The backbone of e-commerce regulations is established by the Information Technology Act, 2000. It provides legal validity to electronic transactions which in turn gives recognition to the services provided by e-commerce platforms.
Landmark changes

  • India’s Foreign direct investment (FDI) policy on e-commerce comprises of circulars, guidelines, reviews, clarifications or press-notes issued by the DPIIT. It is intricate
    and multifaceted by design and aims to strike a balance between protecting the interests of smaller market players and promoting consumer welfare while regulating anti-competitive practices of big e-commerce players. The policy distinguishes between e-commerce businesses built on the ‘marketplace model’ and the ‘inventory-based model’. FDI is permitted in B2B e-commerce but is prohibited in B2C e-commerce. There are also separate provisions for FDI in e-commerce for single brand retail, multi-brand retail, manufacturing entities selling on e-commerce, and wholesale
    trading entities.
  • All product information required to be displayed on pre-packaged commodities (such as MRP, best before date, generic/common name of product etc.) also needs to be specified on electronic platforms under the Legal Metrology Act read with the Legal Metrology (Packaged Commodity) Rules. The Rules were amended in 2017, and also allocate they liability of ensuring informational accuracy to the seller or manufacturer of the commodity.
  • The interests of online consumers are protected by The Consumer Protection Act, 2019 and its associated Consumer Protection (e-commerce) Rules 2020. These regulations divide e-commerce into ‘marketplace model’ and ‘inventory model’, and mandate disclosure of product details inter alia, price, expiry dates, country of origin, and details of the importer. They provide for the creation of a substantial grievance redressal mechanism, place restrictions on unfair trade practices and consumer discrimination, and prohibit fake reviews.
  • To better understand the functioning of e-commerce and its implications for markets and competition, the Competition Commission of India published a “Market Study on E-Commerce in India” in 2020. It chronicles the trends and features in the market, highlights competition issues in the e-commerce sector (such as platform neutrality, deep discounts, exclusive agreements, platform to business contracts, and platform price parity clauses) and provides the commission’s recommendations for the same, while indicating certain self-
    regulatory guidelines for e-commerce platforms to increase transparency, reduce information asymmetry, and incentivise competition.
  • The Parliamentary Standing Committee on Commerce also published its report on Promotion and Regulation of E-commerce in India in 2022 which called for e-commerce platforms to be subject to stricter regulations and enforcement. Herein, the committee recommends, inter alia, that India’s regulatory framework be amended to include identification of ‘gatekeeper
    platforms’ of a specific scale that should be subject to more stringent supervision, proposed tougher methods to identify anti-competitive mergers and acquisitions, advised that the FDI framework be made more comprehensive, emphasised on the regulation of data and significance of cybersecurity, and recommended for the creation of a separate division within the CCI with the sole mandate of regulating e-commerce platforms.

Recent Developments
The Department of Industry and Internal Trade (DPIIT) has formulated a draft National E-Commerce Policy (NECP) in 2019. In its current iteration, the draft policy seeks to address six broad issues in the e-commerce ecosystem viz., data, infrastructure development, e-commerce marketplaces, regulatory issues, stimulating domestic digital economy, and export promotion through e-commerce. This policy has yet to come to fruition.

The Consumer Protection (e-commerce) Rules were also proposed to be amended through the highly contentious Draft Consumer Protection (e-commerce) Rules 2021 which sought to restrict flash sales, introduce ‘fall-back liability’, and restrict preferential treatment to related parties. The current status of this amendment remains unclear at this date.

Department for Promotion of Industry and Internal Trade (DPIIT)
Ministry of Commerce and Industry

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