INTRODUCTION
With the emergence of Globalization and the Capitalist Approach, platforms like Amazon, Flipkart, Nykaa, Myntra, and Meesho have drastically changed the landscape of the Indian Retail Market. These platforms have not only made the lives of Consumers super convenient but have also generated employment opportunities for others. These platforms provide a medium where competent sellers can list their products and interested buyers can purchase the same, while saving both cost and time. Nowadays, everything and anything from groceries to electronics can be made available right at the doorstep within a few minutes. Platforms like Amazon Fresh, Flipkart Minutes, etc, have captured the market of Indian Kirana Stores while offering high-quality products at discounted prices to the consumers. These platforms have also created employment opportunities, which led to the recognition of a new concept for Labourers, which is “Gig Workers”. Through which any person, regardless of their skills, can work part-time and generate income with just a smartphone and a two-wheeler.
Amidst all of this, whenever any dispute arises between the Consumer and the Listed Seller on these platforms, Tribunals like National Consumer Dispute Redressal Commission (NCDRC), State Consumer Dispute Redressal Commission (SCDRC), District Consumer Dispute Redressal Commission (DCDRC), often imposes heavy penalties on these Big Giants (Amazon, Flipkart, etc). Whereas these platforms only serve a purpose of providing a platform that facilitates the transaction between the Buyer and the Seller, while protecting themselves with the help of Section 79, Information Technology Act, 2000[1], i.e., “Safe Harbor Provision”.
WHAT ARE E-COMMERCE INTERMEDIARY PLATFORMS?
E-commerce Intermediary Platforms are those platforms that facilitate transactions between the listed Seller and the potential Buyer. The critical question that arises here is, can E-commerce Platforms be treated as Intermediaries?
As per the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rule, 2021, “an E-commerce Entity that is acting as a third-party facilitator to ensure smooth transaction between Buyer and the Seller will qualify as an Intermediary Platform. Whereas, an E-commerce Entity that is functioning as per the Inventory-based Model will not qualify as an Intermediary Platform as per Rule 2(1)(w) of the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rule 2021[2]” Therefore, platforms like Amazon, Myntra, Flipkart, will qualify as an E-commerce Intermediary Platform, whereas platforms like Amazon’s Retail Model will fall out of the purview of it.
E-commerce Intermediary Platforms do not have any control over the working of Listed Sellers; their role is limited to ensuring a smooth communication platform between both. Below mentioned are the various categories of disputes between a Buyer and a Listed Seller, where the courts have often imposed heavy penalties on E-commerce Platforms:
- Dispute Related to Counterfeit Product[3]
- Dispute Related to Overpricing of Product[4]
- Dispute Related to Manufacturing Defect[5]
- Dispute Related to Duplicate Goods Delivery[6]
The above-mentioned list is non-exhaustive.
It is pertinent to note that disputes falling under the category of the above-mentioned disputes do not create any liability on E-commerce Intermediary Platforms. Rather, the liability should solely be owned by the Seller/Manufacturer.
WHAT IS THE SAFE HARBOR PROVISION?
The Safe Harbor provision originated under Section 79, Information Technology Act, 2000. This provision works as a shield for the E-commerce Intermediary Platforms to safeguard themselves from the malicious intents of the Buyers. Section 79(1) states that “no Intermediary Platform shall be made liable for any third-party data, information, made available or hosted by it”[7]. But the immunity granted under Section 79(1) is conditioned with Section 79(2)[8], which mandates an Intermediary observing Due Diligence and not having actual knowledge of an Unlawful Act.
In the case of Christian Louboutin SAS v Nakul Bajaj & Ors[9]., The Delhi HC has made a clear distinction between Active Intermediaries and Passive Intermediaries. Moreover, the judgment also talks about the concept of “Hosting-Defence”, which restricts the liability of an Intermediary Platform, provided that the said Intermediary must not have “Actual Knowledge” of the Unlawful Act.
It is pertinent to note that, if an E-commerce Intermediary Platform works outside the ambit of a Passive Intermediary and indulges in the function of handling returns, goods promotion, etc, it loses the immunity under Section 79(1)[10].
Therefore, Safe Harbor Provision[11] only applies when:
- The Intermediary Platform is not involved in Listings.
- The Intermediary Platform does not hold any inventory or regulate prices.
