In this article, Swathy Nair & Swetha Nair discusses the applicability of consumer protection laws in online transactions.
The cyber marketplace has evolved dramatically in recent years and consumer faith in such a complex and interactive atmosphere has become important. The cyber space has now become a huge platform for trade and commerce. E-Commerce is the buying and selling of goods and services over the internet. The extent of e-commerce has developed simultaneously with the advancement in networking facilities all over the world. The consumers have also been offered several advantages such as multiple choices, convenient delivery services, competitive prices etc, in the cyber world. From sale of goods and services, the lucrative trade opportunities offered on the online platform ranges to e-banking and online payments. Thanks to the expansion of internet, for the effective competition and the consumers’ convenience of entering into commercial transactions from home.
However, the sad reality is that, despite such advantages, trade and transactions in the cyberspace is inherently risky owing to the ambiguity in the laws governing such transactions. Adding to this is the inherent difficulty in organizing the cyber consumers. The dilemma remains in the fact that our legal system does not cover the facets relating to the large but, often neglected domain of consumer rights in case of internet transaction. It is thus indispensable to strengthen the study of legislation on e-commerce and consumer rights.
There are concerns such as data privacy, online identity theft, and sometimes, the product ordered do not conform to the actual description. In such situations, the buyer is often left without remedy, because of jurisdictional other issues in cyber space.
Besides, it is not easy to pass legislation protecting the consumer rights in e-commerce, because of the consideration for preferential development in e-commerce, especially in developing countries like India. It is apprehended that such legislation may hinder the development of trade on the cyber platform due to hasty legislation.
This essay analyses this environment and tries to suggest how to adapt to the current scenario and reinforce fair practices, information disclosures, privacy and payment protection, consumer education and dispute resolution.
The ‘Cyber’ Market
The online medium offers different facilities through which commercial activities may be conducted. The online medium can be seen as a collection of different media united by common use of computer-to-computer communications at a distance. The forms of online communication that are significant to e-commerce are the World Wide Web, newsgroups and e-mail. The online marketing websites may be simple or elaborate and may allow less interactivity to the consumer. The simplest form of a marketing website is a page that presents the user with company’s name, some description of the products or services it offers and means of communicating with the company. The most advanced commercial sites allow consumer to purchase products online. In addition to maintaining its own website, a company may advertise its products or website on other websites.
Deceptive Marketing Practices
However, these are typically favourable to specific kinds of fraud; for example, chain letters and pyramid schemes which are quickly propagated through bulk email and pattern websites. Deceptive marketing practices that use online medium may use other communication media. A solicitation carried on internet through an email or a website often refers to sources of additional information in order to convince and persuade the user such as a telephone number or a contact address. Chance fraud is comparatively higher if the payment is made through an online mechanism. Most common types of online fraud are;
Pyramid schemes: In pyramid schemes, promoters collect payment from consumers for the right to recruit new participants, and to collect commissions for doing so. Nearly all participants in these schemes lose money. Sometimes, these are operated as ponzi schemes, in which fees paid by participants in the lower pyramid are used to simulate earnings that are paid to earlier investors, thereby increasing the verisimilitude of the scheme.
Chain letters: Chain letter promise recipients that if they follow simple instructions such as small sums of money to four or five listed individuals, inserting one’s own name in the top name on the list, they will make fortune.
Bogus Business Opportunities: Internet communications are used to promote business opportunities that fall short of the claims made for them. This involves marketing of credit repair services, work at home schemes, franchises and online shopping programmes. Fraudulent credit repair schemes involve claims that seller can remove or can instruct the consumer how to remove accurate, non-obsolete negative information from the consumer’s credit report.
Magical Remedies: Several cases have been brought against promoters of purported cure for AIDS, impotency, hairsuitism, hyper-pigmentation, mood disorders and cosmetic products.
Items Paid for but never delivered: There are many cases in which the sellers or service providers accept payments for the goods and services, and then fail to deliver goods or perform service as offered. Recently, the case of Timtara.com was brought light, where the consumers were duped of their money; advance money was taken but the goods were never delivered.
