Legal Issues in E-commerce – Part 1 of the series

E-commerce has picked up in India and how ! We love when a young e-com business gives a large traditional organization a run, whose competitive advantage is just being big.

Over three posts we plan to present some of the legal issues in an e-com business. Some of these legal issues are applicable because of “e” and then there are those which are very specific to the nature of business itself.

Let us take a few examples of specific business related issues.

FDI in retail: The FDI policy issued by Department of Industrial Policy and Promotion (DIPP) has a separate section for Ecommerce activities and specifies that FDI in e-com is allowed provided such companies would engage only in B2B and not in retail training. i.e. existing restrictions on FDI is applicable to e-commerce as well.

And then there are regulations for the web variation of the business. For example:  Insurance Regulation Development Authority (IRDA) introducing guidelines for the web aggregators.  Any company which maintains/owns a website  which provides information pertaining to insurance products and price comparisons of different insurers and offers leads to an insurer / insurance brokers will have to adhere to some detailed Dos and Don’ts  wef 1 Feb 2012.

Reserve Bank of India (RBI) has very stringent guidelines on pre-paid payment instruments.  For the ones like Itz Cash, the guidelines are clear.  But applicability of the said guidelines for ecom sites which issue vouchers/ coupons/ deal sites are still not very clear.

Recurring payment mechanism, which the Indian SaaS businesses are crying for, is still not available in India because of RBI restrictions and also the guidelines under the Payment and Settlement Systems Act is still expected.

Most young entrepreneurs believe that the only applicable legislation for anything that uses technology is Information Technology Act (IT Act).  While IT Act is an important applicable legislation, this post is meant to illustrate that numerous legislations come into play as well.

Coming up next are legal issues due to the “e” in business.

Disclaimer:    This is not a legal opinion and should not be construed as one. Please speak with your attorney for any advice.

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