CHAPTER I

INTRODUCTION

SYNOPSIS

1.1Introduction

1.2 Electronic Commerce

1.2.1Meaning of Electronic Commerce

1.2.2 Kinds of Electronic Commerce

1.2.3 Modes of Electronic Commerce

1.2.4 E-commerce Trends in India

1.3 Consumer Protection in India – An Overview

1.4 Statement of the Problem

1.5 Scope and Objective

1.6 Literature Review

1.7 Significance of the Study

1.8 Research Questions

1.9 Hypothesis

1.10 Research Methodology and Design

1.10.1 Consumer Information and Awareness

1.10.2 Dispute Resolution

1.11 Limitations of Study

1.12 Chapterization

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1.1 Introduction

"A Consumer is the most important visitor on our premises. He is not dependent on us we
are on him. He is not an interruption to our work; he is the purpose of it. We are not doing
a favour to a consumer by giving him an opportunity. He is doing us a favour by giving an
opportunity to serve him." – Mahatma Gandhi

“I dream of a Digital India where access to Information knows no barriers.

I dream of a Digital India where the netizen is an Empowered Citizen” – Prime
Minister Narendra Modi at the launch of Digital India.

Electronic commerce (e-commerce) has grown by leaps and bounds. Interestingly,

globalization and e-commerce emerged at about the same time making it convenient to
overcome spatial barriers in the global market. With its ubiquitous reach, the architecture of
electronic commerce provides a dynamic and collaborative platform to business and
consumers. This has resulted in increased competition and lower prices. Consumers get to
choose from a whole range of goods and services across the world, from anywhere and at any
time. Businesses are constantly innovating new technologies in order to adapt to new and
evolving challenges in the area of e-commerce. One of the main drivers underlying e-
commerce growth is the rise in number of individuals using the Information and
Communication Technology (ICT) as a platform to trade.

From an economic perspective, both organizations and individuals benefit from e-commerce.
Businesses choose to sell their products and services through electronic mode because they
gain access to the global market without much intervention of traditional market
intermediaries. This in turn enables consumer to reach out to a variety of goods and services
at competitive prices. Even during financial hardship, businesses get to provide visibility of
their goods and services in the international market at relatively low costs. Customers can
inquire about their order status around the clock at the click of a mouse. E-commerce also
provides better access to information, which allows the consumer to discriminate among
diverse goods and services available.

Consumer protection within domestic markets is no doubt a well-established concept. But the
same does not hold in the international realm. The Organisation for Economic Co-operation
and Development (OECD) in its recommendations concerning Guidelines for Consumer
Protection in the Context of Electronic Commerce adopted in 1999, rightly identified e-
commerce as being ‘inherently international in nature’. This being the scenario, the global

2
network environment challenges the capability of each country to address impediments
relating to consumer protection appropriately. The ubiquitous reach of information
technology has expanded business operations and the volume of trade has increased very
easily, leading to a proportional increase in the number of consumer frauds.

1.2 Electronic Commerce

1.2.1 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

The OECD, while addressing the Economic and Social Impact of Electronic Commerce in
1999 stated – “In order to explore and estimate the socio-economic impacts of electronic
commerce, it is essential to define electronic commerce. As with many new services, this is
not a simple matter, as definitions given by various sources differ significantly. Some include
all financial and commercial transactions that take place electronically, including electronic
data interchange (EDI), electronic funds transfers (EFT), and all credit/ debit card activity.
Others limit electronic commerce to retail sales to consumers for which the transaction and
payment take place on open networks like the Internet. The first type refers to forms of
electronic commerce that have existed for decades and result in trillions of dollars worth of

1
World Trade Organisation, “Declaration on Global Electronic Commerce”, (1998), available at
[Link] (last visited on July 29,2012)

3
activity every day. The second type has existed for about three years and is barely
measurable.”2

The Model Law on Electronic Commerce (MLEC) was adopted by United Nations
Commission on International Trade Law (UNCITRAL) in 1999, to enable and facilitate
commerce conducted using electronic means by providing national legislators with a set of
internationally acceptable rules aimed at removing legal obstacles and increasing legal
predictability for electronic commerce. The fundamental principles of non-discrimination,
technological neutrality and functional equivalence adopted by the Model Law makes it
widely regarded as the founding elements of modern electronic commerce law.3

Based on the UNCITRAL Model law, the Indian Information Technology Act, 2000,
provides legal recognition to transactions carried out by electronic means. The Act refers
‘electronic commerce’ to transactions carried out by means of electronic data interchange and
other means of electronic communication, which involve the use of alternatives to paper-
based methods of communication and storage of information.

In general, electronic commerce involves the following stages:

Information Sharing

Order

Payment

Performance of Order/Delivery

Support/Services

2
Organisation for Economic Co-operation and Development,(1999), “Economic and Social Impact of
Ecommerce: Preliminary Findings and Research Agenda”, Box 1.1, page 28, OECD Digital Economy Papers,
No. 40, OECD Publishing, available at [Link]
/[Link]?expires=1433753211&id=id&accname=guest&checksum=42375C14863AB71A84F9B700
62565626, (last visited on March 25, 2012)
3
United Nations Commission on International Trade Law (1996), UNCITRAL Model Law on Electronic
Commerce with Guide to Enactment, with additional article 5 bis as adopted in 1998, available at
[Link] (last visited on December 20,2011)

4
1.2.2 Kinds of E-commerce

a. B2B – Business-To-Business – E-commerce has enabled businesses to partner with other

businesses for efficiently managing their business functions. Here businesses commonly use
the Internet to integrate the value added chain that can extend from the supplier of raw
materials to the final consumer. [Link] is one such B2B online market place which
provides a platform for businesses to find other competitive suppliers.