Delivery of items not in conformity with description and substandard packaging: Recently, Maharashtra government’s legal metrology department registered a number of cases against the e-commerce giants Amazon and Flipkart for alleged violation of the Legal Metrology Act, 2009, and the Packaged Commodities Rules, 2011. The action was based on a number of complaints which alleged that the packages did not mention MRP of the Goods, the Weight, details of manufacturing, packing dates, contact details of makers or suppliers etc. A similar case was alleged against the emerging online retailer Shopeclues.
There has been several incidents of the online shops delivering substandard or substantially different or misbranded products. For some websites such as Home shop18, in case of defect in goods or if products with substantial difference from the description are delivered, it must be notified within 48 hours in order to be eligible for return. Such conditions destroy all most all possibilities of return. These types of unilateral terms are unconscionable and unfair.
Investment and Security Scams: One common type of internet based security scam is the offer Phoney or overvalued investments. Ranging from traditional securities like stocks and bonds, to more esoteric investment opportunities involving anything from eel farms, cattle breeding, oil and gas drilling to online gambling and multi-level marketing programmes. Securities hawked over internet come in huge variety of shapes and sizes. Sometimes false information is disseminated through newsgroups; chat sessions, online newsletters to manipulate the price of a security. False and misleading information is pumped to create spurious demand whereby the perpetrator dumps his holdings on unwitting buyers at huge profit. Offering of unregistered securities, illegal off-exchange futures, dispensing fraudulent investment advice, failure to comply with registration and disclosure requirement etc. are other examples of online misconduct relating to securities.
Spoofing: Spoofing involves online communications to impersonate another person or entity. Several characteristics of the online medium make it easy to engage in this practice. The addressing scheme is virtual; domains names are handed out without any verification of the identity of the domain owner and communications are at a distance. This involves the setting up of a website with a domain name similar to that of a well known company, but is different from the domain actually owned by the company, offering a product that the actual company sells and selling it to unsuspecting consumers.
Spamming: Spamming refers to the bulk unsolicited commercial email and making commercially oriented off topic newsgroup postings. The first widely noted use of this marketing technique occurred in US in 1994, when a law firm in Phoenix, Arizona posted an advertisement in 1000s of newsgroups offering their services as immigration lawyers and the firm became instantly famous and widely reviled throughout the community of internet users for what was viewed as serious breach of internet etiquette. Spamming is one of the major media through which business entities ‘trap’ their customers. On an everyday basis, we receive offers for availing credit cards and personal loans in easy steps, for opening trading accounts in investment companies with trading app and software for free, for free comparison of different insurance options and advice to save tax on payment of minimum amounts, free health insurance tips, free coupons to avail discounts on flight, cabs, movie shows and so and so forth. Though, these techniques are not inherently deceptive, to a great extent used as delivery mechanism for fraudulent solicitations and to manipulate consumer decisions.
Misleading Advertisement: We receive several emails offering free shopping for the first purchase from an online shopping Application or free ride for the first booking of online cab services. However, we may not get these offers, on the ground that the offer is not applicable to the purchased product or the kind of service we availed.
The growth in online commerce will definitely be followed by an increase in deceptive marketing practices. Annual consumer losses from online deceptive marketing practices may amount to several billion dollars. Similarly, merchants may also be the victims of online fraud. When a credit card thief makes unauthorized use of a consumer’s credit card number and the sale is made at a distance without signature verification, the merchant may be responsible for the full amount of the loss. Deceptive marketing practices include both fraudulent and negligent misrepresentations. According to one definition, a misrepresentation is fraudulent if the maker knows or believes that the matter is not as he represents it to be.
Trader identity theft and phishing
Online identity theft is the practice of pretending to be someone else online. The objective can range from quite harmless activity to a criminal activity such as stealing customer’s personal information. It involves phishing or online fraud to get a person’s bank details for making financial gains.
On internet, there is sufficient opportunity for people to mimic legitimate business more convincingly, reach potential victims effectively, escape detection by maintaining identity, and ridicule enforcement officials by locating or relocating if detected, in remote jurisdictions which have no significant law or enforcement mechanisms.
