India e-commerce Investment Laws and Rules Guide
Today, e-commerce has become an indispensable part of everyone’s life, and e-commerce platforms have largely replaced physical stores as a new business model. The establishment of e-commerce platforms in India began in 2000. While there are more than 3 billion Internet users in the world, India has 259.14 million Internet broadband users. More and more Indians have registered on e-commerce websites and made online purchases through mobile phones, indicating the huge potential of e-commerce in the Indian market in the future and realizing the transformation from physical stores to virtual stores is one of the best ways to develop the retail industry.
What is the role of social networks in promoting e-commerce?
Social networks play an important role in promoting customers’ online shopping. In the case of insufficient network coverage outside the urban areas of India, mobile phones have become the most important online shopping tool. The Indian government has already approved the installation of broadband for village-level areas, which will further promote the development of international and local e-commerce in India.
The term “e-commerce” does not have a standard concept. It generally refers to an electronic method that replaces the traditional physical method when conducting business. This electronic method includes using computers, other mobile devices, mobile phones, etc. to place orders online.
What e-commerce refers to?
In addition, e-commerce does not only refer to online shopping, but also includes other aspects of transactions, such as express delivery, payment, supply chain and business management. Some common e-commerce business models are:
1. B2B (business to business): It is mainly a cooperation model between enterprises, including distribution services, procurement services, etc. The two parties can shop around to reduce business costs. In India, such e-commerce companies include BuyQG.com IndiaMART, Ariba, etc.
2. B2C (business to customer):
This sell goods and services directly to consumers.
3. C2C (customer to customer):
This includes person-to-person transactions. Such as eBay, quikr, etc.
4. C2B (customer to business):
The consumer-to-business model is a reverse business model, which is a reversal of the model that companies provide products to consumers. The demand is raised by consumers, and customized production is carried out by the enterprise. Under the B2C model, the living space of e-commerce and suppliers is severely squeezed.
Compared with consumers, there are too many choices, but they are at a loss. Such vicious competition cannot last forever. As consumers’ requirements for products increase, Even Jack Ma, the godfather of e-commerce, said: “C2B is the future of e-commerce.”
5. B2B2C (business to business to customer):
This business model refers to the addition of an e-commerce company engaged in goods and services between e-commerce and consumers, such as e-commerce and third-party payment companies that provide goods and services. Or logistics companies cooperate to provide consumers with integrated services. It is a perfect combination of B2B and B2C. luckonluck, Flipcart, fashionandyou, Jabong and other large Indian e-commerce companies all adopt this model.
US Court Ruling in Napter Case
Behind this seemingly simple and profitable business model, there are many legal factors that cannot be ignored by investors. In the “Napter.com” case in 2001, the U.S. Court of Appeals for the Ninth Circuit ruled that the music file sharing system “Napster” repeatedly infringed the copyright law because as many as one million users uploaded and downloaded recording materials protected by the copyright law ( Songs etc.).
Court Cases closer to India:
The Delhi High Court ruled in the “Myspace” case that if social networking sites have control over illegal information or comments published on their web pages (can be deleted) and fail to delete them in time, they will be liable Correspondingly, the website is also obliged to conduct pre-review to prevent infringement. (This reminds me of the fast broadcast case a few months ago).
In addition, a series of data protection regulations promulgated by the Indian government are of great significance to the protection of private data.
Regulations on e-commerce in India’s foreign investment policy:
1. Definition of e-commerce: buying and selling transactions on electronic platforms, but excluding other forms of behavior on e-commerce platforms, such as free sharing of information and pre-determined behavior without deposit.
2. 100% foreign investment is automatically permitted in the B2B model, and without the prior consent of the Indian government, foreign investment can account for 100% of the shares.
3. Currently, foreign investors are not allowed to enter single-brand online retail.
4. Currently, foreign investment is not allowed to enter multi-brand online retail.
The above restrictions on foreign investment are limited to the sale of goods, and there are no such restrictions on the provision of services online. In terms of foreign investment policies, other industries have become more and more free. However, there are still many restrictions in the e-commerce industry.
Due to government policy restrictions, another market transaction model has been derived. The role of online platforms of this model is not to directly trade on the platform.
The mode of operation is that merchants are customers on the online platform, and they have their own supply of goods. T
he advertisements of their own goods are published on the online platform. The final sales of goods are completed directly between the merchants and consumers, while the online platform only serves as an advertisement, thus avoiding the restrictions of foreign investment policies.
Direct investment in Local ecommerce companies
There is another new model that can be adopted. Investors can directly or indirectly invest in local e-commerce or local companies related to e-commerce:
Invest in a wholesale company with local sources of goods and online platforms, but the following conditions must be met:
(1) The transaction volume with the group company shall not exceed 25% of the company’s total turnover;
(2) Wholesale companies cannot have retail stores to conduct direct transactions with consumers;
(3) The wholesale company should maintain daily sales records, including sales details.