b. B2C - Business-To-Consumer – In a Business to Consumer (B2C) transaction, the

distribution channel typically starts with manufacturer and goes through a distributor/
wholesaler to retailer, who interacts with the end customer. The B2C ecommerce model is not
only cost effective in terms of investment to the seller, but also provides consumer with
products at discounted price.
c. C2C – Consumer-To-Consumer – Here individuals use Internet, social media and
mobile phones as means to sell goods and services, either through their personal websites,
email, auction sites, text messages through mobile phones and sites providing classified
advertising services. For example, portals such as eBay, OLX and Quikr enable consumers to
transact with other consumers.
d. B2B2C – Business to Business to Consumer or Intermediary Model – An extended
B2C model commonly used in ecommerce is the B2B2C model or the Intermediary Selling
model. Here, an additional intermediary business assists the first business to transact with the
end consumer. This model is cost-effective to the manufacturer, who can reach his
goods/services to distant locations through the marketplace model. For instance, Flipkart, one
the most successful e-commerce portals provides a platform for consumers to purchase a
wide variety of goods such as books, music, clothing and electronic goods. The growth of this
model is evident from the surge in the number of e-commerce players adopting this model in
recent times – Amazon, Jabong, Snapdeal to name a few. These online platforms tie up with
payment gateway facilitators who provide a platform for the processing of payments or
simply provide for cash on delivery option, where the buyer pays for the goods on delivery.

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1.2.3 Modes of E-commerce

i. Teleshopping:

Advertisements extolling the virtues of body slimming gadgets, magical skin creams and
cleaning equipment with extensive demos on the television is a common phenomenon today.
There are channels such as telebrands and homeshop18, which are exclusively dedicated to
telemarketing. Teleshopping also comprise of slots on channels of different sorts spanning
entertainment, news etc. These advertisements generally flash toll free lines to enable
consumers to place their order, while offering easy payment options. The price and code
number (if any) of the products and the telephone number of the sellers are also displayed on
the screen. A significant characteristic of using teleshopping is that a business that operates
from a single location can reach large numbers of potential customers who are geographically
widely spread.

ii. Telemarketing:

Telemarketing is a method of selling goods or services using telecommunication devices such

as Mobile phones, landlines, satellite phones and voice over Internet protocol (VoIP). It can
be done from the seller’s place of business or from a call centre or even from home. It is a
form of distance selling where the business can reach far and wide without much effort and
expense. For instance, while the mother company is in UK, the call centre is located in India.
The consumer will get a call from India about a product, which is in UK. It is important in
such forms of distance selling, that the telemarketer should make adequate and proper
disclosure of the goods or services to the customers.

iii. Internet Shopping:

Internet shopping or commonly called online shopping is now one of the most convenient and
quick modes of e-commerce to which consumers have adopted. Here the consumer browses
the online catalogue on the product or service he desires to purchase and places an order.
Payment is made by using some safe online payment modes. On receiving the order, the
supplier or seller delivers the goods at the consumer’s place through postal service or courier.
Thus, internet shopping enables one to visit a world market, make best choice of goods at
competitive prices by just a click of button.

6
Communication on the World Wide Web may take place either through a common server or
through intermediate/multiple servers. In case of communications carried via common server,
the parties communicate with each other using a common server, irrespective of the fact that
the parties may be in different jurisdictions. All communications take place on this server. In
case of Communication through intermediate servers/ multiple servers, the network includes
servers located in different jurisdictions and the message is relayed to any one or several
servers before it is actioned. Electronic Commerce on the World Wide Web is a virtual
market place, where the websites are sited on servers which host pages or services offered by
several commercial concerns which in effect represent a form of virtual marketplace, where
businesses have their information accessed by customers. The topographies in turn have an
effect on the analyses of three important questions of if, where and when.
iv. Mobile commerce: Mobile commerce (m-commerce) has also created immense platform
for e-commerce transactions today. The phrase mobile commerce was originally 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, sale of ring-tones, wallpapers, and games for mobile
phones, information such as news, stock market etc. are some of the common transactions for
which mobile commerce is extensively used. Likewise, with several online shopping portals
providing mobile applications for purchase of goods and services, mobile commerce has been
the most convenient mode for a consumer to purchase goods and services, without even using
a computer or laptop.
v. Social media shopping: Social media commerce is a subset of electronic commerce that
involves use of social media such as Facebook, Twitter and YouTube in the context of e-commerce
transactions. Social media commerce is on the rise as it supports social interaction, and user
contributions to assist in online buying and selling of products and services. It includes customer
ratings and reviews, user recommendations and referrals that attract consumers to the
platform.

1.2.4 E-commerce Trends in India

E-business has indeed emerged as a major opportunity for India. With the phenomenal spread
of mobile telephony and the advent of 3G in the country, buyers from small towns and cities
are also buying online in large numbers. It is a fact that internet has dissolved the
discrimination factor between the small and the big cities enabling buyers from small towns

7
to have access to the same branded goods, and quality products which earlier was a privilege
of large city buyers.4

Internet is a bustling industry connecting to more than 2 billion people worldwide. In the
context of the Indian internet landscape, a December 2012 McKinsey report offers seven key
findings concerning the impact of and outlook for Internet in India. According to the report,
India’s base of about 120 million Internet users is currently the third-largest in the world.
India is likely to have the second-largest user base in the world, and the largest in terms of
incremental growth, with 330 million to 370 million Internet users in 2015. The report also
shows that India has the potential to double its economic contribution from the Internet in the
next three years, from 1.6 percent of GDP at present to 2.8 to 3.3 percent by 2015. 5

Internet and Mobile Association of India (IAMAI) has estimated that nearly 1 million large
and small retailers make use of online marketplaces to reach out to their customers. These
online retailers represent a very wide range of categories including electronics, books,
apparel, accessories, footwear, jewellery etc.6 The ‘Digital India’ Programme, approved by
the Hon’ble Prime Minister Narendra Modi in August 2014 aims to transform the country
into a digitally empowered society and knowledge economy. Among the visions areas in
terms of infrastructure, the programme aims at providing high speed internet access to all
upto Grama Panchayat levels. The programme also aims at digital empowerment of citizens
and emphasizes need for universal digital literacy.7 Further, the ‘Make in India’8 initiative of
the Government of India, which encourages domestic and multi-national companies
manufacture their products in India, can benefit greatly through the use of electronic
commerce technology.