Invasion on Consumer Privacy
The cyberspace and its capacity to collect and arrange vast amounts of information without the digital consumer even knowing this is an emerging threat to traditional privacy values.
Today transactions over the internet often require the consumers to divulge large amounts of personal information including credit/ debit card details and delivery details. Also the possession of such information gives e-business the opportunity to analyze it, discovering the trends and increasing the efficiency of their business dealings. Consumers usually had no idea about the potential uses of such information, and as such had no idea as to the possible misuse of such information and the violation of their privacy that could happen.
The US which is one of most developed countries in terms of internet technology. In the US, the protection of the right of e-commerce consumers to privacy has been sought through the means of self-regulation by the e-commerce industry. The US mainly advocates mainly take advantage of industry self regulation to protect e-commerce consumer right to privacy. However, its first real legislation on network in which the consumer interests are considered, came when it passed the Child Online Privacy Protection Act on October 21, 1998. The Act focuses on the protection of children’s privacy rights, which clearly provides provider obligations and penalties when the consumer is 13 years old. As the technique of ‘industry self –regulation has proved to be ineffective, there is increasing demands in US for more such legislation for ensuring consumer privacy.
Consumer Identity Theft in Online Banking
In fact Scams targeting internet banking has increased dramatically with the increase in the number of e-consumers to the bank. This fact will impact consumer trust in online banking. If these crimes increase the public trust for online banking will decrease automatically, it is a dilemma for online banking activities where consumer identity theft frequently occurred then the identity will be used for committing cyber crimes such as cyber stocking harassment, unauthorised access to computer systems and non-accesses computer crimes. However, the development in biometric technology is expected provide better protection of consumer identity. Biometric technology is an automated method of recognizing individuals on the basis of measurable biological and behavioural characteristics.
It is quite common that, in e-wallets when users try to transfer money to bank accounts, it fails, and when a complained is filed though the consumer receives a message that it is rectified but this failure continues. The result of this is the freezing of money in the e-wallet. Sometimes, even though you receive a message that the money is transferred, it does not, in fact, reach the bank account, and after several days you receive a notification that the transaction is reversed. Most of the times, the consumer is left with the question of, whom to approach for the fixation of the problem.
Sometimes it happens in online shopping that, though the site ensures next day delivery or delivery within a specified date, thereby manipulating consumer decision to chose a particular product from a particular site over another, the company does not deliver the product within that period. They merely inform the consumer that an unexpected delay has occurred in transit. Similarly, often we find the parcel left at the doorsteps, or with the security or neighbours or in the office reception even if it requires our signature to complete the delivery by the carrier. It will cause a lot of discomfort and uneasiness if the products purchased are personal care or sexual wellness products, in addition to the risk of being lost.
Likewise, though most of the online retailers offer ‘easy’ return and cancellation, the process of refund is not ‘easy’, in fact. Many of the times, it takes weeks to process the request for refund and to initiate refund. There have been allegations of arbitrary denial of ‘return’ requests on the ground of non-compliance with the terms and conditions, which are most times, hidden, unnoticeable or misleading.
THE EXISTING LEGAL FRAMEWORK IN INDIA
It is in several cases not clear how existing regulatory mechanisms governing trade practices apply to online commerce. In the older paradigm of trade legislation and other rules of conduct designed to protect consumers from deceptive marketing practices apply with their full force, since the relevant transaction is a domestic one between the consumer and a domestic vendor. But, when a consumer deals with an online vendor, the controls on deceptive marketing practices loose much of their efficacy; attempts to enforce the laws of the consumers’ jurisdiction face both legal and practical roadblocks and self regulatory mechanisms may be unavailable. When sellers make use of different kinds of online communication, regulation of online transactions ranges from difficult to impossible.
