CHAPTER I

INTRODUCTION

SYNOPSIS

Introduction

Electronic Commerce

Meaning of Electronic Commerce

Kinds of Electronic Commerce

Modes of Electronic Commerce

E-commerce Trends in India

Consumer Protection in India – An Overview

Significance of the Study

Research Questions

Research Methodology and Design

1
 Introduction

"We see our customers as invited guests to a party, and we are the hosts. It’s our job
every day to make every important aspect of the customer experience a little bit better ."
– Jeff Bezos

“Be genuine. Be remarkable. Be worth connecting with.” Seth Godin

By leaps and bounds, electronic commerce (e-commerce) has grown. Interestingly,
globalization and e-commerce have appeared at about the same time making it convenient for
the worldwide economy to overcome spatial barriers. The structure of ecommerce, with its
universal scope, offers a dynamic and collaborative forum for businesses and consumers.
Increased competition and lower prices have led to this. Consumers, from anywhere and at
any time, can choose from a whole range of goods and services around the world. In order to
adapt to new and growing challenges in the field of e-commerce, businesses are constantly
innovating new technologies. The rise in the number of individuals using information and
communication technology (ICT) as a platform for trade is one of the key drivers influencing
the growth of e-commerce………………………………………..

Both companies and individuals profit from e-commerce from an economic perspective. Businesses
choose to sell their products and services through electronic technology because without much
intervention by traditional market intermediaries, they gain access to the global market. This in turn,
allows consumers at competitive prices to reach out to a variety of products and services. Also
through financial challenges, companies are able to make their products and services available in the
foreign market at reasonably low prices. At the click of a button, clients will ask about their order
status around the clock. E-commerce also provides better access to information, allowing the

consumer to discriminate between the various available goods and services. .

Within domestic markets, consumer security is no doubt a well-established term. But in the
foreign realm, the same doesn't apply. In its Guidance on Consumer Security Guidelines in
the Sense of Electronic Commerce, adopted in 1999, the Organization for Economic Co-
operation and Development (OECD) correctly described e-commerce as 'inherently foreign in
nature.' This is the case globally the network environment challenges each country's ability to
deal appropriately with impediments related to consumer protection. Market practises have
widened the pervasive reach of information technology and the amount of trade has risen
very quickly resulting in a proportionate rise in the number of consumer frauds.

………………..
 Electronic Commerce

Meaning of Electronic Commerce

Put simply, electronic commerce involves buying and selling of goods and services through
electronic means. Black’s Law Dictionary defines Electronic Commerce as “business
conducted without the exchange of paper based documents through the use of electronic
and/or online devices. It includes activities such as procurement, order entry, transaction
processing, payment, authentication and nonrepudiation, inventory control, order fulfillment,
and customer support. The general public participates in ecommerce, almost unknowingly
these days. Ecommerce devices include computers, telephones, fax machines, barcode
readers, credit cards, automated teller machines (ATM) or other electronic appliances,
whether or not using the internet.”

The WTO Work Programme on Electronic Commerce defined “electronic commerce" to

mean “the production, distribution, marketing, sale or delivery of goods and services by
electronic means”. The Committee further stated that “a commercial transaction can be
divided into three main stages: the advertising and searching stage, the ordering and
payment stage and the delivery stage. Any or all of these may be carried out electronically
and may therefore be covered by the concept of "electronic commerce”.1

1
World Trade Organisation, “Declaration on Global Electronic Commerce”, (1998), available at
http://r0.unctad.org/ecommerce/event_docs/colombo_wto.pdf, (last visited on July 29,2012)
 Kinds of E-commerce

a. B2B – Business-To-Business – E-commerce has made it possible for companies to work

with other companies to better handle their business functions. Here, companies frequently
use the Internet to incorporate the value-added chain that can stretch from the raw materials
supplier to the final customer. Indiamart.com is one such online B2B marketplace that offers
companies a forum to find other affordable suppliers.