- The Intermediary Platform takes down the content/information within 48 hours of receiving a court notice.
Undoubtedly, the provision guarantees an “Umbrella Protection” to the Intermediary Platforms in regulating free trade and combating the victimized false approach of the Buyers, provided that a proper due diligence has been followed. For Example, if Flipkart or Amazon hosts any third-party seller’s product listings without making any alterations, and the product turns out to be fake, Flipkart or Amazon can claim safe harbor, provided they were not aware of the illegality.
THE WAY FORWARD
Despite having a shield provision of Safe Harbor, many E-commerce Intermediary Platforms are held accountable for various disputes related to Overpricing, Manufacturing Defect, Counterfeit Product, Unfair Trade Practices, etc. The major cause behind this is a lack of proper due diligence, irregular Audits, etc.
Recently, in the case of Lifestyle Equities CV & Anr. V Amazon Technologies, Inc. & Anr[12]The Delhi High Court has imposed a heavy penalty of Rs. 339.25 crores on Amazon for a Trademark Infringement case. Undoubtedly, Amazon was satisfying the definition of an Intermediary Platform mentioned under Rule 2(1)(w), Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rule, 2021. But, in the present case, the company that has infringed the logo of Beverly Hills Polo Club was owned by Amazon itself, making it worse and thereby working outside the ambit of the Safe Harbor Provision. The court slammed Amazon not only for trademark infringement but also for being a guiding force in the same.
In my opinion, as the economy is getting digitalized, striking the right balance between innovation and consumer protection becomes extremely critical. Various advancements that can decrease the burden of E-commerce Intermediary Platforms from illicit third-party listings are:
- Maintaining proper and Regular Audits of the Listed Sellers.
- Expeditious Grievance Redressal Mechanisms.
- Clear Intermediary Platform guidelines that specify up to what extent they can be held accountable.
- Proper Due Diligence followed by advanced AI-driven tools.
- Organizing Digital Literacy Consumer Campaigns.
CONCLUSION
While the Economy is getting digitalized exponentially, it’s high time now for advancement in existing regulations to ensure healthy trade and competition. Undoubtedly, these platforms (Amazon, Flipkart, Myntra, etc.) are huge giants in comparison to the deprived Consumer, but the statistics showed that these platforms were held accountable in almost every dispute, regardless of the Safe Harbor Protection. These platforms only work like a shopping mall and involve no role between the buyer and the seller. Their role is limited to providing smooth communication.
Nowadays, anything from groceries to electronics is available on these Intermediary Platforms with high discounts. Buyers prefer to order products online while choosing comfort over chaos. Therefore, it is pertinent to note that smoother regulations w.r.t. the working of Intermediary Platforms are mandatorily required so that a healthy environment for both Sellers and Shoppers can be made.
The future of E-commerce lies in a “Delegated Model of Responsibility”, where:
- Sellers should ensure a standard of quality and no deceitful measures.
- Buyers should be digitally aware of the consequences, and
- Intermediary Platforms should ensure transparent and lawful mechanisms.
Any protective measure like Section 79(1)[13], can only be fruitful when used in good faith rather than using it as a means of escape from liability.
Author(s) Name: Ashi Singhal (IMS Unison University)
References:
[1] Information Technology Act 2000, Section 79
[2] Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rule 2021, Rule 2(1)(w)
[3] Lifestyle Equities CV & Anr. V Amazon Technologies, Inc. & Ors., [CS (COMM) 443/2020]
[4] Myntra Designs Pvt. Ltd. V Ajay Pal Singh, CC/ 472/ 2018, [6]
[5] Lakshay Kundu v Amazon Seller Service Pvt. Ltd., CC/ 686/ 2021, [10]
[6] Ginni v Flipkart Internet Pvt. Ltd. & Anr., CC/218/2019, [6]
[7] The Information Technology Act 2000, Section 79(1)
[8] Information Technology Act 2000, Section 79(2)
[9] Christian Louboutin SAS v Nakul Bajaj & Ors, (2018) 253 DLT 728, [47]
[10] Information Technology Act 2000, Section 79(1)
[11] Information Technology Act 2000, Section 79(1)
[12] Lifestyle Equities CV & Anr. V Amazon Technologies, Inc. & Ors., [CS (COMM) 443/2020]
[13] Information Technology Act 2000, Section 79(1
