IS 19000:2022 standards for collecting, moderating, and publishing online consumer reviews.
Analysis and Comments
A few thoughts on the Guidelines arise where certain requirements would need clarity.
Definition of Recurring obligations under Section 3.20 seems to be left out since there is no definition written after the hyphen. It is not clear whether the definition was purposely left out or for any other specific reason it would be included in the final draft.
The express consent requirement under Section 4.3 of the Guidelines, which is the foremost Contract Formation Principle, requires some clarity. The section says, “no such entity (E-Commerce Entity) shall record such consent automatically, including in the form of pre-ticked checkboxes”. This would mean that most e-commerce entities that record consent by automatic clickwrap checkboxes will violate the Guidelines. However, we are not sure if this also invalidates any form of clickwrap agreements, even where the user has to manually press on the checkbox, since that clickwrap Agreements are considered a valid form of agreement in India by the Courts.
In the case of Trimex International FZE Limited v. Vedanta Aluminium Limited,[ii] Trimex offered certain supply for 5 shipments and it was accepted by VAL, through emails, but a draft contract was only prepared and not formalized. VAL later denied the binding nature of any contract. The Court held that an oral or written contract remains valid and enforceable, even if a formal contract is not initiated. It was also held that in absence of a signed agreement, acceptance can be inferred from approved communications like emails, letters, or telegrams.
This established the legal backing for validity of clickwrap agreements since an explicit consent is given for the certain terms and conditions. Therefore, clarity is required on whether manual selection of the checkbox by users would be considered a valid contract between the E-Commerce Entity and the User according to the Guidelines.
Further, it has been mentioned that the Users shall be given their preferred choice of refund under Section 4.3.8 (Refund in case of Cash on Delivery). Would this mean that, refund for COD transactions, by Users can also be requested through cash? An affirmative answer would mean an onerous obligation on the E-Commerce Entities since security of the cash with the contractor who delivers the refund would be required, that could cost high sums, and any failure would mean that heavy losses would fall both on the user and the E-Commerce Entity.
Section 4.5.4 of the Guidelines state that: “Marketplace e-commerce entities shall not extend preferential treatment, whether directly or indirectly, to a seller or service provider …”. Clarity could be given as to what is considered as preferential treatment. A specific definition could be helpful since the term ‘preferential’ can be interpreted in various ways, such as not allowing brands to be on the foremost search result slots even after payment of sponsorship or advertising fees directed for the same. This could mean loss of funds for various E-Commerce Platforms.
Conclusion
The Guidelines issued by BIS set a strong foundation for consumer protection in e-commerce, ensuring that E-Commerce Entities take proactive measures to enhance transparency and security in online transactions for consumers. By mandating stringent requirements for sellers and other fair business practices, the Guidelines significantly reduce risks associated with online purchases and thereby improve consumer confidence and protection.
However, while these Guidelines introduce vital reforms, certain aspects could benefit from greater clarity and refinement, such as the requirements as listed above in the Analysis and Comments section. Addressing these ambiguities would ensure that the Guidelines effectively balance consumer protection and also be practical to follow for E-Commerce Entities. The practicality is important since it seems that the Guidelines are not intended to be binding in nature, and ease of compliance will result in a higher adherence. This also brings another point, that it is unlikely shady platforms will comply with the Guidelines (being non-binding and self-regulatory in nature), so any hassles you have with shady online stores are probably not going to end anytime soon except through lawsuits.
[i] Trimex International FZE Limited v. Vedanta Aluminium Limited, Arbitration Petition No. 10 Of 2009.
Image generated on Dall-E
