Consumer Protection in India: LM Rules Now Apply to E-commerce, Notified Medical Devices
In India, retail standards, such as labelling and declaration requirements are governed by the Legal Metrology Act, 2009 (LM Act) and the Legal Metrology (Packaged Commodities) Rules, 2011 (LM Rules).
The LM Act and LM Rules stipulate the standard units of measurements for quantity and the declaration requirements for various commodities. These rules ensure that the consumer is always informed about the production and pricing of the commodity – at the time of making the purchase.
From January 10, 2018, the LM Rules extend to packaged commodities sold on e-commerce websites and Notified Medical Devices. These goods will have to specify details such as Maximum Retail Price (MRP), country of origin, and expiry date for packaged products. The new rules were notified by the Department of Consumer Affairs in June 2017 under the Legal Metrology (Packaged Commodities) Amendment Rules, 2017 (Amendment Rules).
The rapid growth in online retail, over the past half-decade has thrown up fresh challenges for consumer protection in India.
Misleading information on the quality of products sold on e-commerce websites and a lack of basic product information necessitated regulatory amendments to the existing law. Consumers complained of receiving inferior commodities, products nearing expiry, and incomplete packages.
With the new rules, the government also aims to curb the practice of websites offering steep discounts on products, without actually specifying the original MRP.
In addition to pre-packaged commodities, the Amendment Rules also extend to Notified Medical Devices. Previously, the original LM Act, 2009 had exempted Notified Medical Devices from making any declarations about their manufacture.
Notified Medical Devices in India are classified as ‘drugs’, and their retail standards are also governed by the Drug Price Control Order, 2013.
Compliance under LM Rules, 2017
The new metrology rules make it mandatory for e-commerce entities to specify the following details on the package:
- Name and address of manufacturer/packer/importer;
- Name of the country of origin/manufacture;
- Common/generic names of the commodity;
- Net quantity and dimensions of the product;
- Expiry date or “Best Before” or “Use by Date”; and,
- MRP inclusive of all taxes (as illustrated in the Legal Metrology (Packaged Commodities) Rules, 2017. Only one MRP must be displayed.
Besides these compulsory requirements, the seller may also display barcode or QR Code or GTIN (Global Trade Item Number), “e-code”, and logos of government schemes – if authorized by the federal government.
The Amendment Rules also direct e-commerce websites to display the information in legible font and font size. The declarations must be made on both the website as well as the packaged commodity delivered to the consumer.
A violation of any of these requirements will attract penalties under the Amendment Rules.
The Rules shift the responsibility of compliance from the e-commerce entity to manufacturers and sellers, if the e-commerce entity fulfills the following conditions:
- The function of the e-commerce entity is limited to providing access to a communication system over which information made available by the manufacturer or seller or dealer or importer is transmitted or temporarily stored or hosted; or
- The entity does not initiate the transmission or select the receiver of the transmission, or select or modify the information contained in the transmission; or,
- The entity observes due diligence while discharging its duty as an intermediary under the Information Technology Act, 2000, and also observes such other guidelines as the federal government may prescribe.
Consumer protection for e-commerce
The new regulations will be applicable to all e-commerce firms in the country, including marketplace companies like Amazon and Flipkart, as well as inventory based portals. Further, online businesses owned and managed by non-residents will also be subject to the requirements of the new rules.
Packaged commodities weighing above 25 kg (55.11 lbs) or 25 liters (6.60 US gallon) will be exempt, as will commodities meant exclusively for industrial or institutional consumers.
E-commerce firms have had six months to comply with the new rules, since its announcement in June 2017. This involved the training and education of online retailers, suppliers, and partners on gathering and displaying accurate information for all products.
Notified Medical Devices: Applicability of LM Rules, 2017
The amended Legal Metrology Rules will apply to 15 categories of medical devices. These medical devices will have to carry labels that will display the following particulars:
- Maximum Retail Price (MRP);
- Common or generic name of the commodity;
- Month and year of manufacture and packing;
- Contact details (phone, email, and address) for consumer feedback;
- Country of origin or manufacture;
- Actual corporate name and complete address of domestic manufacturer or importer or packer (for retail and wholesale);
- Net quantity in standard measure or numbers (for wholesale products only); and,
- Identity of commodity (for wholesale products only).
For medical devices, which are usually packaged in multiple layers for quality purposes, the declaration labels can appear on the outer package only, and need not be repeated on interior layers.
The manufacturer, packer, or importer of Notified Medical Devices must register themselves under the relevant regulatory authority, as prescribed by the 2017 LM Rules. A price revision brought about by a change in tax rules must be conveyed to the public, distributors, and relevant regulatory authority.
Increasing accountability, consumer protection in India
The Amendment Rules are likely to increase the accountability and transparency of online retail transactions, thereby boosting consumer confidence.
For businesses, this means additional efforts in ensuring correct labels displaying product information for all existing inventory as well as for future products.
Marketplace e-commerce entities, which harbor a large share of the market, must have clear agreements with their seller and manufacturer partners about how the new compliance requirements will be met.
India Briefing is published by Asia Briefing, a subsidiary of Dezan Shira & Associates. We produce material for foreign investors throughout Eurasia, including ASEAN, China, Indonesia, Russia, the Silk Road, & Vietnam. For editorial matters please contact us here and for a complimentary subscription to our products, please click here.
Dezan Shira & Associates provide business intelligence, due diligence, legal, tax and advisory services throughout India and the Asian region. We maintain offices in Delhi and Mumbai and throughout China, South-East Asia, India, and Russia. For assistance with India investment issues or into Asia overall, please contact us at email@example.com or visit us at www.dezshira.com.
- Previous Article India’s New Accounting Standard ‘Ind AS 115’ Effective April 1, 2018
- Next Article Maharashtra Shops and Establishments Rules, 2018 Explained