Though there is no specific mention in the consumer protection Act, it is argued that nothing in it precludes it application over internet transactions. On the other hand, the consumer Protection Bill, 2015, proposes to specifically include online transactions under its ambit. Similarly, it is also argued that the existing framework of Indian Contact Act, Sale of Goods Act and Hire Purchase Act is sufficient to deal with the new Challenges. But these legislations fail to deal with the complexities and technicalities involved in cyber transactions. Though it true that Banking Regulations Act, Banking Ombudsman Scheme and Various RBI circulars cover e-banking, these legislations do not regulate e-wallets through which huge amount of money transferred. Information Technology Act covers only commercial transactions between government through its functionaries and citizens. This is mainly aimed at implementing measures towards e-governance. In case or Fraud or cheating an aggrieved person can register FIR with the police.
Last year the advertising industry watch dog Advertising Standards Council of India upheld consumer complaints against 6 e-commerce giants namely, Amazone.com, Redbus.in, HolidayIQ.in, Xeroine Retailers and Portamart, Lenskart.com for violating ASCI Codes.  However, unfulfilled and false offers of online shopping sites, manipulating consumer interest, continue without any hurdles and with impunity. Similarly, today, India does not have a comprehensive legislative protection of e-commerce consumers’ privacy, but consumers are more concerned with this issue than before.
MEASURES TO PROTECT CONSUMER RIGHTS
Consumers who participate in e-commerce should be afforded transparent and effective consumer protection that is not less than the level of protection afforded in other forms of commerce.
Governments and stalk holders must join hands to ensure such protection, and determine what modifications may be necessary for the existing legal framework to deal with the special circumstances of e-commerce, especially for the protection of vulnerable consumer groups such as children. It must be ensured that businesses do not make representations or omissions, or adopt any deceptive, misleading, unfair, fraudulent practice. This includes the general impression which is likely conveyed to consumers by the representation or practice as well as implied factual representations conveyed through features such as the good or services name, words, pictures, audio or video and the use of disclaimers that are hidden, hard to notice or to understand. Online disclosures must be clear, accurate, easily accessible and noticeable so that consumers’ have sufficient information which will help them make an informed choice. Disclosures should be made in plain and easy to understand language. The product description and pictures in online shopping websites must correspond to the goods actually delivered.
Similarly, it must be ensured that online traders do not use unfair, unilateral and non-negotiable contract terms and that they do not miss represent or hide terms and conditions that may affect a consumer’s decision regarding a transaction. Most importantly, they should not adopt deceptive practices in collection and use of consumer’s personal data.
E-consumers like traditional consumers are entitled to the right to be heard, represent and redress. In order to secure this, it is important to make sure that the e-shopping sites or mobile applications do not restrict the consumers’ ability to make negative reviews or dispute charges and they are given ample opportunities to approach government agencies or other complaint bodies. The business should take into account the technological or special characteristics of a device or platform while providing necessary information.
Advertising and marketing should identify the business on whose behalf the advertising or marketing is being conducted. It should be ensured that the advertisements are consistent with the actual characteristics of goods and services and conditions of access and usage.
The choice of the consumers whether they wish to receive or not unsolicited commercial messages should be respected by the industry. They must develop effective and easy to use procedures which will help consumers to make this choice.
Dispute Resolution and Redressal
E-consumers should be provided with meaningful access to consumer justice. That is, fair, easy to use, transparent, and efficient methods of dispute resolution, including those for cross-border e-commerce disputes. Such system must provide remedy expeditiously and inexpensively. This should include access to alternative dispute resolution mechanisms and internal complaints handling. Internal complaints handling mechanisms means in-house dispute resolution platforms which will enable the consumers to informally resolve their complaints through direct dialogues between the consumer and the seller or service provider at the earliest possible stage.
Alternative dispute resolution mechanism should include online dispute resolution systems, to facilitate the resolution of claims over e commerce transactions with special attention to low value or cross-border transactions. Government should work towards ensuring that enforcement authorities, Consumer organizations and other self-regulatory authorities that handle consumer grievances are competent enough to take action, to obtain and facilitate consumer redress.
Consumer Competence through Education and Awareness
Governments should endeavour to educate consumers, government officials and the industry to foster informed decision making and fair disposal of consumer complaints. They must be made aware of the consumer protection framework that applies to online transactions, whether domestic or cross-border including their rights and obligations. Such awareness schemes should also aim at improving consumers’ digital competence through skill development training in digital technology. While designing such programmes the needs of different consumer groups should be taken into account.
