This article is written by Meenal Garg, Advocate in Punjab and Haryana High Court, Chandigarh.
Table of Contents
Introduction
With the coming into force of the new Consumer Protection Act, 2019 (hereinafter “COPRA, 2019) and Consumer Protection (E-Commerce) Rules, 2020 (hereinafter “Consumer Rules, 2020); there has been some significant debate regarding the future of e-commerce in India. However, app stores and apps that have become such an integral part of our lives have somehow been a stranger to the consumer law of India. As a matter of fact, at the time of writing this article, there was no reported case law against Google Play Store, Apple Store, or any other app store under the consumer law of India. Such a scenario begs the question of how could digital applications or apps which are virtually providing a consumer every service like banking, medical, food delivery, music, etc. could escape the ambit of consumer protection law which was enacted for the benefit of the consumers.
In this author’s views, the most common reason for this is that once a consumer is dissatisfied with the services of an app, the same is simply uninstalled. This begs another question that in such cases what would be the liability of the app store from which such app was purchased or procured. This article is an attempt to answer such questions.
The global scenario
Most of the litigation concerning app stores has been in form of competition law complaints or cyber law complaints on account of misuse of data. However, some countries do have specific consumer laws with tailor-made provisions specifically dealing with the liability of an app store or an app.
In countries like the USA, there have been cases where app stores like Google play store have been prosecuted under the consumer law of the country. In this case, an action was brought against Google Play store for unauthorized billings regarding in-app purchases without obtaining any informed consent. While this case was ultimately settled, it implies that prosecution under US consumer law is dependent upon the fact of the consideration received by the App store directly and billing the consumer in its name. Moreover, in addition to the general consumer law, the U.S. has recently proposed to introduce a new Apps Act, 2020 for regulating apps and app stores which is currently pending before the legislature.
In contrast to the U.S., the European Union has slightly more developed laws including the Directive 2011/83/EU on Consumer Rights and Directive 2005//EC on Unfair Commercial Practices Directive. These laws act as a mixture of data privacy laws, contract laws, and consumer laws. Moreover, these laws contain specific provisions for information which is to be provided on app stores including price transparency norms, an adequate description of the app, etc.
In countries like Australia, no specific legislation or principles exist that govern consumer issues arising from app stores; nevertheless, such issues are covered in the general ambit of its Competition and Consumer Protection Act, 2010.
Thus, an analysis of the above position reveals that at the very least some jurisdictions directly or indirectly provide for the applicability of consumer law on app stores.
Liability of app stores under Indian consumer law
App stores as service providers in India
Sec. 2(17) of COPRA,2019 defines an electronic service provider as “a person who provides technologies or processes to enable a product seller to engage in advertising or selling goods or services to a consumer and includes any online marketplace for online auction sites”
Similarly, Sec. 2(42) of COPRA, 2019 defines services as “service of any description which is made available to potential users ….”
Thus, a conjoint reading of these two definitions makes it amply clear that app stores are electronic service providers who provide service of aggregating potential app users and app developers at a commonplace i.e. the app store. Moreover, these app stores also provide a value-based service of verifying app developer accounts, filtering genuine app reviews, etc.
It is noteworthy to mention here that under the erstwhile Consumer Protection Act, 1986 (hereinafter “COPRA, 1986”), e-commerce marketplace entities usually took a defense that they are mere intermediaries and actual service contract is between the buyer and seller, thus, they are excluded from the purview of liability under COPRA, 1986. However, this point has been clarified in many cases like Amazon Seller Services Private Limited vs. Vishwajit Tapia where it has been held that
“… Online market place Company earns revenue each time a consumer clicks and visits on its website. Moreover, the same is being done as per the terms and conditions between the online portal company and the sellers for a consideration. It is the duty of the intermediary that it should verify the bona fides of the seller, who sells the articles and products. Intermediaries are entities and provide service enabling delivery of online contents to the end user….”
Applying this principle on the app store it can be easily inferred that an app store cannot take the defense of a mere intermediary and are squarely covered within the ambit of COPRA, 1986. Thus, it can be seen that both by means of the statutory definitions as provided in COPRA, 2019, and judicial interpretation under COPRA, 1986 app stores are covered within the ambit of an electronic service provider.
Consideration as data
The next question that arises is how a person can be classified as a consumer in the context of app stores. This is because most of the apps can be procured free of cost from such app stores. Moreover, in the case of in-app-purchases, the consideration may either go directly to the app developer or it may be payable via the app store. A simple example of this is that while paying for online food delivery services like Zomato, Swiggy, etc., a consumer may choose to pay via cash on delivery or through payment apps or net banking thus eliminating the role of the concerned app store altogether. However, in games like PUBG, etc., payment can be made through Google Play credits.