4
Maitra Dilip, E-commerce is a new dream for India Inc., Deccan Herald, (10/07/2013)
[Link] (last visited on July 12,
2013).
5
Gnanasambandam Chandra, Madgavkar Anu et al, “Online and Upcoming: The Internet’s Impact on India,”
(December 2012), p.1, available at [Link]
GYCw#q=Gnanasambandam+Chandra%2C+Madgavkar+Anu+et.+Al.%2C+%E2%80%9COnline+and+Upcom
ing:+The+Internet%E2%80%99s+Impact+on+India%2C%E2%80%9D+December+2012%2C+[Link].
com, (last visited on July 10, 2013).
6
Press Release of Internet And Mobile Association of India, “1 Million Retailers Sell Online: IAMAI”,
(March 27, 2014) , available at [Link]
r=2014, (last visited on April 20, 2014)
7
Press Information Bureau, Government of India, “Digital India – A programme to transform India into digital
empowered society and knowledge economy”, (August 20, 2014), available at [Link]
/[Link]?relid=108926, last visited on January 10, 2015).
8
“Make in India”, available at [Link] last visited on
December 10, 2015.

8
Emerging ecommerce market is also being perceived as a huge business opportunity by the
Department of Posts. India Post being one of the world’s largest postal networks, covering
rural, semi-urban and urban parts of India, is being seen as a potential delivery service
provider to the ecommerce portals. Several ecommerce companies offering online shopping,
such as Flipkart, Snapdeal, Shopclues etc. have tied up with India Post to provide distribution
of products based on Cash on Delivery. The department is also in process of developing a
pilot to provide online sale facilities for rural artisans.9

A recent e-marketer report shows a consistent rise in the digital penetration in business.10

Table 1.1 Digital Buyers Worldwide, By Country, 2011-2016

Source: [Link]

9
India Posts, “New Initiatives: Parcel & E-commerce”, available at [Link]
.aspx, (last visited on April 14, 2015).
10
Ecommerce Sales Topped $1 Trillion for First Time in 2012, (February 5,2013), Digital Buyers Worldwide,
By Country, 2011 – 2016 (table), [Link]
First-Time 2012/1009649#W72ph2WLuIkQBAoE.99, (last visited on July 11, 2013).

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E-commerce as a modern business methodology focuses on the needs of the business as well
as consumers to cut costs and at the same time improve the quality of goods and services and
speed of service delivery. It is the cutting edge in all areas of business today. Among the
several modes of distance selling channels, internet shopping or online shopping has been the
most dominant one. Information about the product as well as product reviews play an integral
role in this form of distance selling.

E-commerce platform has acted as a good tool for the seller to break open geographical
barriers and reach the global consumers without actually setting up branches, companies or
other entities in the consumers’ country. This makes business time-efficient and simpler. At
the same time, the consumer can compare product features and prices to make a better
decision.

1.3 Consumer Protection Law in India – An Overview

The need to ensure basic rights to consumer welfare has long been recognized by legislations
world over. The phenomenon of consumer protection has been a constant endeavour since
Vedic times in India. As industrial revolution progressed, proliferation of human needs in
respect of goods and service also increased. Unlike the earlier age, when a personal
relationship between a seller and buyer preceded an economic relationship, the new canon is
marked by sophistication of business techniques and impersonal relations between the two.

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 Reforms11 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 recognised
as one of the six basic rights of a consumer protection.

11
Union of India v. Association for Democratic Reforms, (2002) 5 SCC 294

10
In the international context, April 9, 1985 is a significant date for it was on that date the
General Assembly of the United Nations adopted a set of guidelines for consumer
protection12. These guidelines constitute a comprehensive policy framework outlining what
the governments need to do to promote consumer protection.

On lines with the United Nations Guidelines on Consumer Protection (UNGCP), India
enacted the Consumer Protection Act in 1986 to protect consumer interests. The popularity of
the enactment lies in its avowed objectives of identifying consumer rights and providing cost-
effective and speedy redressal. The Act guarantees six rights to the consumer which are right
to safety, right to be informed, right to choose, right to be heard, right to seek redressal and
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).

11
Protection Law in India. An important amendment in the light of grievance Redressal in
electronic commerce is that the proposed amendment allows a consumer to initiate legal
action against a seller in the place where consumer resides. This provides for a ‘territory –
free’ legal action against supplier of goods and services through electronic means. To add to
this, the proposed amendment has also introduced mediation as an alternate mode to
consumer dispute resolution. Non-information and negligent withdrawal of information by
electronic business is seen as a serious ‘deficiency in service’ under the new law. The
definition of ‘unfair trade practice’ is amended to include cooling-off period, which is
relevant in online sale of goods. Some new concepts such as unfair contractual terms and
product liability have been introduced to strengthen protection of consumers in electronic
transactions.

1.4 Statement of Problem

The Internet, born and first used as means to exchange knowledge and information between
institutions and research centres, or between cultural and research centres, has now
metamorphosed into a powerful business media. The advent of satellite and electronic media
has given limitless opportunities to manufacturers of goods and service providers to sell their
products and services. At the receiving end of this media blitz is still the poor consumer!

