E-Commerce:

Fundamentals and Applications

 E-Commerce:

The business activity conducted through

electronic means falls within e-commerce.
Though there is no specific definition provided in
any statute, it encompasses all business
conducted by computer networks, be it B2B, B2C,
C2C, C2B or B2B2C.
 E-Commerce:

The services that are offered does not begin or

end with providing an online platform but
involves efficient delivery system, proper
payment facilitation and an effective supply
chain and service management
 E-COMMERCE
E-commerce is the purchasing, selling and
exchanging goods and services over computer
networks (internet) through which transaction or
terms of sale are performed electronically

It is also the exchange of information across

electronic networks, at any stage in the supply
chain, whether within an organization, between
businesses, between businesses and consumers,
public and private sector, whether paid or unpaid

Commonly known as Electronic Marketing

 Legal Aspects
There are no specific e-commerce laws and
regulations in India and they are still evolving

The Information Technology Act 2000 governs

the online issues of e-commerce in India

Legal issues of e-commerce in India are different

for different categories of e-commerce
 Legal Aspects
The legal requirements for undertaking e-
commerce in India also involve compliance with
other laws like contract law, Indian penal code,
etc

Further, online shopping in India also involves

compliance with the banking and financial norms
applicable in India

E-commerce websites must also ensure privacy

protection, data protection, data security, cyber
security, confidentiality maintenance, etc as well
 Types of Commerce

Commerce

Electronic Commerce Physical or Traditional

Commerce

Internet
Commerce

Business
focused Consumer focused
e-commerce e-commerce
 Digital Phenomenon

What are the drivers of e-Commerce?

Data networks
DIGITAL
Intense competition
Globalization
Information age
Technologies
Automation
Low cost high quality products/services
 Different types of E-Commerce

Business Customer
Organisation Individual

B2C
Business B2B
Organisation
(e.g
(e.g TPN)
Amazon)
C2B
Customer C2C
Individual
(e.g
(e.g eBay)
Priceline
 Examples

B2C: www.amazon.com
C2C: www.eBay.com
B2B: www.tpn.com
C2B: www.priceline.com
 E-commerce scenarios
Retailing
Servicing
Publishing
Supply chain management
 What are the advantages of e-commerce?

To consumers (think about the consumer

buying process: search, evaluate and execute):

To businesses (think about the common

objective of every business):
 Discussion
How should different departments participate
in an e-commerce project?
Management
Marketing
Production
Finance
Procurement
Customer support
Transformation of a Compartmentalized Organization into
Integrated Organization

Production Marketing
Management

Management

Production Marketing Finance Personnel

Department Department Department Department

Finance Personnel
 Three-tier Technical Model

Server side

Client side Service system Backend system

Architecture of Web-based E-Commerce System

Service system
Backend system

Web Server Application Server

Internet
Database

Intranet
Firewall
(Secure)

Client side Server side

 E-commerce categories
Business originating from .
B
Business Consumers
U
A S
Publishers order paper supplies
n I
from paper companies
d N
Consumers aggregate to bulk
E
Purchase from Amazon
S S Amazon placing orders with
e S
Publishers
l C
l O
i N
n S
Consumers buy thousands of Consumers resell copies on e-
g U
Harry Potter books from Amazon bay
t M
o E
R
S
 E-commerce Vs Traditional Commerce
Key elements E-commerce Traditional Commerce
Value creation Information Product /Service
Strategy Sense and respond simple rules Classical(established)
Competitive edge Speed Quality/cost
Competitive force Low barriers of entry/power of Power of suppliers/product
customers substitution
Resource focus Demand side Supply side
Customer interface Screen to face Face to face
Communication Technology mediated channels Personal
Accessibility 24x7 Limited one
Customer interaction Self service Seller influenced
Customer behavior Personalization One to one Standardization/Mass/one
Mktg way Mktg
Promotion Word of mouth Merchandising
Product Commodity Perishable, feel& touch
 E-commerce Vs Traditional Commerce
1995-2000 -Innovation 2001 -2009 Consolidation Future Reinvention
Tec driven Business driven Audience,customer,commun
ity driven
Revenue growth focus Earning & profit focus Audience& social network
growth focus
Venture capital finance Traditional financing Merger & Acquisition
Entrepreneurial Traditional /old economy Large pure Web based firms
Disintermediation Strengthening intermediaries Proliferation of small online
intermediaries
Perfect mkts Imperfect mkts,brands,network Online market imperfections
effects
Pure- play Bricks & clicks New mkt(pure
play),Retail(bricks & clicks)
First mover advantages Strategic follower New mrkt (1st mover)
 Online dispute resolution

No formal e-commerce dispute resolution regulatory

mechanism in India
E-commerce websites are not following Indian laws
Allegations of predatory pricing , tax avoidance,
anticompetitive practices
India moving toward global norms for e-commerce
business activities
Option either Telecom Regulatory Authority of India
(TRAI)or through different Ministries/Departments of
Central Government in a collective manner.
Possibility of e-courts
 CASE STUDY
Insulting Images of Warrior
Shivaji on Google - Orkut
 An Indian posted insulting images of respected
warrior-saint Shivaji on Googles Orkut. Indian police
came knocking at Googles door demanding the IP
address which was the source of this negative
image. Google- India handed over the IP address.