If you consider the above model, you must strictly follow the specific provisions of the foreign investment policy.
The following is the latest foreign investment information in the e-commerce industry:
1. Flipkart received US$1 billion in investment from foreign investors.
2. Snapdeal received US$627 million in foreign investment, and Japan’s SoftBank became the largest shareholder of Snapdeal in Delhi.
Legal Validity and mandatory of electronic contracts
1. The composition of electronic contracts
Electronic contracts mainly include click contracts (clicking is considered as agreement), browsing contracts (only browsing is considered as agreeing), unpacking contracts (contracts that can only be read after receiving the goods and unpacking), electronic contracts and paper contracts are fundamental the difference.
In the electronic contract, you only need to click the “I accept” button to accept all the contents of the contract.
2. Validity of electronic contracts
Electronic contracts, like other types of contracts, are regulated by India’s “Contract Act of 1872”. The Contract Law of 1872 stipulates the preconditions for the contract to take effect, such as the free will of both parties to the contract and the legality of the contract terms themselves. The “Information Technology Act of 2000” further regulates e-commerce.
The following are the basic provisions of the contract law on the conditions for contract effectiveness:
(1) Based on the free will of the parties to the contract
(2) The content of the contract complies with the law
(3) Both parties to the contract should have full civil capacity
(4) The subject matter of the contract should be legal.
Except for some prohibitive provisions, clicking on the content and terms of an electronic contract is considered a valid contract as long as it meets the provisions of the Contract Law.
The Information Technology Act does not apply to content and activities related to negotiable instruments, power of attorneys, bequest contracts, trust contracts, and the sale or transfer of real property.
Legal Signing requirements
Since it is an electronic contract, signatures are generally not required, but there are special regulations. For example, the “Indian Copyright Act of 1957” stipulates that the transfer of copyright requires the transferor’s signature.
In this case, the Information Technology Act provides for electronic signatures It has the same effect as a physical signature, and an electronic signature should be issued by the competent authority specified in the Act.
The validity of signing an electronic contract with a minor: For electronic contracts, the age of the signer is generally not judged.
Indian law stipulates that minors do not have full civil capacity, and the contract signed with them is not binding on them. In India, whether they are of adulthood The standard for defining is 18 years old.
Stamp Duty Requirements
The stamp duty stipulated by the Stamp Law only applies to physical contracts, and there is no requirement to pay stamp duty on electronic contracts.
What to do if the electronic format contract is unreasonable?
Obviously, even if the electronic contract has unreasonable format clauses, it is impossible to negotiate with the other party. The current law does not specify how to treat and deal with the unreasonable clauses of the electronic format contract.
So how do Indian judges deal with unreasonable substantive contract format clauses?
If the terms do not conform to public policy, the contract itself is invalid. If it is a contract clause that puts both parties in an excessively unequal position, the court will put pressure on the stronger party so that the contract is not obviously unfair, and the court has the discretion to “public policy” and “obvious unfairness”.
Security issues in e-commerce
Identity verification: Passwords are the method used by most people. The Information Technology Act stipulates that anyone who steals a user’s personal password or electronic signature and uses it illegally or imposts it will be punished with a maximum of 3 years in prison and a fine of up to 100,000 rupees.
Personal privacy information under Online Selling
It is inevitable to leave records on the trading platform for the information of online transaction users, including identity information, financial information and other information. Therefore, personal privacy protection is a key factor that must be considered when building an e-commerce platform, which violates personal privacy information.
The main behaviors of which include unauthorized access to personal information and misuse of personal information. Indian law does not provide for this, but the Supreme Court supports the “right to privacy” in two cases.
Data protection under Online Sales
Article 43(A) of the Information Technology Act provides a corresponding regulatory framework for the protection of personal data. The types of data protected by this article include: personal information, sensitive personal data (such as passwords, bank payment information, physical and mental health, sexual orientation, past medical history, biometric information).
This bill also stipulates that relevant e-commerce companies need to formulate privacy policies for such information, obtain user consent when obtaining relevant information, provide users with options for rejection, and maintain information in accordance with the requirements of the bill.
Potential liability in Internet Selling
For those who illegally disclose personal information, the bill stipulates a maximum of three years’ imprisonment and a fine of up to 500,000 rupees. If the company’s negligence results in information leakage, the company shall be liable for compensation.
In India there is very little awareness about data protection and privacy. People so easily part with their private information as it never happens in any other country. Whatever little awareness is there, is there due to trend in foreign countries. Just observing that privacy is something and has some meaning in foreign countries some Indians correlate to it, but then again forget it and fall in the Indian trend. Due to corruption there is very little respect for humans and humanity. Under these circumstances it is the duty of the legal fraternity to ensure rights of the humans as and when such matter come across them. It is only the legal fraternity that can establish privacy in judicial courts and must try doing it and make India wise again.
Name: Ajay Rastogi
Educational Qualification: LLB
Profession: Advocate / Lawyer
Work Experience: 20 Years of Legal Practice