The Internet has raised a variety of legal issues since it first became widely used in the mid-
1990s, most in the area of consumer rights and protection. Legislations affecting consumer
and business rights in areas such as privacy, cybersquatting, and electronic signatures have
been passed. These legislations are only the first attempts to regulate the Internet
marketplace. Since the Internet is far changing and developing, these new laws are certainly
not the last in terms of Internet regulation.19

Consumer confidence primarily involves two convictions – that the consumer will get what
he expects and that if things go wrong, the consumer can seek a remedy. The most significant
reason for lack of consumer confidence in electronic transactions lies in anonymity of parties
to the consumer contract. For instance, a consumer may purchase goods (such as books or
CDs) through a website – where the contract is concluded in cyberspace and the payment
obligation is also effected online. Though the performance of the characteristic obligation of

19
Coteanu Cristina, “Cyber Consumer Law and Unfair Trading Practices”, p. 116-117, (Ashgate Publishing
Company, USA, 2005),

12
the contract (delivery of good) occurs in the real world in exactly the same way as offline
contracts, the parties to the online transaction do not encounter each other during the
transaction, unlike in a ‘brick and mortar’ model. This in turn results in greater risks of fraud,
problems relating to delivery, return of goods etc.20

A predominant feature of consumer law is to promote good business practices, such that the
consumer is well-informed about the transaction. The anonymous character of the online
market demands a greater need for clear information on matters at every technical step for
conclusion of the contract and also effective means to identify and correct input errors prior
to the completion of the contract.

The virtual aspect of e-commerce sale throws up newer confronts to consumer trust and
confidence. The Consumer Protection law recognises several unfair trade practices such as
false and misleading representation of goods and services in terms of standard, quality, grade
etc., materially misleading the public as regard the price at which the goods are ordinarily
sold, disparaging of goods, misrepresentations as to warranty or guarantee etc. But, what
about failure on the part of the business in providing adequate disclosure of information
regarding the address of the supplier, characteristics of goods and services, delivery costs,
withdrawal etc. in case of such distance selling? An important challenge in e-commerce is
that internet companies are often difficult to locate. E-mail domains, designation of websites,
electronic addresses or home pages do not necessarily relate to the place of business of the
supplier. The supplier may hide behind the business seat of the provider.21 Hence, lack of
information or low quality or obscure information provided by the seller/intermediary is a
key issue which remains unanswered in traditional consumer protection law.

In its first attempt to address the concerns of consumers’ right to information in ecommerce,
the Consumer Protection Bill, 2011 has extended the definition of ‘deficiency in service’ to
include “…any act of omission or commission on the part of service provider in withholding
‘relevant information’ which may cause damage to the consumer.” The existing legal
framework on consumer protection is however, subjective on disclosure of certain
information in the pre-contractual stage. Website information still remains poor on a

20
Jonathan Hill, “Cross-border Consumer Contracts”, p. 11, (Oxford: Oxford University Press,2008)
21
Norbert Reich, “Consumerism and Citizenship in the Information Society in Consumer Law in the
Information Society”, Thomas Wilhelmsson, Salla Tuominen and Heil Tuomola(ed.), p. 168, (The
Hague/London/Boston: Kluwer Law International, 2000).

13
significant proportion of sites and the number of fully compliant websites in terms of
information is also low. Thus, the virtual nature of e-commerce has given rise to information
asymmetry, which is a great hindrance to consumer trust and confidence.

Further, lack of awareness among consumers results in further exploitation. The survey
conducted by Consumer Unity and Trust Society (CUTS)22 in 2012 found that even after 25
years, only 20 percent consumers know about the Consumer Protection Act (COPRA) and
who has heard about consumer rights is just 42 percent. However, CUTS was of the opinion
that these findings are still encouraging considering the fact that five years ago the consumer
awareness level was just 18 and 34 percent respectively.

A 2013 Survey Report conducted by the Centre for Consumer Studies, Indian Institute of
Planning and Administration states that 55.4 percent of the respondents have experienced
adulteration, 47.4 percent short weighing, 50.1 percent have been victim of overcharging,
43.4 percent had received poor quality product, 35.3 percent had deficiency in services, 41.2
percent had an experience of defective goods and 36.8 percent of the respondents are victims
of false information.23 The study also revealed that the Consumer Protection Act, 1986 had
limited impact on consumer empowerment mainly due to lack of awareness about the Act and
its provisions. The virtual nature of electronic commerce has a greater potential to swindle
consumers with all sorts of unfair and fraudulent trade practices.

Protection of consumers who purchase goods and services offline/online are protected by a
wide range of consumer protection laws. However the real problem is with the enforcement.
Laws which are unenforceable have two major defects – (a) they fail to deal with the mischief
which it seeks to remedy and (b) the knowledge that they are unenforceable make the
normative force of law weak.24

The Consumer Protection Act, 1986 provides for a structured grievance redressal mechanism
with adequate clarity on jurisdictional aspects. But the question is how far the territorial

22
“State of the Indian Consumer -Analyses of the Implementation of the United Nations Guidelines for
Consumer Protection, 1985 in India”, Consumer Unity and Trust Society, (2012), available at [Link]
[Link]/CART/pdf/Overview-State_of_the_Indian_consumer.pdf, (Last visited on June 05,2013)
23
“Evaluation Report on Impact and Effectiveness of Consumer Protection Act, 1986”, Centre for Consumer
Studies, Indian Institute of Planning and Administration, (2013), available at [Link]
/ResearchStudyReports/CP_Report.pdf, (last visited on September 20, 2014).
24
Chirs Reed, “Internet Law Text and Materials”, 2nd ed., p.291, (Delhi: Universal Law Publishing Co. Ltd.,
2004)

14
based jurisdictional provisions are being interpreted by the redressal machinery in deciding
disputes involving non-territorial character of online shopping complaints. Another question
that arises here is how far the grievance redressal machineries are effective in deciding
disputes involving online shopping complaints. Earlier study indicates that the effectiveness
of the Consumer Protection Act is marginal as far as redressal of consumer complaints is
concerned. The District Forums to a very large extent are not able to deliver justice quickly
and in a cost effective manner as envisaged under the Act and therefore, consumers are losing
faith in the redressal mechanism at the District level. Some of the reasons attributed to such
effectiveness were lack of adequate infrastructure, poor management of records, shortage of
manpower and the required skill and knowledge of the members manning the District
Forums.25 Further, lack of understanding of the technicalities involved in electronic forms of
consumer contracts among decision-makers impact consumers’ right to seek Redressal.
Grievance Redressal in consumer complaints arising out of cross-border transactions are yet
another challenge in terms of jurisdiction and enforcement of decisions.