The computer with that IP address was using Airtel-

India as the ISP to connect to the internet and Orkut-
Airtel gave police the name of an innocent person using
a different IP address.

An innocent Indian, Lakshmana Kailash K, was arrested

in Bangalore and thrown in jail for 3 weeks. Eventually,
his innocence was proved and he was released in Oct,
2007.
He has slapped a ten page legal notice on Telecom
giant Bharti Airtel, the Principal Secretary (Home)
of the state government in Maharashtra, India and
the Assistant Commissioner of Police (Financial &
Cyber crime unit) demanding that an amount of 20
crores be paid as damages.

The software engineer has also sent a copy of the

legal notice to the National Human rights
commission. Lakshmana had spent a harrowing 50
days in police custody accused of a crime he had
never committed just because an IP address sought
by the police was wrongly supplied by Bharti
Airtel.
 E-commerce challenges
Understanding customer evolution
Charting changing technology
Weathering the storm
Integrating offline & online activities
Identifying key levers of competitive
advantage
Expanding globally
 LEGAL ISSUES

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. The Supreme Court in Trimex International FZE Ltd. Dubai v.
Vedanta Aluminum Ltd.1 has held that e-mails exchanges between
parties regarding mutual obligations constitute a contract.
In an online environment, the possibility of minors entering into
contracts
 LEGAL ISSUES
Stamping of contracts is yet another issue.
An instrument that is not appropriately stamped
may not be admissible as evidence unless the
necessary stamp duty along with the penalty
has been paid. But payment of stamp duty is
applicable in case of physical documents and is
not feasible in cases of e-contracts. However, as
the payment of stamp duty has gone online and
e-stamp papers are available, it can become a
possibility later that stamp duty might be asked
on e-contracts as well.
 LEGAL ISSUES
The other crucial issue is the consent and the way offers are
accepted in an online environment In a click wrap and shrink
wrap contract, the customers do not have any opportunity to
negotiate the terms and conditions and they simply have to
accept the contract before commencing to purchase. Section 16(3)
of the ICA provides that where a person who is in a position to
dominate the will of another, enters into a contract with him, and
the transaction appears, on the face of it or on evidence adduced,
to be unconscionable, the burden of proving that such contract
was not induced by undue influence shall lie upon the person in a
position to dominate the will of the other. So, in cases of dispute
over e-contracts the entity carrying out the e-commerce will have
the onus to establish that there was no undue influence.
 LEGAL ISSUES
Further, section 23 of the ICA provides that
the consideration or object of any agreement
is unlawful when it is forbidden by law, or is
of such a nature that if permitted, it would
defeat the provisions of any law; or is
fraudulent, or involves or implies injury to
the person or property of another, or the
Court regards it as immoral or opposed to
public policy.
 LEGAL ISSUES
Data Protection:
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.
 LEGAL ISSUES
Intellectual Property Rights (IPR):
There are enormous possibilities of trade mark, copyright or
patent infringements in online medium. E-commerce websites are
designed and made by other parties and often the content is also
created by third parties. Unless the agreements between the
parties specifically provide the IP rights, there can be serious
ownership issues of IPR. Any usage of third party IPR should have
valid approvals in place. In interactive websites, the disclaimer
and IPR policy should clearly spell out these issues and
goods/service providers should also keep a watchful eye on the
usage of their websites regularly. Domain names have trade mark
protection and deceptively similar domain names can give rise to
disputes. In Satyam Infoway Ltd v. Sifynet Solutions Pvt Ltd., the
Supreme Court had held that a domain name may pertain to the
provision of services within the meaning of section 2(z) of the
Trade Marks Act.
 LEGAL ISSUES
Efficient delivery system and an effective supply chain and service
management:
It is important to always keep consumer protection issues in
consideration in e-commerce. The Consumer Protection Act, 1986
(CPA) governs the relationship between consumers and goods &
service providers and there are no specific provisions related to
online transactions. Liability for a goods/service provider arises
when there is deficiency in service or defect in goods or
occurrence of unfair trade practice. The CPA specifically excludes
from within scope any service rendered free of cost. So, if only the
actual sale is taking place in the online medium, the users will be
considered as consumers under the CPA. The goods/service
providers may be asked to remove defects/deficiencies, replace
the goods, return the price already paid, compensate and
discontinue the unfair trade practice or the restrictive trade
practice and not repeat them.
 LEGAL ISSUES
Under the Information Technology (Intermediaries
Guidelines) Rules, 2011, the intermediaries have the
obligation to publish the rules and regulations,
privacy policy and user agreement for access or usage
of the intermediarys computer resource by any
person. Such rules and regulations must inform the
users of computer resource not to host, display,
upload, modify, publish, transmit, update or share
certain prescribed categories of prohibited
information. Also, the intermediary must not
knowingly host or publish any prohibited information
and if done should remove them within 36 hours of
its knowledge
 LEGAL ISSUES
In Consim Info Pvt. Ltd v. Google India Pvt. Ltd, the Delhi
Court recognized that no injunctive relief could be granted
to Consim since it did not pass the triple test of (i) prima
facie case (ii) balance of convenience and (iii) irreparable
hardship but here the decision of the court was greatly
influenced by the fact that the trademarks in dispute were
generic in nature. The court also observed that though the
intermediary, Google, cannot be made liable for
infringement arising out of a third partys actions since it
is not possible to always check every advertisement
posted online; however, this observation was subject to
section 3(4) of the aforesaid Intermediaries Guidelines and
Google had to act upon it within 36 hours of receipt,
failing which it may be held liable.
Advertising:
Advertising is an important and legitimate means for a seller
to awaken interest in his products. For long,
advertisements were regulated by the courts,
government, tribunals, or police that depended upon the
nature of each case. Additionally, absence of a single
comprehensive legislation created a lot of confusion in
terms of a proper code to follow by the industry and the
authority to regulate or guide the pattern of advertising.
In 1985, the Advertising Standards Council of India
(ASCI), a non statutory tribunal, was established that
created a self regulatory mechanism of ensuring ethical
advertising practices. ASCI entertained and disposed off
complaints based on its Code of Advertising Practice
 LEGAL ISSUES
Competition:
E-commerce has already generated a lot of competition with ever
increasing players and acquisition of several old players in the
market and has enabled development of new services, new
distribution channels, and greater efficiency in business activities.
Creation e-hubs where significant market share lies can lead to
certain competition issues if they appear to have developed
sustainable market power resulting from network effects and/or
engaging in strategic acts to preserve or maintain their market
power. Potential issues for e-commerce players would be price
fixing or tacit collusion or anti-competitive discrimination or
refusal of access to third parties. E-commerce players should
refrain from collusion and excessive pricing. Options for parties to
use same web platform for different kinds of products/services
can give rise to different intermediaries and that can lead to
collusive behavior. Market transparency should be encouraged.
 LEGAL ISSUES
Conclusion

