As digital marketplaces have become the new frontier of consumer interaction, the landscape of consumerism has shifted from the traditional physical shops to intangible, online platforms. With the advent of such digital marketplaces, there have been multiple instances where the products received by the consumers, despite the product and seller looking promising, are anything but what was advertised. The items appear to be extremely mediocre and defective in quality. Even if the consumer happens to lodge a complaint because of the counterfeit product received, they become a victim of an endless loop of redirections where the seller and the platform neither claim liability for the products delivered. In this legal limbo, the consumer is left hanging with no award of an effective remedy.
The principle of Caveat Emptor, which means that ‘let the buyer beware’, places responsibility on the buyers to ensure that the product they are purchasing is of substantial quality, but this principle had been prevalent in markets of yore, where if the sellers were caught manipulating the product, they would face consequences. However, this principle cannot be followed in modern online marketplaces. Now it is assumed that the seller is responsible for liability of selling faulty products to their customers, but the process of selling online has changed drastically. Multiple sellers, being third-party vendors, sell their products on online e-commerce platforms, and with this, the question of the onus of liability changes.
In the United States, we see that the platforms tend to enjoy relatively broad immunity from lawsuits that are brought by consumers. Section 230(c)(1) of the Communications Decency Act of 1996 states that the platforms shall not be held liable for any content that is posted by their users, i.e third-party sellers. However, the application of this law is deemed to be controversial by many critics. In 2019, a California court found that Amazon could be held strictly liable for the sale of defective products; in the case at hand, it was a defective laptop battery. The Court further stated that even if the product was sold by third-party vendors, it was still been claimed to be ‘Fulfilled by Amazon’, thus the platform should be held liable. Consequently, in 2021, Amazon was held liable for the harm caused to the consumer by a shipment from an overseas third-party vendor. Despite Amazon’s argument that they should not be held liable, the court opined that the platform had played a key role in the sale, thus, they should take all necessary and cost-effective measures to ensure that such grievances do not arise in the future.
Without the lack of any proper institutional reform, the disparity between the consumers and online sellers would continue to grow, thus becoming a hindrance to the growth of this thriving market
In cases of similar nature, the commonly used defence by digital platforms is that they merely serve as a bridge between the consumers and third-party sellers, so they should not be held responsible for the liability for the defective products received. This defence is enshrined in the principle of ‘safe harbour’, which shields intermediaries from liability, however, it must be noted that this doctrine is under extreme scrutiny. The recently enacted Digital Services Act (DSA) by the European Union has also introduced heightened due diligence obligations for online marketplaces. The DSA had put forth provisions that ensure traceability of third-party sellers, and it tends to act swiftly upon receiving notice of illegal content or products.
However, if we turn our eye to the underdeveloped legal framework of Pakistan, there is no section in the Punjab Consumer Protection Act, 2005 that entails or refers to ‘online transactions’, ‘digital platforms’ or ‘online marketplace’, creating an imbalance and legal void between the consumers and the online platforms. The scope of the Consumer Protection Act of 1986 is restricted concerning e-commerce, as the Act does not provide a solution to the various loopholes that are brought about by online transactions. Under Section 2(c) of the Act, a consumer has been defined as a person or entity who buys or obtains a lease of any product for a consideration, etc. This definition is not all-inclusive as it does not include, nor cater nor explicitly mention digital consumers.
In 2020, India enacted the Consumer Protection (E-Commerce) Rules, which explicitly caters to digital consumerism and has laid out the rules and parameters for e-commerce platforms and sellers. In Section 3(b) of the Act, they defined “e-commerce entity” as any person who owns, operates or manages a digital or electronic facility or platform for electronic commerce, but does not include a seller offering their goods or services for sale on the marketplace e-commerce entity. The Act also imposes several new obligations on e-commerce platforms and sellers, i.e. providing clear and accurate information about products and services, honoring returns and refund policies, protecting consumer data, etc. With the advent of this Act, multiple cases of unfair online trade practices have been reported, and notices have also been served to food delivery services for various violations, including the bogus claims of ‘delivery under 10 minutes’. In the Indian case of Amazon Seller Services Pvt. Ltd, v. Amway Enterprises Pvt. Ltd. & Ors (2020), regarding the unauthorised listing and sale of products, the court held that e-commerce sites need to ensure that the sellers on their platforms strictly follow the guidelines of legal business practices to avoid consumer deception.
Considering the legal frameworks of the world and the neighbouring jurisdictions of Pakistan, it is the need of the hour for the initiation of comprehensive legal reforms in the Consumer Protection Act of 1986 that would regulate online platforms, define due diligence and the liabilities of the platforms and sellers, etc. Without the lack of any proper institutional reform, the disparity between the consumers and online sellers would continue to grow, thus becoming a hindrance to the growth of this thriving market. As in the words of Hillary Clinton, “Instead of gutting consumer protection, we should be expanding it”.