Fallback liability Clause in e-commerce Rules

Fallback liability Clause in e-commerce Rules

Subject : Economy

Section: Fiscal policy

The Ministry of Consumer Affairs notified the Consumer Protection (E-Commerce) Rules, 2020 under the Consumer Protection Act, 2019. Several changes were brought to the E-Commerce Rules in June 2021, which included specific flash sales, mis-selling of goods and services, the appointment of grievance redress mechanisms. It also introduced the concept of ‘fallback liability’.

Fallback liability intends to make e-commerce platforms responsible for any negligence or wrongdoings of sellers in relation to product delivery or sale of defective products.

The Issue:

• Under the Consumer Protection Act, 2019, the seller is held accountable for selling a defective product or causing harm to the consumer through it. However, under the ecommerce rules, the platforms, not sellers will be held liable/responsible.
• It has been pointed out that FDI norms prevent these platforms from having control over the inventory sold on their sites but they are being made responsible for quality of the products.

Possible adverse Impact of the provisions:

• Marketplaces as well as consumers may adopt risk averse strategies that limit their engagement to large sellers having the resources to shoulder consumer liability and ensure product quality standards.
• Can impact the growth of the digital economy, and restrict MSMEs from benefiting from rise of e-commerce
• May worsen the ease of doing business in India by increasing legal, compliance burden for any new enterprise.
• It will also increase the regulatory burden and costs for the companies too.
• It does not penalize bad actors that may “game” the framework as they are shielded from direct action. This will create a negative bias even against genuine small sellers.