websites should lay down purchasing and payment process in

sequence with absolute clarity and regular updating/monitoring
of information provided. The terms and conditions should not be
generic but specific depending upon the nature of the goods &
services offered and they should be brought to the sufficient
attention of the consumers and provide ample opportunity to
read and then accept. E-commerce players should ensure
reasonable efforts to prevent unauthorized transaction. E-
commerce business is in nascent stage but the growth has been
exemplary. It is crucial for e-commerce players to work towards
capacity building by training employees and alarming them
against the risks discussed above.
 LEGAL ISSUES
Working and more crucially implementing the risk management
policy and strategy for overall risk mitigation of the company is
critical. Constant monitoring and evaluating the consumer behavior
(like by keeping track of their footprints on their websites, which
can also serve as an evidence at a later stage) for risk assessment
and taking further initiatives for a strategic & dynamic approach to
the digital economy is crucial. At the end of the day, e-commerce is
more about strategy and business management than it is about
technology. The online platform should not only provide innovative
infrastructure but also innovative and proprietary information
structures with sufficient protections and safeguards for its users.
This will ensure the problems will remain at bay or at least the
companies would be prepared with a strategy to tackle them.
 E-Commerce-Retail
1. In garb of marketplace model most e-comm cos. directly selling to customers.

2. Predatory Pricing tactics effecting brand image & violation of Competition Act.

3. Platform Providers also Seller Irrespective of model, should be responsible

for the Products sold.

4. Setting up of E-Courts/ADRs/On-line Dispute Resolution systems required

5. Increased Security required- System security, securing IPR

6. Validity of online contracts

7. The players should have long-term commitment

8. VAT Clarity required to avoid disputes. Definition of e-commerce, Retail,

wholesale & marketplace selling essential.
 E Commerce Key take away &
beneficial to Retail Business
. 100% FDI in MBRT should be allowed

2. Growth in e-comm- beneficial to off-line retailers and economy

also

3. Opportunity not a threat- Mutually beneficial, symbiotic

relationship

4. Chance to sell to customers in untouched markets.

5. Emergence of on-line retailers- making both traditional and

modern retailers to be more techno savvy and innovative to retain
the customers.

6. Way forward- Omni-Channel approach

Thank you !