b. B2C - Business-To-Consumer – The distribution channel usually begins with the

producer in a Business to Consumer (B2C) transaction and goes to the retailer through a
distributor/ wholesaler who communicates with the end customer. The B2C e-commerce
model is not only cost-effective for the seller in terms of investment, but also delivers goods
to customers at reduced prices..
c. C2C – Consumer-To-Consumer – Individuals use the Internet, social media and cell
phones as a way of selling products and services through their personal websites, emails,
auction pages, mobile text messages, and classified advertisement services. Portals such as
eBay, OLX and Quikr, for example, allow consumers to trade with other customers…...
d. B2B2C – Business to Business to Consumer or Intermediary Model – The B2B2C
model or the Intermediary Sale model are an expanded B2C model widely used in e-
commerce. Here the first company to negotiate with the final customer is assisted by an
external intermediary company. This model is cost-effective for the producer, who through
the marketplace model will reach his products/services to distant locations. Flipkart, one of
the most popular e-commerce websites, for example, offers a forum for customers to buy a
wide range of items such as books, music, clothing and electronic goods. The advancement of
this model is evident from the increase in the number of e-commerce players that have
recently embraced this model—Amazon, Jabong, Snapdeal, to name a few. These online
platforms are connected to payment gateway providers that provide a payment processing
network or simply provide the option of cash on delivery, where the customer pays for the
goods on delivery.
 Modes of E-commerce

i. Teleshopping:

A popular phenomenon today is advertising reaping the benefits of body slimming devices,
magical skin creams and cleaning equipment with detailed television presentations. There are
channels which are solely dedicated to telemarketing, such as telebrands and homeshop18.
Teleshopping also consists of slots on various types of channels covering entertainment,
news, etc. In general, these commercials flash toll free lines to encourage customers to
position their order, while providing simple payment options. The price and code number of
the goods (if any) and the seller's telephone number are also displayed on the computer. A
significant feature of the use of teleshopping is that a company operating from a single
location can attract vast numbers of potential customers who are widely scattered
geographically.

ii. Telemarketing:

Telemarketing is a method used by telecommunication devices such as mobile phones,

landlines, satellite phones and Voice over Internet Protocol (VoIP), to sell goods or services.
It can be done from the business location of the seller or from a call centre or even from
home. It is a form of distance selling where, without much effort and expense, the business
can reach far and wide. For example, while the parent company is in the UK, the call centre is
in India. The customer will receive a call from India about a product located in the UK. It is
important that the telemarketer should make adequate and proper disclosure of the goods or
services to customers in such forms of distance selling.

iii. Internet Shopping:

Internet shopping, or commonly referred to as online shopping, is now one of the most
convenient and fast e-commerce modes adopted by consumers. The customer browses the
online catalogue of the product or service he wants to buy and places an order here. By using
some secure online payment modes, payment is made. Upon receipt of the order, the supplier
or seller delivers the goods via postal service or courier at the consumer's place. Thus,
internet shopping allows one to visit a world market by just a click of a button, making the
best choice of products at competitive prices.
World Wide Web communication may take place either via a common server or via
multiple/intermediate servers. In the case of communications made through a common server,
the parties may communicate with each other by means of a common server, irrespective of
the fact that the parties may be in different jurisdictions. On this server, all communications
take place. The network includes servers located in different jurisdictions in case of
communication through intermediate servers/multiple servers, and the message is relayed to
any one or several servers before it is triggered. World Wide Web Electronic Commerce is a
virtual marketplace where websites are located on servers hosting pages or services offered
by a number of business concerns that in effect, represent a form of virtual marketplace
where businesses have access to their customer information. In turn, the topographies have an
effect on the analysis of three significant questions of whether, where and when.

iv. Mobile commerce: Today, mobile commerce (m-commerce) has also created a huge e-
commerce transaction platform. Initially, the phrase mobile commerce was coined in 1997 to
mean "the delivery of electronic commerce capabilities directly into the consumer’s hand,
anywhere via wireless technology." Mobile money transfers to mobile ATMs, mobile
ticketing, mobile vouchers and coupons, selling ring-tones, wallpapers, and mobile phone
games, information such as news, stock market, etc. are some of the commonly used
information. Likewise, mobile commerce has been the most convenient way for a consumer
to buy goods and services, without even using a computer or laptop, with several online
shopping portals providing mobile applications for the purchase of goods and services.

v. Social media shopping: Social media commerce is a small segment of electronic

commerce which in the context of e-commerce transactions includes the use of social media
such as Facebook, Twitter and YouTube. As it promotes social interaction and user
contributions to help purchase and sell products and services online, social media commerce
is on the rise. Customer ratings and reviews, user recommendations and referrals that draw
customers to the platform are included.
 E-commerce Trends in India

E-commerce has transformed the way business is done in India. The Indian E-commerce market
is expected to grow to US$ 200 billion by 2026 from US$ 38.5 billion as of 2017. Much of the
growth for the industry has been triggered by an increase in internet and smartphone penetration.
The ongoing digital transformation in the country is expected to increase India’s total internet
user base to 829 million by 2021 from 636.73 million in FY19. India’s internet economy is
expected to double from US$ 125 billion as of April 2017 to US$ 250 billion by 2020, backed
primarily by E-commerce. India’s E-commerce revenue is expected to jump from US$ 39 billion
in 2017 to US$ 120 billion in 2020, growing at an annual rate of 51%, the highest in the world.
 
