Source: theprint.in<\/p>\n\n\n\n
New Delhi:<\/strong> The Delhi High Court has restrained \ne-commerce platforms Amazon, Flipkart, Healthkart and Snapdeal from \nfeaturing and selling products belonging to Amway without its consent.<\/p>\n\n\n\n A similar order has been issued against Amazon with respect to the products of Modicare and Oriflame.<\/p>\n\n\n\n Authoring the judgment, Justice Pratibha M. Singh quoted the popular adage from American comic book Spider-Man<\/em>\n \u2014 \u201cwith great power comes great responsibility\u201d \u2014 to highlight the \nburden on e-commerce platforms, which it said have \u201cpenetrated all forms\n of trade, commerce and businesses\u201d.<\/p>\n\n\n\n The court issued an interim injunction against the websites Monday, \nobserving that \u201cat the prima facie stage, the apprehension of the \nPlaintiffs that the products are being sourced through unauthorised \nchannels and that the products are tampered, conditions changed and \nimpaired, is completely valid\u201d.<\/p>\n\n\n\n Singh asserted that if the injunction was not issued, the websites \nwould \u201ccompletely erode\u201d the business of the companies through their \npractices.<\/p>\n\n\n\n The observation came after the court was informed, with photographs \nand other evidence, that there was \u201clarge scale tampering of goods\u201d \ntaking place at the platforms\u2019 warehouses. This, the court said, also \nraises apprehensions over the manufacturing and expiry dates on these \nproducts.<\/p>\n\n\n\n The court was hearing a batch of seven suits filed by Amway, Modicare and Oriflame, raising overlapping issues.<\/p>\n\n\n\n The legal complexities in the case involved Constitutional issues, \nintellectual property rights, information technology, consumer \nprotection and contractual laws as well as other guidelines applicable \nto the business model of the petitioners.<\/p>\n\n\n\n Amway, Modicare and Oriflame, the three companies, sell their \nproducts through a system of \u2018direct selling\u2019, allowing sellers to sell \ntheir products under a direct seller\u2019s contract. These sellers agree to \nmarket, distribute and sell their products directly to the consumers.<\/p>\n\n\n\n Last year, the companies challenged the sale of their products on the\n e-commerce websites without their consent. This, they said, was \nviolative of the Direct Selling Guidelines, 2016, which prohibit the \nsale of products in such arrangements \u2014 direct selling of these products\n \u2014 without the consent of the company.<\/p>\n\n\n\n Additionally, the companies apprehended that counterfeit products \nwere being sold on these websites, in view of the drastic reduction in \nprice being offered and consumer dissatisfaction with these products.<\/p>\n\n\n\n They also took objection to the change in the refund, return, \nguarantee and warranty policy for their products, asserting that this \nresults in the erosion of the customer\u2019s trust in their products.<\/p>\n\n\n\n In April 2018, the Food Safety and Standards Authority of India had \nalso sent a letter to all major e-commerce websites, asking them to stop\n the sale of direct selling products, without the consent of those \ncompanies.<\/p>\n\n\n\n According to the HC judgment, this letter was neither challenged, nor complied with.<\/p>\n\n\n\n In its interim order, the Delhi High Court observed that the manner \nin which the products of the three companies find their way to these \nwebsites would be finally adjudicated at the time of trial. It, however,\n noted that none of the websites was able to \u201cunimpeachably vouch\u201d for \nthe originality of the products sold on their platforms.<\/p>\n\n\n\n During the proceedings, the court conducted an enquiry into the \nproducts available on these websites and examined the reports filed by \nthe local commissioner who was directed to visit the warehouses of these\n platforms.<\/p>\n\n\n\n Among other things, the court noted that the name of the seller was \neither not mentioned on the website at all or was mentioned without any \ndetails. As for warehouses, it noted that as alleged by the companies, \nsome of the products found there were tampered with and did not contain \nthe barcode affixed by the companies.<\/p>\n\n\n\n The local commissioner submitted that some products found in the \nwarehouses could not be traced back to the three companies, leading to a\n question on their quality and genuineness. Besides, their seals were \nbroken and QR codes removed, posing concerns on the hygiene standards at\n these facilities.