Self- Regulation of Industry
Industry participants must put into place different kinds self-regulation aimed at controlling online deceptive marketing practices like,
- Mandatory code of conduct applicable to online commercial activities.
- Denial by legal businesses to give support to illegal conduct.
- Third party certification systems.
- Mechanisms for centralisation of complaints.
Trade associations can play an important role in bringing effective self regulatory mechanisms. The trade association that implement a code may secure compliance by expelling those who fail to comply with its membership. Those providers who lend services that are essential for the operation of a deceptive marketing scheme should take care not to lend support to such schemes. ISPs, operators of payment services, owners of online malls, and advertising agencies can chose not to facilitate deceptive and unfair marketing practices.
If third party certification becomes widely accepted, the absence of certification will have a stigmatising effect, which will in turn urge sellers to rise their standards in order to qualify for certification. However, regulatory supervision of such third parties is necessary in order to prevent abuse.
When transactions are made at a distance, the purchaser is unaware of the seller’s reputation. This problem can be rectified if there is a system that collects and centralises consumer complains about sellers. Such system can be effective, only if it is accessible through an open network at no cost to the consumer. This must also safeguard the privacy interest of the consumers complaining and should have tools to protect sellers from being unfairly stigmatised vexatious and malicious complaints.
Due to ease in transactions the number of e-consumers is growing at a high rate and within a very short period it will defeat the physical consumer. There are a number of ancillary Legislations, which indirectly protect ‘e-consumers’. However, it is the need of the hour to have a comprehensive legislation which will specifically and exclusively cover all aspects of online transactions. It demands a strict and user friendly law, which provides security at the time of transaction as well as protects the interests of the consumer post-transaction. The technological aspects of online transactions make it difficult to make such legislation for the protection of the digital consumers, since it involves jurisdictional issues and helps merchants to hide their identity; as such the myriad challenges in protecting the consumer right in e commerce can only be met through the collective action of various governmental agencies, business entities and other relevant stakeholders. However, not in all circumstances, the government and the traders would take care of the consumers’ rights. Consumers should be well aware of their rights and should assert and stand up for such rights.
 John Rothchild, ‘Protecting The Digital Consumer: The Limits of Cyberspace Utopianism’(1999) 74(893) Indiana Law Journal, 904.
 Tracy Wilkinson, ‘Pyramid Scheme Fever Scorches Albanian Society’, L.A. TIMES ( 3 February 1997) A1.
 Rothchild(n.3), 906.
 PTI, ‘Cases against Amazon, Flipkart for flouting packaging norms’, The Economic Times, (Oct 26, 2016)
 Joseph J. Cella III & John Reed Stark, ‘SEC Enforcement and the Internet: Meeting the Challenge of the Next Millennium’ (1997), 52 BUS. LAW 815, 821
 Rothchild,(n.3), 909.
 Id. at 910
 Id. at 911
 See Dee Pridgen, ‘How Will Consumers Be Protected on the Information Be Protected on the Information Superhighway?’, (1997)32 Land& Water L.Rev..237-40
 RESTATEMENT ( SECOND) OF TORT, § 526 (1965)
 Ruthchild (n.3) 998,
 Saul Handsell , “Internet Merchants try to fight fraud in software purchases”, n.y Times , (Nov. 17 , 1997),D1
 Meirong Guo, “A Comparative Study on Consumer Right to Privacy in E-Commerce”,(2012) Modern Economy, 402-407.
 Alan Davidson,The law of Electronic Commerce,1 (Cambridge University Press, Sydney,2009).
 Chuck Easttom and Det. Jeff Taylor, Computer Crime, Investigation, and The Law, 3 ( Course Technology, Boston, 2011).
 Ruthchild, Supra note 3, at 988
 Advertising Standards Council of India, January 2016 decision, ASCI https://www.ascionline.org./index.php/oct-2016.html
 Id. at10
 Id at.13
 Id at11
 Id. At 17