From the above example, it can be inferred even in cases where the payment has passed through the app store, the liability of the app store is limited as actual payment has been received by the app developer. This raises the question as to what would be the liability of the app store in case there are no in-app purchases and virtually no money is involved. To answer this question, one may refer to the definition of “consideration”.
The term consideration is not defined in COPRA, 2019 but defined in Sec. 2(d) of the Indian Contract Act, 1872. As per this definition, consideration can be in the form of money, in-kind, or reciprocal service. However, consideration in COPRA, 2019 must be paid. The usage of the term “paid” suggests that goods and services must be purchased in exchange for something of monetary value. It is in light of this monetary definition of consideration that the concept of data as consideration assumes significance.
In this age of information technology, Data is the most valuable asset. Many apps and app stores collect user data and sell the same to make huge amounts of money. In fact, it is through this collecting and selling of data that user-specific advertisements are sent to the consumer. Thus, by collecting data that undoubtedly has monetary value; the app stores provide apps free of cost. In other words, a consumer pays in the form of data in exchange for availing the service of an app store or an app.
Hence, it can be stated that a complaint can be filed against an app store under COPRA, 2019 as the same is an electronic service provider who provides services of an online marketplace in exchange for data as a consideration paid by the consumer in exchange of availing such services.
Country of origin requirement vis-a-vis app store
Apart from expanding the scope of consumer law, the Consumer Rules, 2020 have imposed additional obligations on e-commerce entities. One such requirement which has attracted much attention is the obligation to disclose the “country of origin” of the product or service offered for sale on the online platform. Needless to say that such a statutory obligation comes in the wake of the ongoing border tensions between India and China, because of allegations of negligence on China on its failure to contain the COVID-19 virus and in light of promoting “Make in India” campaign.
At the outset, it must be mentioned here that as per Rule 2 of Consumer Rules, 2020 these rules apply to all e-commerce entities whether established in India or not and irrespective of the product offered by such entity. Therefore, in light of such a wide applicability clause, it would be futile to discuss the origin of app developers and whether an app is a product or a service. It is sufficient to say that once an app is being offered for installation in India, it falls within the ambit of Consumer Rules, 2020.
Rule 6(5)(d) of the Consumer Rules, 2020 mandates a seller to disclose to a marketplace e-commerce entity all relevant details of the product including “the country of origin” of the product or service. Moreover, Rule 5(3)(a) mandates the marketplace e-commerce entity to disclose all relevant details of the product and service offered on the marketplace. These rules imply that an app developer is statutorily obligated to disclose the country of origin of his app to the concerned app store and that such an app store is in turn mandated to display the country of origin of the app on the app store.
The concept of “Country of Origin” is difficult to understand and many would argue that such a concept may not have real applicability in the present world. This is because most products are assembled and manufactured in various countries and it cannot be determined with precise accuracy as to what is the country of origin of the product. This concept becomes even more complex when applied to apps and services. In today’s COVID struck world many services can be provided from any part of the world while sitting at home. Similarly, an app may be developed by a team of developers residing in various countries and subsequent management and maintenance of the apps may also be done through any country. At present various retailers and e-commerce, entities have asked the Government to provide specific guidelines for identifying the “Country of Origin” of a product or service but to date, no such guidelines exist under the consumer law. It is pertinent to mention that there currently exists a set of rules issued by the Department of Commerce for determining the country of origin. However, such rules are made to determine whether a particular good is eligible for the Duty-Free Tariff Scheme. Such rules cannot be applied in the context of consumer law as these rules do not provide guidelines for determining the country of origin of services and digital products like apps etc.
Conclusion: What opportunities and challenges lie ahead
From the above discussion, it is amply clear that app stores can be made liable under COPRA, 2019, and Consumer Rules, 2020. However, this liability exists only in theory right now and various hindrances need to be overcome before practical application of the above concept:
- A cue may be taken from the EU by providing specific guidelines regarding price transparency, adequate disclosure, etc.
- Data as a means of consideration may be specifically added while defining a consumer.
- Some formulas or methods may be evolved to determine the monetary value of the data provided. Such a formula assumes significance to determine the pecuniary jurisdiction of consumer courts.
- It is imperative that necessary guidelines for determining the “country of origin” are timely issued and those guidelines also cover apps as a product or service with sufficient clarity.
With change comes new challenges and new opportunities. Apart from the challenges enumerated above, it can be easily anticipated that there would be an increase in consumer litigation with respect to app stores and e-commerce entities. Moreover, such e-commerce entities would also have to be wary of consumer law compliances to avoid litigation. By impliedly covering app stores within the realm of consumer law, the aggrieved consumer has indeed been provided an additional and efficacious remedy to address the grievances suffered by him on account of faulty and fraud apps.
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