This article is written by Muhammad Aneeq Ali, International Islamic University Islamabad (IIUI), 4th year of LLB5Y student, during his internship at LeDroit India.
ABSTRACT
E-commerce is the rising star in the business horizons. Globally, the people prefer online marketplaces for selling and purchasing the products. In other words, sale and purchase is now a single click away. E-commerce has the potential to transform the global economy as the revenue is expected to reach trillions of dollars annually. The most reliable online marketplaces like Alibaba, eBay, Amazon, and some others have played the role of intermediaries between buyers and sellers and offer a virtual platform for trade and business. However, these flourishing marketplaces have posed serious legal challenges that are required to be addressed through a strong legal mechanism for the protection of individual rights. This study focuses on the emerging trends in e-commerce law and examines the challenges in regulating online marketplaces.
KEYWORDS
- Online marketplaces
- E-commerce law
- Transparency in online transactions
- E contracts
- Protection of individual rights
- Legal mechanism for effective financial transactions
INTRODUCTION
The trend of traditional marketing has significantly changed into e-commerce marketing which not only elevates the standard of human life but poses serious challenges to human life. These advances in the latest technology have provided faster means of business transactions.
In the complex online marketplace scenario, where the privacy of individuals may easily be compromised and there are chances of trade irregularities, a strong framework of law is needed to protect the rights and interests of businesses and consumers. This strong framework of law provides the principles regulating the relationship of contracting parties, the protection of intellectual property rights, data privacy, and consumer protection. These principles of law will regulate smooth transactions by ensuring transparency and accountability.
EMERGING TRENDS IN E-COMMERCE LAW
- The creation of e-contracts:
Unequivocally, e-commerce has expanded the business platform beyond borders. It becomes difficult for the parties to regulate business transactions and set the terms and conditions of business contracts by interacting physically. This insists that the parties approach online means of forming contracts with the help of software. This process of forming business contracts by online means is referred to as e-contracts.
- Mandatory framework for consumer protection:
The expansion in online business transactions has attracted the need for a strong legal mechanism and to scrutinize online marketplaces for all the practices that may harm consumers which include misleading advertisements, counterfeit goods, and the lack of accountability for defective products. The recent legislation like the European Union’s Directive on Consumer Rights and India’s Consumer Protection (E-Commerce) Rules, 2020 are practical legal insights that emphasize transparency, individual grievance redressal mechanisms, and product liability.
The legal measures are ensured by requiring unambiguous seller details, product descriptions, and complete information on price policies. The legal framework for online transactions also offers a productive platform for individual grievance redress and online dispute resolution (ODR). Because they are responsible for guaranteeing the quality of products offered on their platform, online marketplaces will be held accountable if they provide faulty goods.
- Data Privacy and Protection
The increasing trend in e-commerce has enabled online marketplaces to hold the vast data of users including but not limited to personal information, banking information, and more. This collection of vast data has posed serious challenges to protecting personal data and privacy. Recent laws such as the EU’s General Data Protection Regulation (GDPR) and California’s Consumer Privacy Act (CCPA) guarantee that data is only collected for necessary purposes, give consumers control over their data, and offer a thorough system for punishing data misusers. The usage of AI-based cybersecurity solutions and encryption to improve data protection are emerging trends for guaranteeing adherence to data protection rules.
- Regulating fair competition:
The growing power of major marketplaces has sparked worries regarding monopolistic behaviors, like giving preference to their products and offering lower prices than smaller competitors. Antitrust regulators in different areas are concentrating on limiting activities like monopolies, introducing limitations on predatory pricing, and ensuring fair competition for small and medium enterprises (SMEs).
- Taxation of Online Transactions
The cross-border nature of business transactions has made the tax collection method more complex and difficult. So different countries have adopted several measures to ensure an effective tax mechanism, as France and India have established Digital Services Tax (DST) to scrutinize revenue collection. Moreover, countries are moving toward the harmonization of Tax Rules like OECD is an organization working for effective tax collection mechanisms.
- Addressing Counterfeit Goods
E-commerce platforms continue to face the challenge of selling counterfeit goods. Blockchain and artificial intelligence are being used by platforms to trace supply chain origins and validate items. As demonstrated by the Shop Safe Act in the United States, which holds platforms responsible for failing to handle counterfeit transactions, governments are also tightening rules.
CHALLENGES IN REGULATING ONLINE MARKETPLACES
Despite advancements in e-commerce laws, significant challenges remain:
- Jurisdictional Complications
Ascertaining the national jurisdiction over international business transactions is a very complex and difficult process. As e-commerce transactions involve the rights and liabilities of nationals from different states, it often poses serious challenges as to which country has the right to determine a dispute among the contracting parties that arises during online transactions.
The major challenges that arise due to the lack of clarity in state jurisdiction include the determination of applicable laws applicable for dispute resolution. For instance, if a consumer in India purchases a product from a seller in the USA through a marketplace established in the EU. It will become difficult to ascertain which country’s law will be applicable in this scenario. Another challenge may be the enforcement of foreign judgment across borders. This problem can be resolved by the harmonization of e-commerce laws.