Market Size
Propelled by rising smartphone penetration, launch of 4G network and increasing consumer
wealth, the Indian E-commerce market is expected to grow to US$ 200 billion by 2026 from
US$ 38.5 billion in 2017. Online retail sales in India is expected to grow 31% to touch US$
32.70 billion in 2018, led by Flipkart, Amazon India and Paytm Mall.
Smartphone shipments in India increased eight% y-o-y to reach 152.5 million units in 2019,
thereby making it the fastest among the top 20 smartphone markets in the world.
Internet penetration in India grew from just 4% in 2007 to 52.08% in 2019, registering a CAGR
of 24% between 2007 and 2019. The number of internet users in India is expected to increase
from 687.62 million as of September 2019 to 829 million by 2021.
Investments/ Developments
Some of the major developments in the Indian e-commerce sector are as follows:

 In August 2020, Reliance Industries (RIL) acquired 60% stake in Netmeds, an online
pharmacy, for Rs 620 crore (US$ 84.61 million). This acquisition gives RIL’s retail unit,
Reliance Retail, entry into a vertical e-commerce space.
 In January 2020, Divine Solitaires launched its E-commerce platform.
 In February 2020, Flipkart set up a ‘Furniture Experience Center’ in Kolkata, its first
offline presence in eastern India.
 In April 2020, Reliance Industries (RIL) started home delivery of essentials in
partnership with local kirana stores in Navi Mumbai, Thane and Kalyan.
 In April 2020, Swiggy received an additional US$ 43 million funding as part of its
ongoing Series I round.
 In May 2020, PepsiCo India partnered with Dunzo for its snack food brands that include
Lay’s, Kurkure, Doritos and Quaker.
 In May 2020, chocolate maker Hershey India partnered with Swiggy and Dunzo to
launch their flagship online store in order to increase reach.
 In Union Budget 2020–21, Government has allocated Rs 8,000 crore (US$ 1.24 billion)
to BharatNet Project to provide broadband services to 150,000-gram panchayats.
 In August 2019, Amazon acquired 49% stake in a unit of Future Group.
 Reliance will invest Rs 20,0000 crore (US$ 2.86 billion) in its telecom business to
expand its broadband and E-commerce presence and to offer 5G services.
 In September 2019, PhonePe launched super-app platform 'Switch’ to provide a one stop
solution for customers integrating several other merchants apps.
 In November 2019, Nykaa opened its 55th offline store marking success in tier II and tier
III cities.
 

Government initiatives
Since 2014, the Government of India has announced various initiatives, namely Digital India,
Make in India, Start-up India, Skill India and Innovation Fund. The timely and effective
implementation of such programs will likely support growth of E-commerce in the country.
Some of the major initiatives taken by the Government to promote E-commerce in India are as
follows:

 Government e-Marketplace (GeM) signed a Memorandum of Understanding (MoU) with

Union Bank of India to facilitate a cashless, paperless and transparent payment system
for an array of services in October 2019.
 In February 2019, the Government of India released the Draft National e-Commerce
Policy which encourages FDI in the marketplace model of E-commerce

 In order to increase the participation of foreign players in E-commerce, Indian

Government hiked the limit of FDI in E-commerce marketplace model to up to 100% (in
B2B models).
 Heavy investment made by the Government in rolling out fiber network for 5G will help
boost E-commerce in India.
 In Union Budget of 2018–19, Government allocated Rs 8,000 crore (US$ 1.24 billion) to
BharatNet Project to provide broadband services to 150,000-gram panchayats
 As of August 2018, the Government has been working on the second draft of E-
commerce policy, incorporating inputs from various industry stakeholders.

Achievements
Following are the achievements of the Government in the past four years:

 Internet subscribers reached 718.74 million by the end of 2019.

 In the festive sale (September 29–October 4, 2019), E-tailers in India achieved US$ 3
billion of Gross Merchandise Value (GMV).
 Unified Payments Interface (UPI) recorded 1.25 billion transactions in March 2020,
valued at Rs 2.06 lakh crore (US$ 29.22 billion).
 Internet Saathi project benefitted over 26 million women in India which reached 2.6 lakh
villages and 20 states.

