Internet penetration and widespread use of handheld devices is fuelling e-commerce in India. With the rise in online purchases of goods and services, complaints about counterfeit goods are also rising. The Department for Promotion of Industry and Internal Trade released a Draft National E-Commerce Policy (hereinafter referred to as the policy) on February 23 2019 and invited comments from stakeholders and the public. The draft policy is separated into six categories:
2) Infrastructure development
3) E-commerce marketplaces
4) Regulatory issues
5) Stimulating the domestic digital economy
6) Export promotion through e-commerce
From an IP perspective, the policy explicitly recognises the growing menace of the sale of counterfeits on online portals/marketplaces. Anti-counterfeiting measures have been prescribed under Part III of the policy which require e-commerce entities to implement those measures. Part III of the policy covers the following seven areas which will be integrated by e-commerce portals in their business model:
1) FDI Policy
2) Other strategies relating to e-commerce marketplaces
3) Anti-counterfeiting measures
4) Anti-piracy measures
5) Authentic ratings and reviews
6) Consumer-oriented customer service
7) Prevention of sale of prohibited items
In this article, we will discuss the first three areas listed above.
Under this head, the policy reiterates that the government of India's Foreign Direct Investment (FDI) Policy demarcates a marketplace model from an inventory-based model for sale and distribution of products. The policy encourages foreign investment in the marketplace model. In a marketplace model, the operator cannot exercise ownership or control over the inventory sold on its platform. This is to ensure that the interests of small offline retailers (brick and mortar stores) of multi-branded products are protected and that the marketplace is fair and non-discriminatory towards all participants – traders, vendors and retailers, irrespective of their business size.
The overall flavour under this head is to make clear that e-commerce portals should not adopt predatory pricing and a discounting policy to hamper competition. They should also not favour certain sellers/traders operating on their platforms over others. The objective of the policy is to ensure that the interests of domestic manufacturers, traders, sellers, MSMEs and start-ups are safeguarded which may not be equipped to set up and maintain complex distribution channels etc.
Other strategies relating to e-commerce marketplaces
This section essentially deals with regulating shipments arriving from Chinese e-tailers (without naming them). Several Chinese e-tailers are known to be accepting orders from consumers in India and sending products marked as gifts or reducing invoice value on shipments (undervaluing imported products) to cut import tax/duties.
The policy, as an interim measure, to avoid misuse of the gifting route proposes banning all such parcels with the exception of life-saving drugs. India Post is obligated to conduct due diligence on "from and to" shipping entities and addresses and set thresholds in the shipment booking system.
The policy states that all e-commerce sites/apps available to Indian consumers (that display prices in Indian rupees) must have maximum retail price (MRP) on all packaged products, physical products and invoices. All product shipments from other countries to India must be channeled through the customs route. The policy proposes developing an integrated system connecting customs, the Reserve Bank of India (RBI) and India Post to track imports. It further lays down that any e-commerce apps/website trying to circumvent these regulations will be barred from operating in India.
Under this head various steps have been set out to be complied with by e-commerce marketplaces in order to preserve the interests of customers as well as brand owners. These include:
- Full name, complete address and contact details of sellers be made available on marketplace website for all products.
- When a trademark owner registers with an e-commerce platform, whenever a trademarked product is uploaded for sale on the platform, the platform shall notify the trademark owner.
- For specified high value (luxury) goods, cosmetics or goods having an impact on public health, the platform will be required to seek the trademark owner's authorisation before listing the product.
- Where a complaint is received about a product being a counterfeit, the information shall be conveyed within 12 hours to the trademark owner. If the owner of a trademark confirms its counterfeit nature, the platform shall notify the seller. Unless the seller is able to provide evidence that the product is genuine, the platform shall take down its listing and notify the trademark owner about the takedown.
- The platform shall obtain a guarantee of authenticity and genuineness of the products sold by the seller which should explicitly state that original warranties and guarantees as provided by the brand owner are honoured.
- On being informed, the platform shall stop hosting the counterfeit product on its platform and take down all information related to the product. The marketplace should blacklist the concerned seller for a specified period and also enforce financial disincentives.
The draft policy is an ambitious document that has a pro-consumer and pro-Indian flavour. It seeks to create a level playing field for Indian retailers and safeguard the interests of consumers. In doing so, it puts onus on e-commerce operators to curb the sale of counterfeit goods. It will be interesting to see the final shape the policy document takes after consideration of comments from stakeholders.