1.5 Scope and Objective

Scope –

1. To analyze consumer complaining trends arising out of online shopping.

2. To critically analyze the adequacy and integrity of information in online consumer

contracts.

3. To examine the extent of awareness among consumers about their rights and
responsibilities in online shopping.

4. To critically analyze the manner in which consumer grievance in cases relating to online
shopping are being handled by the existing dispute Redressal agencies set up under the
Consumer Protection Act,1986.

Objectives -

1. To ascertain the need for further government action on regulating consumer’s access to
adequate and authentic information in online shopping.

25
Centre for Consumer Studies, Supra at n. 21

15
2. To identify the extent of consumer awareness and suggest further steps to strengthen
consumer education and awareness about the new market phenomenon.

3. To examine the administration and enforcement of consumer cases in online shopping

brought before the dispute Redressal agencies and suggest measures, if any, for a
meaningful access to fair and timely grievance Redressal.

1.6 Literature Review

Research on the concept of consumer protection in the online space has been vast and varied
in the recent years. Several themes such as privacy and security, jurisdiction and enforcement
issues, consumer redressal, consumer awareness, information asymmetry, net neutrality have
been subject-matters of extensive research.

Understanding consumer issues in online shopping is the first step to consumer welfare in the
online environment. Aslihan Nasir26brought out a research outlining (a) distribution of
complaints according to the business type, (b) distribution of complaint according to online
store type, (c) the major complaint themes and (d) the categorisation of complaint themes.
Addressing some of the cross‐cutting regulatory questions that should be addressed as a
matter of priority to ensure that digital consumers are fully empowered, the GSR Discussion
Paper on Consumer Protection in the Online world brings forth the role of policy makers,
regulators and market operators in targeting initiatives to control the largely non-regulated
ecosystem.27

Global Network Initiative commissioned a first in the series report on Indian Online
Intermediaries and their Liability System. The study brought out the key characteristics and
challenges in The Indian liability regime for online intermediaries and Ways to improve the
rules for intermediaries.28

26
V. Ashilan Nasir, “e-Consumer Complaints About Online Stores”, Bogazici University, p.68, Vol.14 (2004),
Journal of Consumer Satisfaction, Dissatisfaction and Complaining Behaviour, available at
[Link] (last visited
on October25, 2014).
27
GSR discussion paper Consumer protection in the online world, ITU, 2013, [Link]
D/Conferences/GSR/Documents/GSR2014/Discussion%20papers%20and%20presentations%20-%20GSR14
/Session %201%20GSR14%20-%20Discussion%20paper%20-%[Link], (last visited on
May 15, 2014)
28
Martin Hvidt Thelle et. al., “ Closing the Gap – Indian Online Intermediaries and the Liability System Not Yet
Fit for Purpose”, Copenhagen Economics, March 2014, available at [Link]

16
Information Asymmetries in B2C E-commerce hinders the development of electronic
commerce. Many fraudulent small and medium-sized businesses use their information
advantage to defraud consumers to obtain high profits, thereby making consumers lose
confidence in e-commerce. QIN Dezhi, ZOU Lifang29 analysed the causes of information
asymmetry in three aspects: the virtual of e-commerce, one-time transaction of businesses, as
well as the imperfection of information disclosure system and the impact of information
asymmetry on e-commerce development from three dimensions: e-commerce market, the
honest merchant, as well as consumer. The paper also put forward some measures such as
establishing third-party to audit business information published to curb the information
asymmetry.

E-consumers are particularly dependent on appropriate information being provided, because

such information acts as a substitute for the real-life ‘touch-and-feel’ that occurs during
offline transactions. Dr. Rama Sharma, Ms. Vibha Srivastava, [Link] Bhadoria30 explored
the Indian legal system on consumer protection in electronic commerce and suggested
possible measures for effective e-commerce transactions such as stronger intellectual
property rights, online privacy & security and appropriate information about e-retailers,
product, sales process, applicable dispute resolution process.

United Nations Conference on Trade and Development (UNCTAD) undertook the revision of
the United Nations Guidelines on Consumer Protection. This task was mandated by the first
ad hoc Expert Meeting on Consumer Protection, held in Geneva in 2012. Consumer
International’s work on this is an essential part of the task, wherein a number of the key
provisions of the Guidelines are provided in a proposed new section titled “Ecommerce and
digital products and services”.31

/sites/default/files/Closing%20the%20Gap%20-%20Copenhagen%20Economics_March%202014_0.pdf,(last
visited on March 1,2015)
29
QIN Dezhi, ZOU Lifang, "Discussion on Information Asymmetry in B2C E-commerce", International Small
and Medium Enterprise Forum on SME Growth and Sustainability, 2009/10/16-2009/10/16, pp 732-737,
Beijing, PEOPLES R CHINA, 2009, available at [Link]
[Link], (last visited on April 23, 2015)
30
Rama Sharma, Gargi Bhadoria, Vibha Srivastava, “Consumer Protection in the Era of E-
Commerce”, International Journal of Research (IJR) Vol-1, Issue-8, (September 2014) ISSN 2348-6848,
available at [Link] (last visited on July 14,
2015)
31
Ad hoc Expert Meeting on Consumer Protection, 22 - 23 January 2015, Salle XII, Palais des Nations, Geneva,
available at [Link] _FullReport_en.pdf
(last visited on July 14, 2015)

17
Technology generates problems that impact individuals, legal entities and legal communities.
These problems necessitate time-accurate legal solutions. Pedro Less Andrade32 analysed the
legal and technological challenges that transnational electronic commerce carried out over
open computer mediated networks presents to legal systems based on territorial principles in
order to delineate global and systematic solutions to this new non-territorial commercial
environment. A possible global, systematic and technologically oriented legal solution will
create a new commercial environment safer for consumers, more predictable for businesses
and with equal opportunities of access and growth for all countries.