 Under Digital India movement, Government launched various initiatives like Udaan,
Umang, Start-up India Portal etc.
 Udaan, a B2B online trade platform that connects small and medium size manufacturers
and wholesalers with online retailers and provide them logistics, payments and
technology support, has sellers in over 80 Indian cities and delivers to over 500 cities.
 The Government introduced Bharat Interface for Money (BHIM), a simple mobile based
platform for digital payments.

 
Road Ahead
The E-commerce industry has been directly impacting micro, small & medium enterprises
(MSME) in India by providing means of financing, technology and training and has a favourable
cascading effect on other industries as well. Indian E-commerce industry has been on an upward
growth trajectory and is expected to surpass the US to become the second largest E-commerce
market in the world by 2034. Technology enabled innovations like digital payments, hyper-local
logistics, analytics driven customer engagement and digital advertisements will likely support
the growth in the sector. The growth in E-commerce sector will also boost employment, increase
revenues from export, increase tax collection by ex-chequers, and provide better products and
services to customers in the long-term. Rise in smartphone usage is expected to rise 84% to
reach 859 million by 2022.
E-retail market is expected to continue its strong growth - it registered a CAGR of over 35% to
reach Rs 1.8 trillion (US$ 25.75 billion) in FY20.4
.
4
Indian Brand Equity Foundation Report 2020.
 Consumer Protection Law in India – An Overview

Legislations worldwide have long acknowledged the need to guarantee fundamental rights to
consumer welfare. Since the Vedic period in India, the consumer security phenomenon has
been a constant endeavour. As the industrial revolution advanced, there was also an increased
abundance of human needs in terms of goods and services. The modern canon is
characterised by complexity of business strategies and impersonal relationships between the
two, unlike the earlier period, when a personal relationship between a seller and buyer
followed an economic relationship.

The concern for consumer protection is largely seen in the Constitution as well. Article 14
enshrines fundamental right to equality and ensures equal bargaining powers to both seller
and buyer. Article 19(1) (a) provides for fundamental right to speech and expression right
includes freedom to hold opinions without interference and to seek, receive and impart
information and ideas through any media and regardless of frontiers. The Supreme Court
observed in the case of Union of India v. Association for Democratic Reforms 11 as follows -
“One-sided information, disinformation, misinformation and non-information, all equally
create an uninformed citizenry which makes democracy a farce. Freedom of speech and
expression includes right to impart and receive information…” This aspect of “right to
receive information” can be connected with the right to seek information which is recognized
as one of the six basic rights of a consumer protection.

11
Union of India v. Association for Democratic Reforms, (2002) 5 SCC 294
In the international context, 9 April 1985 is an important date for the adoption of a set of
guidelines for consumer protection by the United Nations General Assembly12 on that date.
These guidelines are a detailed policy structure that describes what policymakers need to do
to promote the protection of consumers.

India enacted the Consumer Protection Act in 1986 to protect the interests of consumers, in
line with the United Nations Consumer Protection Guidelines (UNGCP). The prominence of
the statute lies in its stated goals of recognizing consumer rights and offering cost-effective
and rapid redress. The Act guarantees six consumer rights including the right to protection,
the right to be consulted, the right to choose the right to be heard, the right to seek redress and
the right to consumer education.

The Act applies to all goods and services unless specifically exempt by the Central
Government.13 It covers all sectors, public, private and co-operative. The Consumer
Protection Act, 1986 protects consumer against defective goods14, deficiency in service15,
restrictive trade practices16 and unfair trade practices.17 Under the Act, complaint may be
made by a consumer, a voluntary consumer association registered under the Companies Act,
1956 or any other law for the time being in force; or the Central Government or any State
Government, one or more consumers, where there are numerous consumers having the same
interest, in case of death of a consumer, his legal heirs or representative; who makes a
complaint.18 The Consumer Protection Act, 1986 is supported by Consumer Protection Rules,
1987 and Consumer Protection Regulations, 2005.

The advent of Information Technology law in India has recognized electronic forms of
commerce as legally valid and binding on the parties. It also recognizes various players in the
e-commerce market and lays down the extent of their liabilities.

