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E-commerce’s liability conundrum: Calls for greater collaboration between all stakeholders

Amidst the outcry over the economic decline during the Covid-19 pandemic, one industry that not just survived but thrived, exhibiting an unprecedented growth, is e-commerce. Even after the physical shops have opened, the e-commerce sector in India is predicted to grow impressively at 21.5% in 2022. This wouldn’t have been possible without consumers trusting the online mode of shopping to get the right product they were looking for.

E-commerce is a network of several entities working together to bring the right product to the consumers. Each entity has its share of responsibilities to gain and maintain the trust of consumers in products. CUTS Institute for Regulation & Competition (CIRC), in its survey to understand the consumer perception of product trust and establishing the best practices that can help small businesses to attract more business volumes, discovered that consumers categorise receiving a fake/counterfeit product, a damaged product, and an expired product as factors impacting product trust. So, if a consumer does not receive the right product from their online shopping, who is liable for it?

According to CIRC’s survey, in an offline purchase, 54.4% respondents hold a shopkeeper liable for such instances. However, for online shopping, 34.92% of the respondents hold the e-commerce platform liable and 40% say both the platform and the seller are liable. It shows that the majority of consumers aren’t sure who is responsible for such incidents. To strengthen product trust in consumers to shop online, it is essential to bring awareness in consumers about who is liable for these events and enhance consumer grievance redressal mechanism.

Let’s look at the e-commerce value-chain to understand the liability conundrum. In an offline channel, the value-chain consists of the manufacturer and the retailer of the product whereas, in the online channel, in addition to manufacturer and retailer, the e-commerce platform on which the product is traded and the delivery partner are also included. For delivery, there are two models: It is fulfilled either by the seller itself or the platform’s delivery partner. If a consumer receives a damaged, defective, wrong or counterfeit product, then one or more of these parties in the value-chain are liable for it; however, which party is liable depends on where the fault lies.

In case a consumer receives a defective product, the manufacturer should be liable for producing a defective product, but it is routed through the retailer who is selling the product to the consumer. In case a consumer receives a damaged product, it has to be identified whether the product was damaged due to mishandling by the delivery partner and which party fulfilled the delivery, the e-commerce platform or the seller, or it was mishandled by the seller before sending it out for delivery. If the wrong product is sent to the consumer, the liability falls on the party fulfilling the delivery. In case it is a counterfeit product, the onus is on the seller for selling a counterfeit product.

The responsibility of selling good quality, standardised products and providing the correct description and photos of the products on an e-commerce website is that of a seller. If the seller fails to do that, he has to be held liable for it. This is not to say that an e-commerce platform is sans any responsibility. As a mere digital touchpoint for sellers and buyers, an e-commerce platform is responsible for governance to ensure due diligence on the seller-side, mandatory requirements and licenses, fidelity of information and consumer grievance redressal. While there is no foolproof mechanism to completely prevent the incidents of damaged, wrong and counterfeit products on an e-commerce platform, the more established players in the industry like Amazon, Snapdeal, etc, have strong safety and compliance rules, return and refund policies, consumer grievance redressal and investigation mechanism to identify the bad actors and weed out the sellers selling counterfeit products to minimise such events and provide a safe and secure environment to the buyers.

Sellers/marketplaces are the first place for the consumers to seek redressal, and only when a complaint remains unresolved should they take legal recourse. This mechanism helps the sellers, marketplaces and the government to work together and protect the interests of consumers. The consumer protection law and the newly proposed rules for e-commerce under the Act, as well as the jurisprudence in India, must also provide clarity on the liability of each party so that the consumers can be protected from and compensated rightly for such incidents.

The way forward should be greater collaboration between all stakeholders—e-commerce players, trade bodies, consumer consortia and policy makers—to arrive at a stable and predictable policy framework that proves mutually beneficial to all. Moreover, grievances must be acknowledged and addressed in a time-bound manner. This will require setting up of standard operating procedures at both the government’s and e-commerce’s end. Although meaningful strides have been made to formalise online grievances, there is scope to evangelise these avenues further in the consumer community.

In a country that has thriving grey markets, banning or delisting of sellers may not serve the purpose. The solution lies in best practices and education. Financial Express

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