Let us talk about E-Contracts (II): E-Commerce Business Models

Without any argument, new communication systems, especially digital payment technologies, have supplanted the snail-paced conventional systems of communication and transactions. Business communities and consumers are increasingly using digital means to send and receive information in electronic form. The reason is that the information technology (IT) has abridged the time and distance factor in transacting business. Nowadays, inflow and outflow of information have become instant and momentary. Therefore, one principal contribution of IT is in the field of contract-formation.

Electronic contracts (e-contracts) are born out of the need for speed, convenience and effectiveness. The law has already recognised contract-formation using facsimile, telex and other similar technologies.

Let us envision a contract between an Indian businessman and an English businessman. Away from digital means, one option is that one party first draws up two copies of the contract, signs them and sends (through postal or courier service) them to the other, who, in turn, signs both copies and sends one copy back. The other option would be that the two parties meet somewhere and sign the contract. However, within the digital world, the whole process can be completed in seconds, with both parties simply affixing their electronic signatures to the electronic copy of their contract. There is, thus, no need for tardy dispatching mechanism (postal or courier services) and/or supplementary travelling costs in such a situation.

Before proceeding with the E-Contracts, let us have a brief look at the basics of the business model and kinds of transactions under which e-contracts are mostly used.

E-Commerce Business Models

Electronic commerce (e-commerce), in a very general sense, refers to buying and selling products and services over the internet and the World Wide Web (www). E-commerce, however, in actuality, includes all forms of commercial transactions involving both—organisations and individuals—that are based upon the electronic processing and transmission of data including text, sound, and visual images; and involves transactions over the internet as well. In addition, e-commerce also refers to the effect that the electronic exchange of commercial information may have on the institutions and processes that support and govern commercial activities.

There are several ways of looking at e-commerce:

(1) From a communications perspective, it is the ability to deliver products, services, information, or payments via networks like the internet.

(2) From an interface view, it means information and transaction exchanges: business-to-business (B2B), business-to-consumer (B2C), consumer-to-consumer (C2C), and business-to-government (B2G).

(3) As a business process, e-commerce means activities that support commerce electronically by networked connections. For example, business processes like manufacturing and inventory and business-to-business processes, like supply chain management is managed by the same networks as business-to-consumer processes.

(4) From an online perspective, e-commerce is an electronic environment that allows sellers to buy and sell products, services, and information on the internet. The products may be physical, like cars; or services, like news or consulting, etc.

(5) As a structure, e-commerce deals with various media: data, text, web pages, internet telephony, and internet desktop video.

(6) As a market, e-commerce is a worldwide network. A local store can open a web storefront and find the world at its doorstep—customers, suppliers, competitors, and payment services. Of course, an advertising presence is essential.

Types of Online Transaction

Online transactions can be recognised and categorised in four ways:

Business to Customer (B2C)

It is the transaction where a business entity on one side and an individual customer, on the other hand, conduct business. The expression B2C has been commonly used to refer to a sale by a business enterprise or retailer to a person or ‘consumer’ conducted through the internet. For instance, Flipkart.com which provides facilities for customers to buy goods from the website—is an example of a B2C e-business. In this situation, the website itself serves the purpose of a shop. The B2C transactions can be in relation to both—tangible and intangible products. The focal point of this e-commerce application is on the consumer’s use of a merchant’s web storefront or website. Consumers from any place can browse and order for goods and services online at any time. B2C is an electronic equivalent of the conventional mail-order or telephone-based ordering system.

Business to Business (B2B)

It is the type of e-commerce where there is an exchange of products, services, or information between businesses using the internet, rather than between businesses and consumers. Alibaba.com is the prominent example of B2B model.

Customer to Business (C2B)

Customer to Business (C2B), also known as Consumer to Business, is the most recent e-commerce business model, where individual customers offer to sell products and services to companies that are prepared to purchase them. It is the opposite of the traditional B2C model. Example of this model is blogs or internet forums where the author offers a link back to an online business facilitating the purchase of some product (like a book on Amazon.com), and the author might receive affiliate revenue from a successful sale.

Customer to Customer (C2C)

It is the transaction which involves two or more customers with business entity merely providing a web-based interface to facilitate the consumer to consumer transactions (B2C). The expression C2C generally refers to the sale of a product pertaining to a consumer to another consumer either directly or through an intermediary exclusively dedicated for this activity. One best example of C2C website is Ebay.com, which is an online auction site, where any person can buy and sell, and exchange goods and articles using this website. This website provides the web-based interface (i.e. the website with its database and other functions) and users can transact freely with each other. Another example is Amazon, which in fact, acts as both a B2C and a C2C marketplace.

Recommended Readings

  • Alan Davidson, The Law of Electronic Commerce, Cambridge University Press, (2009).
  • R K Singh, Law Relating To Electronic Contracts (2017)

COVID-19 Lockdown Guidelines [updated with Addendum]: E-commerce for essential services, key takeaways & punishment under section 188 of IPC

The Ministry of Home Affairs has issued guidelines on the measures to be taken by government authorities for containment of COVID-19 epidemic, which exempts delivery of all essential goods through e-commerce from the 21-day lockdown that had come in effect from midnight today. E-commerce will operate without restrictions in order to deliver food, pharmaceuticals, and medical equipment.

