Legal Issues in E-commerce in India

Electronic commerce or e-commerce legal issues industry in India has come a long way since its early days and has been growing rapidly across the world. The industry has matured and has seen the entry of many new players in the market. India is considered as a profitable market for these e-commerce businesses.

Competition

E-commerce legal issues have seen a generation of new players and the merging and acquisition between several old players. This has enabled development of new services, distribution channels and far greater efficiency in business activities than ever before. This development has the possibility of leading to certain competition issues with respect to the development of strategies for growing the network and maintaining their market power.

Data Protection

Security of the information provided during an online transaction is a major concern.

The Information Technology (Reasonable security practices and procedures and sensitive personal data or information) Rules, 2011 and the Section 43A of the IT Act together provide a structure and guidelines for the protection of data in India.

It is required of the Company to take all reasonable precautions to prevent any corruption, damage, loss or destruction of the private information and/ or data, even upon the termination of the contract between the parties.

The contracts often have specific clauses to deal with such privacy concerns and they bind all employees, agents, and subcontractors.

Security of the information provided during the online transaction is a major concern. Under section 43A of the IT Act the “Reasonable practices and procedures and sensitive personal data or information Rules, 2011” have been proposed, which provide a framework for the protection of data in India. Data can be personal, which has been defined as “any information that relates to a natural person, which, either directly or indirectly, in combination with other information available or likely to be available with a body corporate, is capable of identifying such person.” The date can also be sensitive and a sensitive personal data consists of password, financial information, physical, physiological and mental health condition, sexual orientation, medical records and history and biometric information. The entity collecting data should have a privacy policy in place, should always obtain consent from the provider of sensitive information and maintain reasonable security practices and procedures. Unauthorized access to personal information and any misuse of such personal information should be checked by the online goods/service providers.

E-Contracts

Electronic contracts are governed by the basic principles provided in the Indian Contract Act, 1872 (“ICA”), which mandates that a valid contract should have been entered with a free consent and for a lawful consideration between two adults. Section 10A of the Information Technology Act, 2000 (“IT Act”) provides validity to e-contracts. So, both ICA and IT Act needs to be read in conjunction to understand and provide legal validity to e-contracts. Further, section 3 of the Evidence Act provides that the evidence may be in electronic form.

Both the Indian Contract Act and the IT Act must be read in conjunction to understand the legal validity of e-contracts. Thus, e-contracts are governed by the basic principles of a valid contract that mandates that the contract must be entered in with free consent and a lawful consideration between two competent parties.

Also, Section 10A of the Information Technology Act, 2000 (“IT Act”) provides the validity of the e-contracts.

On e-commerce websites that operate in an online environment, the possibility of minors entering into contracts is very high. Hence, it is crucial for an online business portal consider such possibility and provides a form on the website stating that the individual with whom it is trading or entering into the e-contract has attained the age of majority.

Intellectual Property Rights

E-commerce websites are designed and sometimes operated by other parties specializing in the field. Often the content is also managed by a third party. Thus, unless the agreement between the parties specifically provides the IP rights, there is a possibility of infringement subject to the trademark, copyright or patent on an online platform.

Some others Concern:

• Ensure proper online contracts
• Original documentation in relation to taxation
• Record retention obligations
• Exchange control regulation
• Import-export regulations
• Foreign data protection law
• Terms and conditions must be specific depending upon the nature of the goods & services offered and not generic.
• Reasonable efforts to prevent the unauthorized transaction.