There is no dedicated law on electronic commerce in India. The Consumer Protection Act,
1986 is now being amended to bring online consumers within its purview. In other words, the
amended Act will bring electronic commerce as a sub-sect within the gamut of Consumer
12
United Nations General Assembly, “United Nations Guidelines for Consumer Protection (as expanded in
1999)” A/RES/39/248,(1985).
13
Consumer Protection Act, 1986, Section 1(4).
14
Consumer Protection Act, 1986, Section 2(1) (f).
15
Consumer Protection Act, 1986, Section 2(1) (g).
16
Consumer Protection Act,1986, Section 2(1) (nnn).
17
Consumer Protection Act, 1986, Section 2(1) (r).
18
Consumer Protection Act, 1986, Section 2(1) (b).
Law for Protection in India has brought an important change in the light of Redressal's e-
commerce grievance is that the proposed amendment allows a consumer to bring legal action
against a seller where the consumer resides. This provides for 'territory-free' legal action by
electronic means against suppliers of goods and services. In addition, the proposed
amendment has also introduced mediation as an alternative mode to the resolution of
consumer disputes. Under the current legislation, non-information and negligent withdrawal
of information by electronic business is seen as a significant service deficiency'. The
definition of 'unfair market practice' is amended to include the cooling-off duration that is
applicable to the selling of products online. Some new principles have been implemented to
improve consumer security in electronic transactions, such as unequal contractual terms and
product liability.
 Significance of the Study

The importance of the study lies in the fact that the complaining patterns resulting from
online shopping are objectively analysed by the customer and the important factors that
trigger data asymmetries in such transactions are brought forward. The study also goes
further in suggesting clear cut ideas that can form the basis for information regulation
strategies in online markets. While there is sufficient literature on consumer protection
concerns in electronic commerce, this is perhaps the first attempt to approach the study in a
comprehensive way, discussing three key aspects of consumer protection in online shopping -
disclosure of knowledge, perception of customers and redress of grievances.
Correspondingly, the three factors apply to three key consumer rights: the right to
information, the right to consumer education and the right to seek redress. The study is useful
in identifying places where information disclosure in online transactions is at the heart of the
issue where government interference in online markets serving customers may be warranted,
and the most successful type of intervention may be warranted. The study applies to the point
that a regulatory structure is placed in place for uniform disclosure guidelines to be complied
with by companies providing consumer products and services for sale through the electronic
medium. The new structure will serve as a starting point for new policy initiatives to
empower consumers.

The purpose of the study is also to identify and establish solutions and strategies aimed at
achieving customer awareness and education that address relevant issues in online shopping.
The report that seeks to objectively analyse the regulatory and compliance processes of the
Consumer Fora in addressing complaints resulting from online shopping proposes an in-depth
review of a body of consumer cases before the consumer dispute redressing agencies. The
goal here is to analyse how Redressal agencies are prepared to manage complaints emerging
in the contemporary digital age and to recommend effective steps to improve the handling of
customer grievances.

Research Questions

1. To what degree are India's consumer laws adequate to provide the consumer with
sufficient and reliable information when buying products or using services online?

2. What are the international requirements and criteria for online customer contracts facing
knowledge deficiencies?

3. Does the legal/regulatory system regulating consumer protection need to be changed to

bring about uniform disclosure of online shopping information?

4. Are customers who shop online properly trained and aware of their rights and obligations
when buying products or services through the platform?

5. What are the different methods of grievance remedy available in India under the Consumer
Protection Law?

2. What is the position of grievance handling by Dispute Regressal Agencies set up under
the Consumer Protection Act, 1986 in the context of online shopping?

Research Methodology and Design

Consumer Information and Awareness

A blend of a doctrinal and analytical approach to solving the research problem is included in
the research review. The basic elements of science are the Paradigm. A paradigm is a set of
popular theories or ways of thinking about some part of the world. The research approach
was motivated by 3 of the most relevant paradigms. This is the oldest of all three. Positivism
It underlies scientific method, independently existed universe, objectivity, research, universal
laws are realities. The object of analytics is to investigate or clarify phenomena. In our
contemporary world, various subjective realities, complex socially constructed concepts,
study reflexivity and critical realism seek to concentrate on liberation, power relations,
conflicts and inconsistencies and help eradicate them as causes of alienation and dominance.
This analysis blends all three, positivism that takes care of hypothesis testing, doctrinal
research led by analytics and at last, critical realism that concerns about, how to empower the
consumer through online rights.

This review widely encompasses both qualitative and quantitative analysis methods with
respect to methodology. In terms of the research process, it covers the method of survey
research and the questionnaire method is used in terms of data collection. This encompasses
both quantitative and qualitative aspects of data analysis, such as statistical analysis and
content analysis, respectively.