MeITY issues advisory to State Governments

On the same lines, the Ministry of Electronics and Information Technology (MeITY) through an advisory has directed all state governments to permit IT/ITeS industries to carry out essential functions which include delivery, warehouse operations, shipping and logistics.  There are cases and videos reported from several parts of countries of police officials halting and beating delivery executives in order to enforce the implementation of the lockdown. Therefore, the advisory by MeITY will help in ensuring that delivery executives and other associated employees carry out these functions. The Ministry advised the state governments to treat “copy of orders, waybills, invoices” as evidence.

Reuters had reported that e-commerce and online grocery delivery services were being disrupted across the country as multiple states have locked down to contain the COVID-19 pandemic. Section 144 has also been imposed in multiple parts of the country, making it harder for delivery personnel to operate, and for warehouse employees to get to work. Flipkart and Amazon temporarily suspended logistics services for sellers across regions, according to an Economic Times report. The problem that e-commerce companies are facing right now is that different states have come out with different guidelines on their operations during the pandemic. For instance, the Tamil Nadu government has banned home delivery services such as Zomato and Swiggy as the state goes into lockdown, but the Maharashtra government exempted food delivery as the delivery of an “essentially good”.

Therefore, the MeITY advisory will assist in providing a uniform direction to all the state governments in order to allow the operation of e-commerce deliveries of essential services across the country.

Other important things to know

Further, for the general information of the reader:

As per guidelines,

Closed Exceptions
Commercial and private establishments will be closed. (such as shopping malls, private outlets etc.) Shops, including ration shops (under PDS), dealing with food, groceries, fruits and vegetables, dairy and milk booths, meat and fish, animal fodder/ district authorities may encourage and facilitate home delivery to minimize the movement of individuals outside their homes/ Banks, insurance offices, and ATMs/ Print and electronic media Telecommunications, internet services, broadcasting and cable services/ Delivery of all essential goods including food, pharmaceuticals, medical equipment through E-commerce.

 

Offices of the Government of India, its Autonomous/ Subordinate Offices and Public Corporations shall remain closed. Police, home guards, civil defence, fire and emergency services, disaster management, and prisons/ District administration, Electricity department, water, sanitation Municipal bodies (Only staff required for essential services like sanitation, personnel related to water supply etc)/ Hospitals and all related medical establishments, including their manufacturing and distribution units, both in public and private sector, such as dispensaries, chemist and medical equipment shops, laboratories, clinics, nursing homes, ambulance etc. will continue to remain functional/ Transportation services for medical purposed will be permitted.

 

The Ministry of Home Affair issued an addendum to the guidelines to include more services/activities that have been exempted from the 21-day nationwide lockdown. Following additional services have been exempted: [The post has been updated on 26.03.2020]

  • The Government “Treasury” has already been exempted vide the guidelines issued yesterday. It is now clarified that the term “Treasury” would include Pay & Accounts Officers, Financial Advisors, field offices of the Controller General of Accounts;
  • Further, it has been added that the RBI, RBI Regulated financial markets, entities such as NPCI and CCIL, payment system operators and standalone primary dealers would also stand exempted;
  • IT Vendor for banking operations, Banking Correspondent and ATM operation and cash management agencies;
  • Shops for seeds and pesticides;
  • Data and call centres for Government activities only;
  • Operation of Railways, Airports and Seaports for cargo movement, relief and evacuation and their related operational organisations;
  • Inter-state movement of goods/cargo for inland and exports;
  • Cross land border movement of essential goods including petroleum products and LPG, food products, medical supplies; and
  • Veterinary hospitals, pharmacies (including Jan Aushadhi Kendra), Pharmaceutical research labs stand exempted.

Punishment for violating the lockdown order

The guidelines strictly note that-

“Any person violating these containment measures will be liable to be proceeded against as per the provisions of Section 51-60 of the Disaster Management Act, 2005, besides legal action under Section 188 of the IPC.”

Section 188 of the Indian Penal Code provides two offences and their punishments as follows:

  • Disobedience to an order lawfully issued by a public servant, if such disobedience causes obstruction, annoyance or injury to persons lawfully employed. Punishment: Simple Imprisonment for 1 month or fine of Rs 200 or both.
  • If such disobedience causes danger to human life, health or safety, etc. Punishment: Simple Imprisonment for 6 months or fine of Rs 1000 or both.

The Section 3 of the Epidemic Diseases Act talks of penalty on any person found to be disobeying any regulation or order made under the law and would be deemed to have committed the offence under the Section 188 of IPC. Therefore, those violating the lockdown orders can face legal action under the Epidemic Diseases Act, 1897, which lays down punishment as per Section 188 of the Indian Penal Code, 1860, for flouting such orders.

Note from the author: The blog started with the aim of simplifying and compiling laws related to technologies for the understanding of everyone. The keyword that motivated the author to write on such topics is the uncertainty behind the laws that regulate technology. However, this post has been different and dealt with the simplification of certain other issues as well. It is again the uncertainty behind the present times that has motivated the author to write this blog piece. The uncertainty related to the magnitude of the damage due to the corona outbreak may result in more such unprecedented laws and guidelines from the government. The author will continue to simplify them for the understanding of everyone. A very little contribution to society in these difficult times. Let us fight this together. Stay home, stay healthy.