Are social media e-commerce shops liable under the same rules as marketplaces?

With the rise of social media e-commerce, many businesses and individual sellers are now using platforms like Instagram, Facebook, and WhatsApp to sell products directly to consumers. These platforms provide a more personalized shopping experience and enable sellers to reach a large audience without setting up a full-fledged online marketplace.

However, the question arises: Are social media e-commerce shops held to the same legal standards and consumer protection laws as traditional e-commerce marketplaces like Amazon or Flipkart?

The answer is not straightforward. While both types of platforms facilitate online transactions, social media e-commerce shops often face different legal implications in terms of liability, consumer rights, and platform responsibility.

Differences Between Social Media Shops and Traditional Marketplaces:

Business Model Differences:

• Traditional Marketplaces: Platforms like Amazon and Flipkart act as third-party intermediaries between buyers and sellers. They offer platforms for sellers to list products and facilitate payments, shipping, and returns. These marketplaces typically have robust systems for customer service, payment protection, and dispute resolution.
• Social Media Shops: These platforms function more as direct sales channels for individual sellers or small businesses. While platforms like Instagram and Facebook provide tools for setting up stores, they generally don’t handle transactions directly, nor do they manage shipping or customer support. Instead, social media platforms provide advertising space and marketing tools to promote products.

Platform Liability:

• Marketplaces: Marketplaces like Amazon and Flipkart have a higher degree of liability when it comes to product safety, fraudulent listings, and consumer disputes. This is because these platforms have a much larger role in the transaction process facilitating payments, ensuring product quality, managing returns, etc.
• Social Media Platforms: Social media platforms are more like advertising spaces. They are not directly involved in the sales process. The liability for issues such as product defects, misleading advertising, or fraudulent activity generally falls on the sellers themselves. For example, a business selling directly on Instagram would be responsible for ensuring the quality and safety of the product, while Instagram would not be liable unless it was involved in facilitating fraudulent transactions.

Consumer Protection and Legal Requirements:

• Traditional Marketplaces: These platforms are subject to a wide range of consumer protection laws, such as the Consumer Protection Act, 2019 and E-Commerce Rules, 2020 in India, which impose strict guidelines on dispute resolution, product quality, and return policies.
• Social Media Shops: Social media shops are somewhat outside of these formal regulations because they do not have a direct role in transactions. However, if the sale involves fraudulent behavior or if the product does not meet advertised specifications, the seller can be held accountable under consumer protection laws.
• Influencers: Influencers promoting products through their social media platforms must follow advertising regulations set out by agencies like the Advertising Standards Council of India (ASCI), which ensures that misleading advertising is not allowed.

Seller Responsibility:

• Marketplaces: Sellers are accountable to both the marketplace and the consumer. Marketplaces often have policies in place that hold sellers accountable for product defects, non-delivery, or fraudulent listings.
• Social Media E-Commerce: In this case, the seller is primarily responsible for the product, customer service, and dispute resolution. The platform (e.g., Facebook or Instagram) typically does not offer buyer protection or refund policies, leaving the consumer to rely on the seller's terms. However, social media platforms can intervene if there is a violation of their terms of service (e.g., illegal products or fraudulent advertising).

Legal Implications and Liability for Social Media E-Commerce Shops:

Consumer Protection:

• Marketplaces: Traditional platforms like Amazon and Flipkart have formal grievance redressal mechanisms, refund policies, and buyer protection programs. They are legally required to ensure fair trade practices and provide consumers with clear return policies and refund processes.
• Social Media Shops: On social media platforms, consumer protection is much less formalized. If a consumer purchases a defective or misrepresented product, they may face difficulties getting a refund or replacement, as social media platforms do not have the same formal mechanisms in place. In such cases, consumers may need to take action directly against the seller, and it is often harder to pursue legal action through the platform.

E-Commerce Rules and Guidelines:

• Marketplaces: E-Commerce Rules, 2020 and other consumer protection laws apply more directly to marketplaces than to social media shops. These rules require platforms to:
  • Provide transparent information about the products being sold.
  • Ensure safe payment processing.
  • Offer dispute resolution mechanisms.
• Social Media Platforms: While social media platforms may not be held accountable for product safety or transaction management, sellers on social media are still bound by Indian consumer laws. Sellers are obligated to provide correct information, ensure product quality, and honor returns if they advertise their products through social media platforms.

Advertising Regulations:

• Social Media Platforms: Social media platforms must ensure that sponsored content (like influencer marketing) complies with advertising guidelines such as the ASCI guidelines in India. Influencers must disclose paid partnerships and ensure that products are advertised truthfully and without misleading claims.
• Platform Responsibility: Facebook and Instagram have advertising policies that prevent the promotion of illegal products, but they do not have the same strict control over the transactions as traditional e-commerce platforms.

Example Case:

Scenario: An individual seller sets up a shop on Instagram to sell handmade jewelry. A consumer buys a necklace but later finds it is faulty. The consumer contacts the seller, but there is no response, and the seller does not provide a refund.

Actions Taken:

• The consumer may report the issue to Instagram, but the platform is not liable for the transaction itself.
• The consumer can take legal action under the Consumer Protection Act, filing a complaint against the seller for not providing a refund or replacement.
• The seller could face consequences for violating consumer rights, but Instagram would not be directly responsible for the issue.

Conclusion:

• Social media e-commerce shops and traditional marketplaces differ significantly in terms of legal liability and consumer protection. While marketplaces like Amazon and Flipkart are subject to a comprehensive set of e-commerce laws, social media platforms generally act more as advertising spaces and are not directly responsible for transactions, product safety, or dispute resolution.
• However, sellers using social media platforms are still accountable under consumer protection laws for their product's quality, advertising, and overall conduct. While social media platforms do not have the same legal obligations as traditional e-commerce marketplaces, they must ensure that advertising follows ethical guidelines and that fraudulent listings are prevented.