India: Delhi High Court Yet Again Calls For Accountability From E-Commerce Platforms.

Last Updated: 30 August 2019
Article by Smriti Yadav and Shwetank Tripathi

The Single Judge of the Delhi High Court (Court), Justice Pratibha Singh, has recently passed a detailed order on the role, responsibility and accountability of intermediaries and held that the e-commerce platforms are bound by the Model Framework for Guidelines on Direct Selling 2016 (Direct Selling Guidelines) and restrained the e-commerce platforms from selling the products of the Plaintiffs (defined below) except with the written consent from the Plaintiffs.

Brief facts

The Court was considering applications for interim injunction in a bunch of seven suits, involving 'direct selling entities' viz: Amway India Enterprises Private Limited, Modicare Limited and Oriflame India Private Limited (Plaintiffs) and e-commerce platforms such as Amazon, Flipkart, Snapdeal, 1MG, Healthkart along with some sellers on such platforms (Defendants) [CS(OS) 410/2018; 453/2018; 480/2018; 531/2018; 550/2018; 75/2019 and 91/2019].

The Plaintiffs who were engaged in the business of health and cosmetic products filed the abovementioned suits. It was the Plaintiffs' case that they sell their products through a system of 'direct selling' wherein they enter into agreements with their respective direct sellers, who in turn sell the products directly to consumers. Such agreements contain stringent terms and conditions in accordance with the Direct Selling Guidelines including that the direct sellers are restrained to sell the products on e-commerce platforms, except with prior written consent of the Plaintiffs. The Plaintiffs learnt that their products were widely sold by the Defendants on the e-commerce platforms despite the fact that they never gave any permission to their direct sellers. The Plaintiffs also found that the products sold by the Defendants were impaired inter alia as (a) QR codes on some products were removed; (b) the price shown on some products were higher than the maximum retail price (MRP); (c) refund, return, guarantee and warranty conditions were completely altered. Thus, the Plaintiffs contended that such sales on e-commerce platforms amounted to tortious interference of their agreements with their direct sellers, infringement of their trade marks, passing off, dilution and unfair competition among other concerns.

The Court passed ex-parte ad-interim orders and also appointed local commissioners who executed the orders and submitted their reports. Thereafter, the Defendants filed their replies and the applications for interim injunction in all the suits were heard together.

The Defendants inter alia contended that the Direct Selling Guidelines (a) are merely executive instructions and are not enforceable in law; (b) apply only to the Plaintiffs and their direct sellers, and not to them; (c) impinge upon their fundamental right to trade and business enshrined under Article 19(1)(g) of the Constitution of India. On the issue of infringement and passing off, the Defendants argued the 'doctrine of exhaustion' contending that once the Plaintiffs sold their products to the direct sellers, their proprietary rights stood exhausted as per Section 30 of the Trade Marks Act, 1999. The e-commerce platforms further heavily relied upon Section 79 of the Information Technology Act, 2000, the Information Technology (Intermediaries Guidelines) Rules 2011 (Intermediary Guidelines) and the judgment of the Hon'ble Supreme Court in Shreya Singhal v Union of India, inter alia contending that they have no role to play in such sales, and they merely act as facilitators. It was further contended that they are only required to take down content once they receive 'actual knowledge', in the form of a court order, that certain content is in violation of law. The e-commerce platforms also relied upon Press Note 2 of 2018 issued by Ministry of Commerce & Industry (Press Note 2) which permits facilitation services provided by them.

Decision

The Court in its decision prima facie observed that the Direct Selling Guidelines were enforceable in law, and the guidelines do not infringe the fundamental rights of the Defendants inasmuch as it merely imposes a reasonable restriction upon the e-commerce platforms requiring them to permit sale of products only with the prior written consent of the Plaintiffs. The Court in its decision also took into account the reports submitted by the local commissioners which showed impairment of the goods at the warehouses of the e-commerce platforms. On the 'intermediary defense' of the Defendants, the Court observed that the role of the e-commerce platforms 1 was prima facie not entirely passive. The Court found that the e-commerce platforms were not compliant with their own policies mentioned on their websites, supposedly in terms of the Intermediary Guidelines, which provides that the seller can only sell products on its platform when it is authorized to do so as an 'authorized seller'. The issue of the extent of liability of the e-commerce platforms and the applicability of the Press Note 2 were left open to be decided after trial.

In light of the above observations, the Court restrained the Defendants from selling the Plaintiffs' products. The Court further directed that if any of the sellers2 obtain the consent of the  Plaintiffs to sell their products through e-commerce platforms, such e-commerce platforms must, clearly, provide the name, address and contact details of the said sellers, including the telephone numbers, email address, etc., in a prominent manner, along with the product description on their platforms. The decision was challenged before the Division Bench of the Delhi High Court by some of the defendants where no interim reliefs were granted, against which Special Leave Petitions have been filed before the Hon'ble Supreme Court, which are currently pending. Interestingly, the decision or the suit proceedings have not been stayed.

Comment

In course of probing upon various issues, the Court on more than one occasion underlined the relevance and importance of the e-commerce industry. The decision is, albeit in the context of a conflict between the specific business model of 'direct selling' vis-à-vis sale on e-commerce platforms, however, the implications are likely to be far and wide. Particularly, the obligation cast upon the e-commerce platforms to disclose complete details of the sellers on their platforms, may come to the aid and benefit of all – the brand owners, the sellers, e-commerce platforms, and most importantly, the consumers at large. In this context, it is relevant to mention that the draft Guidelines for e-commerce for consumer protection published by Ministry of Consumer Affairs is open for public comments until 16 September 2019. The draft Guidelines also cast an obligation upon the e-commerce platforms to disclose the details of sellers on their platforms. It would be interesting to see how these suits progress along with the draft Guidelines.

The content of this document do not necessarily reflect the views/position of Khaitan & Co but remain solely those of the author(s). For any further queries or follow up please contact Khaitan & Co at legalalerts@khaitanco.com

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions