E-Commerce Platforms restrained from advertisement and sale of direct selling entities’ products: Delhi HC

The Delhi High Court (“Delhi HC”) in the case of Amway India Enterprises Pvt. Ltd. v. IMG Technologies Pvt. Ltd. & Ors. has barred e-commerce platforms like Flipkart and Amazon from selling products of companies like Amway, Oriflame, Modicare, etc. (“Plaintiffs”). The Plaintiffs who are engaged in direct selling moved the Delhi HC against unauthorized sale of their products on these intermediary platforms since it violates their rights under:

i.  the Trademark Act, according to which the Plaintiff’s rights exhaust upon the first sale of products;

ii.  the Direct Selling Guidelines, 2016 (“DS Guidelines”), according to which platforms should obtain consent of Plaintiffs for sale.

The Delhi HC decided that since the products might be sourced through unauthorized channels, which means that they could be tampered with and impaired. Intermediary platforms have also been restrained from advertising, displaying or offering for sale products belonging to Plaintiffs without its consent. 

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The DS Guidelines are strictly binding and not merely advisory in nature. Any sellers and platforms have to take the consent of Plaintiffs to offer, display, and sell their products on their platforms. The uncontrolled sale of such products through unauthorized channels will cause wrongful loss to Plaintiffs and destroy their goodwill. Intermediary platforms should be conscious of the nature of sellers and products being sold.


Ministry of Electronics and Information Technology incentivizes low value transactions through minimum KYC wallets

The Ministry of Electronics and Information Technology (“MeitY”) has initiated incentive schemes for promotion of digital payments. A few such schemes are BHIM cash-back scheme for individuals, BHIM incentive scheme for merchants, and BHIM Aadhar merchant incentive scheme for ensuring wider adoption by the masses. MeitY also notified in 2017 that Merchant Discount Rate (“MDR”) charges on Debit cards/BHIM-UPI and BHIM Aadhar Pay Transactions of value up to 2,000.

These transactions are categorized as Prepaid Payment Instruments (“PPI”), which are regulated by the Reserve Bank of India (“RBI”) through a Master Direction.

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Any PPI is allowed for a period of 18 months by acceptance of the PPI Holders minimum details. The Know Your Customer (“KYC”) compliance should be done within 18 months to further transact. MeitY and RBI are actively creating a framework to enable easy payments in the country by encouraging payments by non-bank entities, and to promote acceptance of UPI based payments by small and micro merchants. This is a move in the right direction.


Special Economic Zones Act amended to allow trusts to set up units

The Special Economic Zones (Amendment) Bill 2019 was enacted to provide trusts the opportunity to set up units in Special Economic Zones (“SEZ”). The definition of “person” under the Act was amended to include “trusts”, and any other entity which the Central Government may notify. The proposal to establish a trust can be made by any person.

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Trusts units set up in SEZs will now be eligible to receive government incentives like single window clearance system and government incentives. The other benefits available to trust units in SEZs are absence of license requirement for import and routine examination by customs authorities of any import and export, full freedom for subcontracting, and direct and indirect tax benefits.


Disclaimer: This post has been prepared for informational purposes only. The information/or observations contained in this post does not constitute legal advice and should not be acted upon in any specific situation without seeking proper legal advice from a practicing attorney.