The Developing Trend of E-Commerce and Consumer Protection in India
11 min read • August 22, 2024
Abstract
This study examines the existing legislative framework in India that safeguards the interests of online customers in light of the rapidly expanding e-commerce sector and its impact on consumer preferences for online shopping. To address the study questions and objectives, a comprehensive analysis of the recently adopted Consumer Protection Act, 2019, and the Consumer Protection (E-commerce) Rules, 2020, is supported by a literature review and an analysis of 290 online customers. Key findings include: cash on delivery is the preferred method of payment for online purchases; website content and efficient customer support foster consumer trust; and a safe and reliable system is necessary for e-business enterprises to operate successfully. The new laws are argued to be sufficiently strict to uphold the rights of internet shoppers and encourage the expansion of e-commerce in India. The findings clarify the critical elements influencing customer trust and loyalty and provide an insightful perspective on e-consumer protection in the Indian context with broader implications.
Keywords Online safety, E-commerce, Consumer protection
Background of the Study
The Justification for Online Consumer Protection Globally, consumer safety is a major concern in e-commerce. E-commerce, a system that facilitates sales of products and services through electronic exchange, broadens choice and boosts productivity through cost savings, competitiveness, and improved manufacturing process organization (Vancauteren et al., 2011). According to the Organisation for Economic Cooperation and Development's (1999) principles, e-commerce includes ordering, invoicing, payment processes, and communications such as marketing and advertising (OECD, 2000). The OECD-1999 recommendations acknowledged three crucial aspects of online consumer protection: accessibility for all customers, the development of clear and strong consumer protection laws to stop unfair, deceptive, and fraudulent actions online, and the establishment of efficient redress mechanisms.
In 2016, the OECD updated its consumer protection guidelines to address rapid technological advancements and the increasing use of smartphones and social media. The 2016 guidelines aim to promote competition and innovation while tackling issues such as non-monetary transactions, digital content products, C2C transactions, mobile devices, privacy and security risks, payment protection, and product safety. The United Nations Conference on Trade and Development (UNCTAD) also acknowledges similar consumer protection issues and emphasizes consumer education, fair corporate practices, international collaboration, and appropriate legislation enforcement (UNCTAD, 2017).
E-commerce can be conducted through cross-border or local transactions. There are six e-commerce models commonly used internationally: business-to-business (B2B), business-to-consumer (B2C), consumer-to-business (C2B), consumer-to-consumer (C2C), business-to-administration (B2A), and consumer-to-administration (C2A) (UNESAP and ADB, 2019; Kumar & Chandrasekar, 2016). Regardless of the model, the customer must defend their interests as they are the king in the marketplace.
Several international organizations support robust and competitive global commerce, including the OECD, UNCTAD, and Consumer International. Other prominent organizations include the European Consumer Cooperation Network (ECC-Net), APEC Electronic Consumer Directing Group (APECSG), and the International Consumer Protection and Enforcement Network (ICPEN), which India joined in 2019. ICPEN addresses international internet fraud through the econsumer.gov program, which investigates categories such as internet shopping, computer equipment and services, debit and credit, spam and telemarketing, jobs and earning money, scammers, lottery and reward frauds, and mobile phone services.
Growth of E-Commerce
E-commerce began with the appearance of the world wide web in 1991, but its origins trace back to the Berlin Blockade in 1948-1949, which involved ordering and airlifting goods via telex. The first e-commerce platform, released by the Boston Computer Exchange in 1982, marked the beginning of e-commerce. Internet penetration and the rise of mobile devices have significantly contributed to the growth of e-commerce (Harrisson et al., 2017; Nielsen, 2018; Singh, 2019; UNCTAD, 2019a, 2019b). The traditionally slow-moving B2B industry is being forced to move quickly by the millennial generation, the widespread use of smartphones, and the ongoing optimization of e-commerce technology.
The global retail market has been transformed by e-commerce, which is expected to continue growing competitively due to rising consumer spending power and the development of technological and infrastructure advancements (McKinsey Global Institute, 2019; UNCTAD, 2019a, 2019b). E-commerce is expanding internationally, with a 15% compound annual growth rate (CAGR) from 2014 to 2020 and a projected 25% CAGR from 2020 to 2025. By 2020, over 60% of people had access to the internet, and approximately 42% owned smartphones. The Asia-Pacific area has been the beneficiary of over 70% of worldwide e-commerce operations, with significant contributions from China and the USA (Kerick, 2019). Customers are increasingly willing to make cross-border purchases online, with 74% of consumers making online purchases and 52% using mobile devices by July 2020.
Conceptual Framework
Consumers require protection due to the inherent power imbalance between them and their contractual partners. The thesis of "inequality of negotiating power" highlights the economic disparity between suppliers and consumers (Haupt, 2003; Liyang, 2019; Porter, 1979). The "exploitation theory" argues that consumers need protection because they are often forced to purchase goods and enter contracts on terms set by powerful corporations (Dieterich and Cockshott, 2011). However, the "economic theory" provides a more modern justification for consumer protection, emphasizing the need to adapt contract law to handle consumer transactions in the digital era (Siciliani et al., 2019; McCoubrey & White, 1999).
Trust is a crucial element in e-commerce, as online shopping requires more trust than in-person transactions (Nielsen, 2018). Trust acts as a catalyst for buyer-seller interactions and helps clients overcome perceived risks associated with online business (Pavlou, 2003; Lee and Turban, 2001; O'Hara, 2005). Insufficient trust can lead to shaky agreements, costly legal defenses, and a decline in sales. Therefore, trust is essential for fostering confidence in online transactions and supporting the growth of e-commerce.
The Necessity and Tools for Protecting Consumers Online
Laws and regulations provide security and peace of mind in commercial dealings. In contrast to trust-related concerns, prior studies have shown that individuals with more legally tight contracts experience more legal challenges (Young & Wilkinson, 1989). However, with the advent of e-commerce, people adhere to the law and feel protected and secure (Bolton et al., 2004). Most UNCTAD members, including India, have enacted laws related to e-governance, e-business, and e-society, covering e-transactions, consumer protection, cybercrime, and data privacy and protection.
Conclusions
A lack of trust in products and manufacturers was a major reason for consumers not making online purchases. However, the increasing use of computers, tablets, and smartphones, along with general internet access, has fueled the expansion of e-commerce in India. The rapid growth of e-commerce has introduced new methods of distribution and new types of unfair trade and immoral commercial practices. To address these issues, the Indian government enacted the Consumer Protection (E-commerce) Rules, 2020, and the Consumer Protection Act, 2019, which came into force in July 2020.
While it is premature to judge the effectiveness of these new laws, positive feedback from online shoppers suggests that people are beginning to feel more secure and confident when shopping online. The preservation of consumer rights is critical to the expansion of e-commerce, and the new legislation strengthens grievance redress mechanisms while ensuring the security and safety of online consumers. The phrase "Consumer is the King with power" is now more relevant than ever. Future operating experience may lead to some legal difficulties, but the safety and security of online consumers will support the growth of e-commerce in India through judicial involvement and guidance.
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