<\/p>\n\n\n\n Notably, the court made reference to the policies and contracts \nadopted by these websites themselves, which prohibited the sale of \nproducts for which the seller is not authorised. These policies also \nbanned products by sellers who do not have consent of the relevant brand\n or trademark owner.<\/p>\n\n\n\n The court fastened liability on the websites for the products being \nsold through their platform, saying the company\u2019s grievances were \u201cnot \ncompletely unfounded\u201d.<\/p>\n\n\n\n It observed, \u201cThe Plaintiffs cannot turn a blind eye to the sale of \ntheir products on the platforms when there is a serious threat not only \nto their business but also to their products and the equity enjoyed in \nthem. There is a serious threat to the reputation of the products and if\n the same are permitted to be sold unchecked, there may be enormous \ndilution and tarnishment of the Plaintiffs\u2019 products and brand equity.\u201d<\/p>\n\n\n\n At the prima facie stage, it ruled that the evidence \u201cclearly reveals that the Plaintiffs\u2019 rights are under severe threat\u201d.<\/p>\n\n\n\n The e-commerce websites essentially took the stand that they were \nintermediaries and hence, were entitled to protection under Section 79 \nof the IT Act, which exempts intermediaries from liability in certain \ncases. They asserted that all the services provided by them were that of\n a mere \u2018facilitator\u2019 and that they are not active participants in these\n transactions.<\/p>\n\n\n\n Categorisation of these websites as intermediaries under the IT Act \nwould have given them the protection of Section 79 of the Act.<\/p>\n\n\n\n The concept of an intermediary, as the expression itself denotes, \nmeans a person or entity, which is in between two other persons. The \ne-commerce platforms sought to be intermediaries between the seller and \nthe buyer.<\/p>\n\n\n\n The court, however, ruled that in order to continue enjoying the \nstatus of intermediaries, these websites will have to comply with \u201cthe \ndue diligence requirements\u201d, according to the platforms\u2019 own policies, \nand the Intermediary Guidelines, 2011.<\/p>\n\n\n\n This, it said, was not being done in the case at hand, as the policies were just \u201cpaper policies\u201d.<\/p>\n\n\n\n The court also ruled that the Direct Selling Guidelines do not \nviolate the e-commerce websites\u2019 fundamental right to carry on their \nbusiness under Article 19(1)(g) of the Constitution of India.<\/p>\n\n\n\n It asserted that these guidelines are applicable to the e-commerce platforms as well, observing, \u201cThough, the Guidelines are issued to regulate the Direct Selling industry, the wording of Clause 7(6) of the said Guidelines is clear i.e. it applies on \u201cany person who sells or offers for sale\u201d. This would take within its ambit, all sellers of goods on e-commerce platforms.\u201d<\/p>\n\n\n\n The Delhi High Court considered the international position on the \nliability of e-commerce platforms in such cases, noting that in the US, \nAmazon\u2019s role has been considered more than that of an intermediary. The\n position in Europe is that if the sale of products causes damage to the\n reputation of the trademark, then the trademark owner could oppose its \nsale.<\/p>\n\n\n\n The court referred to Section 29 of the Trade Marks Act, 1999 which \ndeals with infringement of trademarks and Section 30 that sets out what \nis not infringement. Section 30(4) disallows sale of goods by a third \nparty, if the condition of the goods is changed or impaired by such \nparty.<\/p>\n\n\n\n Changes in warranties, refund\/return policies etc \u201ccauses damage to \nthe reputation of the mark\u201d and would constitute \u2018impairment\u2019, said the \ncourt.<\/p>\n\n\n\n Ruling in favour of the \nthree companies in the interim on the question of infringement of \ntrademark by the e-commerce websites, the court explained, \u201cThe sale on \ne-commerce platforms of the Plaintiffs\u2019 products would be infringement \nof the Plaintiffs\u2019 trademark rights as the Defendants are also using the\n Plaintiffs\u2019 trademarks, their trade names for promotion of the \nproducts, sale of products, display of products, and advertising of the \nproducts in a manner that is detrimental to the distinctive character \nand reputation of the Plaintiffs\u2019 marks.\u201d<\/p>\nViolation of policy, counterfeit products<\/strong><\/h4>\n\n\n\n
\u2018No violation of fundamental right\u2019<\/strong><\/h4>\n\n\n\n
Responsibility of the websites<\/strong><\/h4>\n\n\n\n