Internet being a powerful communications medium, allows data exchanges between a wide
range of different users situated in distant locations. This virtual nature of internet has the
potential to lead to cross-border disputes. Application of private international law in resolving
disputes arising cross-border transactions make litigation and enforcement costly and lengthy.
Julia Hornle33 explores the use of mediation and arbitration, using online technology
obviating the need for the parties and lawyers to meet face-to-face and leading to more
efficient information processing, and thereby reducing cost and delay in dispute resolution.

A study titled ‘Consumer Rights in the New Economy: Amending the Consumer Protection
Act, 1986’ conducted by Professor Akhileshwar Pathak of Indian Institute of Management-
Ahmedabad (IIM-A) highlighted the problems faced by consumers in E-Commerce. The
study has stressed on a need for a separate law for e-commerce with a view to protect rights
of web consumers in India. "In e-commerce, numerous problems arise due to the buyer and
seller being at a distance. The buyer is not able to inspect or sample the goods or services.
The buyer necessarily pays through a card. This brings in the problem of fraudulence in card
payment," it said.34

32
Pedro Less Andrade, “Regulating Non-Territorial Commercial Environments In Territorial-Based Legal
Systems a Jurisdictional Framework For The Regulation Of Transnational Electronic Commerce”, 2004,
available at [Link]
_Environments_in _Territorial-based_Legal_Systems?requestFulltext =1, (last visited on July 14, 2015)
33
Julia Hornle, “Cross-border Internet Dispute Resolution”, (Cambridge University Press, 2009)
34
“Law on e-commerce needed to protect online consumers: IIM-A study”, September 7, 2015, available at
[Link]
act-e-commerce, (last visited on September 30, 2015)

18
1.7 Significance of the Study

The significance of the study lies in the fact that it critically evaluates the consumer
complaining trends that arise out of online shopping and brings forth the important factors
that cause information asymmetries in such transactions. The study also goes further to
propose clear cut ideas that can form the basis for strategies in regulating the information in
online markets. Though there is abundant literature on issues pertaining to consumer
protection in electronic commerce, this is perhaps the first attempt to address the study in a
holistic manner, addressing three major aspects of consumer protection in online shopping -
information disclosure, consumer awareness and grievance redressal. The three aspects
correspondingly relate to three major consumer rights – right to information, right to
consumer education and right to seek redressal respectively. Information disclosures in online
transactions being at the heart of the problem, the study is useful in identifying areas where
government intervention in online markets serving consumers may be warranted, and the
form of intervention that will be most effective. The study goes to the extent of placing a
regulatory framework on uniform disclosure guidelines to be complied by businesses that
offer goods and services for sale to consumers through the electronic medium. The new
framework can be a starting point to new policy actions towards consumer empowerment.

The study also aims to identify and develop solutions and strategies that aim to achieve
consumer education and awareness that address relevant issues in online shopping. An
indepth analysis of a body of consumer cases before the consumer dispute redressal agencies
is proposed to be done through the study that aims at critically examining the administrative
and enforcement mechanisms of the Consumer Fora in handling grievance arising out of
online shopping. The objective here is to examine the manner in which the Redressal
agencies are equipped to dispose complaints arising in the contemporary digital age and
suggest appropriate measures to strengthen consumer grievance handling.

1.8 Research Questions

1. To what extent are the consumer laws in India adequate in providing sufficient and
reliable information to the consumer purchasing goods or availing services online?

2. What are the international guidelines and standards confronting information deficiencies
in online consumer contracts?

19
3. Is there a need to upgrade the legal/regulatory framework governing consumer protection
in bringing about uniform information disclosures in online shopping?

4. Are the consumers shopping online sufficiently educated and aware about their rights and
responsibilities while purchasing goods or services through the platform?

5. What are the various modes of grievance redressal available under the Consumer
Protection Law in India?

6. 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?

1.9 Hypothesis

1. Ho: There is no GAP between NGO’s and Consumer perception on Uniform

Disclosure Information.

Ha: There is GAP between NGO’s and Consumer perception on Uniform Disclosure
Information.

2. Ho: The factors on Importance of Consumer rights are perceived same by consumers
who are aware of their consumer rights and who are not.

Ha: The factors on Importance of consumer rights are perceived differently by

consumers who are aware of their consumer rights and who are not.

1.10 Research Methodology and Design

1.10.1 Consumer Information and Awareness

The research study involves a combination of doctrinal and empirical approach to solving the
research problem. Paradigm is the fundamental aspects of research. A paradigm is a set of
shared assumptions or ways of thinking about some aspect of the world. There were 3 most
important paradigms driving the research methodology. Positivism This is oldest of all
three. It underlies scientific method, world existed independently, realities are objectivity,
testing, universal laws. Interpretivism purpose to explore or explain phenomena. Multiple
subjective realities, dynamic socially constructed meanings, researcher reflexivity and

20
Critical Realism aim – focus on the emancipation, power relations, conflicts and
contradictions in our modern world, and help to eliminate them as causes of alienation and
domination. This study combines all the three, positivism which taking care of testing of
hypothesis, Interpretivisim guided doctrinal research and at last, critical realism which is
concern about, how to empower the consumer through online rights.