- Defining Marketplace Liability
Generally, online marketplaces shake their liability by arguing that they are not liable for third-party actions. This sometimes, deprives the innocent consumer of the right of effective remuneration. However, it is seen that the courts are in favour of holding marketplaces liable even for the wrongful acts of third parties.
A case comes to the English court where it has to decide whether the liability of counterfeit is vested in the marketplace or third-party seller. The court in ‘Oberdorf v. Amazon.com’ has decided against Amazon and held it liable due to its failure to pay due diligence while confirming the identity of the seller.
- Combatting Fraud and Counterfeiting
Another challenge faced by e-commerce is to eliminate fraud from the online marketplace. To face this challenge, there is a need for strong legal mechanisms. Increasing cybercrimes in online marketplaces have also raised concerns worldwide whose results include misappropriation of payments, breach of data, and breach of privacy.
- Addressing Competition Concerns
The monopolistic practices of major marketplaces should be leveraged by incorporating measures including but not limited to anti-competitive agreements with suppliers, sharing the manufacturing data of competitive products so that these products flow in the market and unethical behavior of these marketplaces to give priority to their products over the products of third-party seller.
- Managing Environmental Impact
The increasing trend in e-commerce has raised serious concerns related to a healthy environment as e-commerce has caused excessive packaging waste, carbon emissions caused by irregular means of delivery, or overproduction. The international trade community has to adopt a policy for effective solutions to these concerns.
RECOMMENDATIONS FOR EFFECTIVE REGULATIONS
- Harmonization of E-Commerce Laws
The international community must work together to create uniform regulations governing cross-border e-commerce in order to facilitate commercial transactions. The United Kingdom advances this objective by creating the United Nations Commission on International Trade Law (UNCITRAL).
- Empowering Consumers
Along with the other measures, it is also necessary to make the public aware of their rights and duties. There should be clear policy guidelines backed by the international trade community to guide the public in the right direction.
- Technological advancement:
To face the challenges posed by technology, there is a need to empower the technology to find immediate solutions. Emerging technologies including AI, blockchain, and data Analytics can be employed to identify and block unauthorized transactions, enhance supply chain transparency, and monitor market trends respectively. The online marketplaces could be empowered to build strong security mechanism that provides hassle-free solutions to consumers without approaching any third party.
LEGISLATIVE ENACTMENTS: REGULATORY RESPONSES TO E-COMMERCE CHALLENGES
- European Union: The Digital Services Act (DSA)
The EU’s DSA is recent legislation that aims at enhancing the accountability of the parties involved through the online marketplace and transparency in business transactions by providing an effective framework that includes the enhanced measure of consumer protection, to empower the platforms to remove illegal and irrelevant content, conduct risk assessments of their algorithms etc.
- United States: The INFORM Consumers Act
The law also aims at accountability and reducing fraud by requiring the marketplaces to verify the identity of sellers.
- United States: Antitrust Actions Against Big Tech:
The enactment also aims at leveraging fair competition by incorporating effective policies related to pricing and quality of products. Anti-trust investigations have been initiated under this legislation by the Federal Trade Commission (FTC) against Amazon and other major marketplaces.
- India: Consumer Protection (E-Commerce) Rules, 2020
This piece of legislation is mandated for consumer protection and fair competition by prohibiting independent parties from being registered as sellers, restricting flash sales that often incorporate algorithmic pricing, and ensuring the contact details and proper identity of the seller.
CONCLUSION
One dynamic and revolutionary force in the global economy is the e-commerce industry. Nonetheless, the swift expansion of virtual marketplaces has revealed weaknesses in conventional regulatory structures. These issues are being addressed by new developments in e-commerce legislation, which place a strong emphasis on platform responsibility, data privacy, and consumer protection. Finding a balance between innovation and regulation is still crucial, though. Working together with governments, business players, and international organizations will be essential to determining how e-commerce legislation develops in the future. The legislation has to work for a stronger legal mechanism in this age of digital innovation to guarantee that e-commerce continues to be a fair and sustainable source of economic expansion.
REFERENCES
- E-Commerce Law in Europe and the USA: A Practice Guide by Gerald Spindler and Fritjof Börner (2002).
- Cyber Law and E-Commerce by Arshdeep Bahga and Vijay Madisetti (2014).
- The Challenge of Regulating E-commerce in a Global Marketplace by Henry L. T. O’Connell (2020).
- The Liability of Online Marketplaces for Third-Party Content and Transactions by Lilian Edwards (2021), Journal of E-Commerce Law Review.
- Consumer Protection in the Digital Age: Balancing Regulation and Innovation by Sophie Stalla-Bourdillon (2022).
- Amazon EU v. Coty Germany GmbH (CJEU, 2020).
- South Dakota v. Wayfair, Inc. (US, 2018).
- UNCTAD Report on E-Commerce and Digital Economy (2022).
- OECD’s Digital Economy Outlook (2021).
