Legal issues of E-commerce and Indian Laws

Updated: Jun 21, 2020

Electronic Commerce commonly known as E-Commerce is the activity of electronically buying or selling of products over the  internet. Electronic Commerce is developed mainly on technologies such as following:

1. Mobile commerce: The term Mobile Commerce was originally coined by Kevin Duffey in year 1997 at the launch of the global Mobile Commerce Forum, to mean "the delivery of e-commerce capabilities directly into the consumer's hands anywhere via wireless technology. The main products and services available through Mobile commerce are a. Mobile Money transfers, Mobile vouchers, coupons, loyalty cards, content purchase and delivery, Location based services, Information Services, Mobile Banking, Mobile brokerage Auctions, Mobile browsing, Mobile Purchase In application mobile phone payments, Mobile marketing and advertising.  2. App commerce: The popularity of apps has given rise to the latest iteration of mobile commerce. this commerce is mainly into retail transactions that take place on a native mobile app. This type of commerce is said to perform better than both desktop and mobile web when it comes to browsing duration and interactions.  3. Electronic funds transfer: Electronic funds transfer (EFT) are electronic transfer of money from one bank account to another, either within a single financial institution or across multiple institutions via computer-based systems without direct intervention of Bank staff. Electronic Fund transfer include following types:     a. Automated Teller Machine (ATM);     b. Direct deposit payment or withdrawals of funds initiated by  the payer;     c.  Direct debit payments for which a business debits the consumer bank accounts for payment for goods or services;     d. Transfer initiated by telephone; e. Transfers resulting from credit or debit card transactions                  whether or not initiated through a payment terminal.     f.  Wire transfer via an international banking network such as  SWIFT;     g. Electronic bill payment in online banking which may be  delivered by EFT or paper check.     h. Transactions involving stored value of electronic money.     i.   Immediate Payment Service (IMPS), Unified Payments  Interface (UPI) 4. Supply chain management: It is the management of the flow of goods and services involving the movement and storage of raw materials, of work in process inventory and of finished goods from one point to another for consumption. It is interconnected, interrelated or interlinked networks, channels and node businesses combine in the provision of products and services required by end customers in a supply chain.   5. Internet marketing: Internet marketing also known as Online advertising, Online Marketing, Internet advertising, digital advertising or web advertising are all forms of marketing and advertising which uses the internet to deliver promotional marketing messages to consumers. Internet Marketing includes Email marketing, Search Engine Marketing, Social media marketing, many types of display advertising (including web banner advertising) and mobile advertising.  6. Online transactions processing: Information systems of Online transactions processing  typically facilitate and manage transaction-oriented applications.  7. Electronic Data Interchange: It is a concept of business electronically communicating information information that was traditionally communicated on paper, such as purchase orders and invoices. Technical standards for EDI exist to facilitate parties transacting such instruments without having to make special arrangements. 8. Inventory Management Systems: It is a software system for tracking inventory levels, orders, sales and deliveries. It can be used in the manufacturing industry to create work order, bill of materials and other production related documents. Companies use inventory management software to avoid product overstock and outages. it is a tool for organizing inventory data that before was generally stored  in hard copy form or in spreadsheets. 9. Automated data collection systems: It is also known as Automatic Identification and Data Capture refers to the methods of automatically identifying objects, collecting data about them and entering them directly  into computer systems without human involvement. technologies include QR Codes, Bar codes, Radio Frequency Identification (RFID), Biometrics, Magnetic stripes, optical character recognition, smart cards and voice recognition. E-commerce is in turn driven by the technological advances of the semiconductor industry and is the largest sector of the electronic industry. Modern electronic commerce typically uses the World Wide Web for at least  one part of the transaction's life cycle although it may also use other technologies such as email. typical e-commerce transactions include the purchase of online books (such as Amazon) and music purchases (Music download in the form of digital distribution such as iTunes Store) and to a less extent customized/ personalized online liquor store inventory services. There are majorly three areas of e-commerce: Online Retailing/ Shopping: It is a form of E-commerce which allows consumers to directly buy goods or services from a seller over the internet using a web browser. Electronic Markets: These are the Information Systems which are used by multiple separate organizational entities within one or among multiple tiers in economic value chains. Online auctions: It is also known as E-Auction. it is a auction which is held over the internet. the scope and reach of these auctions have been propelled by the internet to a level beyond. these auctions have removed the physical limitations of traditional auctions such  as geography, presence, time, space and a small target audience.   E-commerce business may also employ some or all the followings: 1. Online shopping for retail sales direct to consumers via web sites and mobile apps and conversational commerce via live chat, chatbots and voice assistants. 2. Providing or participating in online marketplaces which process third - party business to consumer (B2C) or Consumer to Consumer (C2C) sales. 3.  Business to Business (B2B) electronic Data interchange. 4. Marketing to prospective and established customers by email or fax (for example with newsletters) 5. Engaging in pretail for launching new products and services. 6. Online financial exchanges for currency exchanges or trading purposes. The E-commerce market is consistently growing in India. Despite the growth this sector is at a beginners stage. There is currently no E-commerce policy been framed to regulate the widely growing business in India.   E-commerce industry is faced by the most common problems which are enlisted below: 1. Finding the right products to sale, 2. Competitor analysis, 3. Attracting perfect customers, 4. Delivering an seamless experience to customer, 5. Generating targeted traffic, 6. Capturing quality leads, 7. Absence of online identity verification, 8. Nurturing the ideal prospects, 9. Shopping cart abandonment, 10. Converting shoppers into paying customers, 11. Retaining customers, 12. Maintaining customer loyalty, 13. Achieving profitable long term growth, 14. Choosing the right technology and partners, and 15. Attracting and hiring the right people to make it all happen. Other than the commercial issues enlisted above there are security issues faced by E-commerce business: 1. Trademark security:  A very common legal issue faced because  trademark infringement of any type of business in Ecommerce industry becomes a very serious legal matter and hinders the growth of that business. It becomes very crucial for every business to identify trademark infringers who sale the counterfeit goods in market. 2. Copyright Protection Issue: The copyright  infringement occurs whenever  someone uses someone else's copyrighted material without permission. Section 14 of the Copy right Act deals with the cases of Copyright infringement. this section protects the owner of work from duplication without his permission. 3. Privacy Issues: Consumer Privacy is very essential factor in the business of ecommerce. The businesses of e-commerce collect, store and process the data which is of personal nature like date of birth addresses Bank details, card details, etc., this data can be misused by any person and can create havoc in one's life. Other then E-commerce also faces many more issues like:

  • Ethical issues,

  • Web tracking,

  • Disintermediation and Reintermediation,

  • Fraud on internet, and

  • Domain names.

E-commerce websites in India are governed by various laws of India which includes Information Technology Act, 2000, Indian Contract Act, 1872, Indian Penal Code, 1860 and Cyber Law due diligence.   The Department for Promotion of Industry and Internal Trade (DPIIT) in 2019 had released the Draft National E-Commerce Policy proposing data localisation and streamlining of the operations of E-commerce companies in line with FDA rules and regulations in the country to put an end to the malpractices of E-Commerce business. after much of the deliberations over the the draft policy, the government on 11th November, 2019 released draft Consumer Protection in E-commerce rules, wherein it was emphasized that E-Commerce businesses cannot influence the prices of goods and services directly or indirectly.

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