In terms of methodology, this study broadly covers both qualitative and quantitative research
approach. In terms of research method, it covers Survey research method, and in terms of
data collection, questionnaire method is used. In data analysis front, it covers both
quantitative and qualitative, such as Statistical analysis and content analysis respectively.

The statistics covers descriptive and inferential statistics which includes both bivariate and
multivariate analysis. To reduce the sizable factors, factor analysis is employed and to test
the hypothesis, Independent t test is used. Besides reliability test is employed to check the
consistency of the instrument with respect to data.

Primary analysis with respect to consumer information and awareness comprises of views
expressed by two important stakeholders to consumer protection, i.e., e-consumers and
representatives of consumer associations. Secondary resource includes information obtained
from online shopping websites, articles, books, commentaries, statutes, guidelines, draft
proposals, recommendations of international bodies on e-commerce and case laws.

Since consumers are the main beneficiaries of policy-making in e-consumer protection, they
are in the best position to voice their concerns about online shopping and to share their
perceptions and opinions about e-consumer protection. An e-mailed questionnaire is
structured using the Google Survey Forms tool for the purpose of data collection. A mixed
approach of qualitative and quantitative data is being adopted for the purpose of study. The
questionnaire is structured based on a study of various consumer cases brought before the
consumer Redressal agencies and the different regulatory regimes to address e-consumer
protection in India. Web-based survey is chosen for the purpose of study because of its wider
reach to consumers across the country with convenience, minimal financial impact and
shorter response time. Another advantage of the web-based survey is that it helps the
researcher to collect, store and process responses with ease and accuracy.

21
The primary study of the e-consumer voice is supplemented with emailed questionnaires to
representatives of well-known consumer associations. Questionnaires through Google Form
Survey are adopted to comprehend perceptions and opinions of representatives of relevant
organizations, having expertise in areas relating to e-consumer protection.

Sampling Frame

The sampling frame for consumers comprised of a list of individual and group e-mail
addresses in the mailing list of the personal e-mail linked to the university’s e-mail address of
the researcher. Questionnaires were e-mailed with a cover letter thanking the potential
respondent for their participation and with a link to the online survey website. A total number
of 650 emails were sent, including individuals and groups, out of which the study received
117 valid completed responses, a response rate of approximately 18 %. Indeed, in the web-
based surveys used in this study, the respondent was requested to answer all compulsory
questions to complete the questionnaire, to ensure that there were no missing data in this.

The sampling frame for consumer organisations, comprised of questionnaire to popular

consumer associations from across the country. The objective of the questionnaire was only
to supplement the main study of consumer voice on online purchases.

Data Analysis Process

The survey data were further processed for the purpose of analysing the various factors that
contribute to investigate whether the hypotheses enounced in Chapter I can be accepted or
not. The key steps to data processing involved Data structuring, Data entry, Data cleaning,
Data preparation and Data Analysis.

Data structuring is generating variable and value label in SPSS, this process includes coding
and transcribing.

Coding – For questions that involved qualitative values, responses were codified using
numerical values. For instance, the interview schedule comprised of various such qualitative
analysis which involved use of varied Likert scales.

22
Transcribing – The data collected from 117 consumer questionnaires and 9 questionnaires of
the consumer associations were edited, codified and transferred on MS Excel on the
computer.

Data Entry, Cleaning and Preparation, data entry is done after data structuring, cleaning is
eliminating data entry error, eliminating unwanted data points etc.

Data preparation is most important work which takes care of recoding, compute and item
parcel etc. Lastly, data analysis is done as per the objective and analysis plan.

1.10.2 Dispute Resolution

Primary resource for analyses on aspects of dispute resolution comprised of judicial decisions
of the apex court, high courts and a rich resource of data on consumer complaints brought
before the National Commission, State Commissions and various District Fora across the
country. Data collection comprises of decisions of the three-tier dispute Redressal machinery
with respect to consumer complaints/appeals in online shopping upto March 2015. For the
purpose of data collection, the researcher explored the official website of the Consumer
Disputes Redressal Agency called CONFONET. CONFONET35 stands for Computerization
and Computer Networking of Consumer Fora in Country. It is an internet based Case
Monitoring System developed for automating the work flow of the consumer forums, starting
from case registration until announcement of judgment. Key words used for the judgement
search are as follows:

a. Deficiency in service
b. Online shopping
c. Website
d. Intermediary
e. Unfair trade practices

Both quantitative and qualitative approach is being adopted in analyzing the complaining
trends before the Redressal Agencies. The objective of the methodology adopted here is to
bring about a critical analysis of the way in which consumer complaints in electronic
commerce are approached, subject-matter of complaints, the extent of procedural compliance

35
CONFONET, available at [Link] (last visited on March 31, 2015).

23
by Redressal agencies in such cases, duration of dispute settlement and the like and approach
for better protection to consumers.

Secondary resource includes articles, books, commentaries, statutes, guidelines, draft

proposals, recommendations of international bodies on e-commerce.

1.11 Limitations of Study

This study covers consumer grievance in online shopping intermediaries/platforms only

where products are bought and sold and services rendered. The study excludes complaints
from other forms of e-commerce such as teleshopping, telemarketing etc. Besides this, study
used questionnaire method to collect the data. Apparently, social desirability bias cannot be
avoided, which is considered as a limitation in terms of respondents’ bias. In terms of theory,
study tested very narrow scope of the theory unlike other social science subjects, however
the limitations is very much compensated with help of doctrinal research effort from the
researcher.

1.12 Chapterization

The research paper is chapterized under the following heads for the purpose of study:

Chapter I deals with a brief review of literature followed by statement of problem, scope and
object of research study, significance of the study, hypothesis and research methodology.

Chapter II brings out the developments of Consumer Protection in Online Shopping in India.
The study begins with a review of trajectory of development and implementation of
consumer protection policies and related laws in India. The first part of the chapter brings
out a description of the evolution of consumer protection laws in India from ancient times
through the medieval period and British regime to the present day developments in the digital
era. This chapter also attempts to bring together various enactments such as Indian Penal
Code, Contract Act, Sale of Goods Act, which cover diverse subjects and provide consumer
protection in one form or the other.

Consumer protection is an integral part of social and economic justice as enunciated in the
Constitution of India. Following the Constitutional mandate a number of legislations have
been enacted in the field of consumer protection relating to standardization, grading,

24
packaging, branding, prevention of food adulteration, weights and measures etc. The study
attempts to understand the Constitutional provisions in the consumer protection perspective.
Further, the Consumer Protection Act, 1986 which is the Magna Carta of consumer welfare
and protection in India deserves a good understanding. The study discusses the important
provisions under Consumer Protection Act, 1986 and their applicability in the context of
online shopping. The study goes further to examine the developments in the field of
Consumer Protection Law that cover consumer transactions in the digital environment.

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. An attempt is also made in
this chapter to analyse the provisions of Information Technology law in the context of the
online consumer market.

Chapter III examines the consumer protection in electronic commerce in the international
perspective. This chapter comprises of four components – international co-operation, regional
co-operations, national legislations and self-regulations. The first part of the chapter attempts
to analyse the international guidelines on consumer protection and the global co-operation
among consumer protection networks in bringing a harmonized digital environment. The
second part of the chapter relates to the various regional co-operations such as the European
Union Directives, ASEAN, APEC and other bilateral and multipartite agreements in the
context. Inference is also drawn from the legal and regulatory framework of US, UK and
Singapore to understand the consumer protection law in the context of information standards
in online consumer contracts. Self-regulations have also contributed significantly in drawing
out code of conduct among the e-commerce industry. The last part of the chapter relates to
the role of self-regulation in bringing consumer welfare in e-commerce.

Chapter IV attempts to bring out a critical analysis on the consumers’ rights to information
and education in online business-to-consumer transactions. The first part of the Chapter
attempts to identify the asymmetries in information disclosure and their impact on consumer
in online shopping. For this, information provided by online shops during the course of
consumer transaction are divided into 6 major components – contact, pricing, availability,
cancellation, return/replacement and refund. The second part of the Chapter attempts to
examine the impact of the existing governmental and non-governmental consumer education

25
programmes initiated for the purpose of consumer awareness in electronic commerce
transactions.

Chapter V brings out an empirical study on consumers’ rights to information and education.
This study disembarks upon an attempt to provide greater insight into the views of e-
consumers and consumer organisations that perceive e-consumer protection. Since consumers
are the main beneficiaries of policy-making in e-consumer protection, they are in the best
position to voice their concerns about online shopping and to share their perceptions and
opinions about e-consumer protection. The empirical study was conducted using the Google
form survey. Each respondent received three–section set of questions, apart from personal
and demographic details, thereby ensuring more focused answers. The first part comprised of
questions relating to dispute resolution in electronic commerce, Section II queried about
consumer awareness and education in online shopping and Section III dealt with issues
relating to information disclosure in online shopping portals. The last part of the
questionnaire comprised of an open-ended question on the consumer’s views and opinion on
better protection to consumers in electronic markets. One response was allowed per
respondent and the response to survey form required a login. The survey was conducted
during March to May 2015.

The questionnaire comprised of 26 questions (Annexure I) which measured responses for

different factors such as location of consumers, educational levels of consumers who shop
online, nature of products purchased online, satisfactory levels of purchase, nature of
consumer complaints, aggressiveness of consumer in pursuing consumer complaint, and level
of consumer education in online shopping. The first section of the questionnaire comprises of
the demographics such as location, age, gender, educational qualification, computing skills
and occupation of the respondent. The second part of the questionnaire related to factors
influencing consumers to make online purchases and their satisfactory levels on such
purchases. The questionnaire then opens out to questions relating to consumer complaints, if
any on the online portals and the modes of Redressal adopted by the respondent in settling the
complaint. The third part of the questionnaire focuses on questions relating to consumer
awareness in online shopping. The last part of the questionnaire is constructed so as to enable
consumers to express their opinion on importance of information in online shopping on six
factors – contact, pricing, availability, cancellation, return/replacement and refund. The
ratings of importance of the variables were measured using standard Likert scale of 1-5

26
ranging from 1 -‘Not at all important’, 3- ‘Moderately Important’ to 5 –‘Extremely
important’. There is also a subset to this part, which includes comments box that is left for the
respondents to fill as if they feel that there are some other factors that consumers may find
important to know while they shop online apart from the structured questionnaire.

The primary study of the e-consumer voice is supplemented with a questionnaire survey
(Annexure II) that was e-mailed to 65 consumer associations in India. Each respondent
received three–section set of questions, apart from organisation details, thereby ensuring
more focused answers. Section I comprised of questions relating to a brief introduction about
the organization and their experiences in handling disputes relating to e-commerce, Section II
queried about consumer awareness and education in online shopping and Section III dealt
with issues relating to information disclosure in online shopping portals.

Chapter VI brings out a classification of consumer complaints before the Consumer Redressal
machinery. Consumer cases with respect to online shopping are classified under two major
heads – Classification based on hierarchy of Courts and Classification based on subject-
matter of complaints. Classification of cases is seen as an important step towards analyzing
the consumer complaining trends and the applicability of law to such complaints.

Chapter VII analyses the ability of the existing dispute Redressal mechanism in settling
consumer disputes in the digital environment. The Chapter explores the effectiveness of the
Redressal machinery in handling grievance arising out of electronic commerce. Doctrinal
study is adopted for the purpose of analysis.

Chapter VI comprises of conclusion and recommendations.

27