New TRAI Regulations

by Aggarwal Associates | Jan 28, 2019 | General

The Telecom Regulatory Authority of India recently came out with the set of new regulations and tariff order applicable to the channel providers, DTH and cable TV operators with effect from February 1st, 2019. The new rules are Telecommunication (Broadcasting and Cable) Services Interconnection (Addressable Systems) Regulations, 2017 and Telecommunication (Broadcasting and Cable) Services (Eighth)(Addressable Systems) Tariff Order, 2017, which were originally notified in March 2017 and re-notified on 3^rd July, 2018, further fixing 31^st December, 2018 as the time limit for service providers to migrate to the new framework. This limit was finally extended to 31^st January, 2019.

The new regulations, resonating the famous phrase “Customer is the king”, proposes to change the previous scenario whereby the consumers were given an option to pick and choose packages (which contained a myriad of channels grouped under one genre) as per their tastes. The reason for such a shift was an ever-growing annoyance whereby the consumer ended paying for many unwanted channels which were shoved upon the user’s guide feed because of subscribing to these packages without actually being able to watch all of the said channels.

According to the statistics relied on by TRAI, 80% of the consumers watch less than 40 channels out of the 200 or so channels offered to them. Thus, the new framework states that the subscribers will not be pushed with unwanted channels; rather they will have freedom to choose only those TV channels that they want to see and pay accordingly.

Some of few significant changes will be:

• Service providers have to offer a basic package of 100 free-to-air channels at a base price. The ceiling limit of this package has been fixed at Rs. 130 per month, excluding GST.
• Pay channels must be offered to customers on ‘a-la-carte’ basis. This entails, a user desirous of watching a particular channel of its choice should have the option to subscribe to that channel alone by paying the price fixed for it, without having to purchase the bouquet of that channel (as a package) with other channels at a higher price.
• The service providers can offer bouquets/packages of channels. The MRP, though, of a pay channel offered in this bouquet/package cannot exceed Rs.19.
• Discount offered on a bouquet cannot be more than 15% of the a-la-carte sums of the channels comprised in the bouquet.
• The sum of discount on television channels and the distribution fee paid by broadcasters to a distributor of television channels cannot exceed 35% of the MRP of the television channel.
• Television channels cannot be priced differently for different distribution platforms.
• The MRP of the channels needs to be displayed on the TV screen through the Electronic Program Guide. In case of free channels, it should be indicated so.

For a base price of Rs.130, a customer will get 100 free to air channels, which includes 24 mandatory channels of Doordarshan. Out of the 535 pay channels, the customer has to give options of preferred channels. Over and above the free channels, the customer can choose the pay channels, either on a-la-carte basis or by taking a package offered by the operators. This is likely to bring down the monthly DTH/cable bills of the users.

The new regulations were challenged by the STAR Group and other broadcasters deeming them to be unconstitutional in the Madras High Court first and then eventually in the Supreme Court. But both the courts repelled the challenge whereby the judgment of the Supreme Court (authored by Justice Nariman) held that TRAI intended to regulate tendencies of large broadcasters to force customers to subscribe to large bouquet of channels. The TRAI acted with the objective to ‘facilitate competition and promote efficiency in the operation of broadcasting services so as to facilitate growth in such services and harmonize the interests of the service providers and consumers.’

The TRAI has advised the customers to give their options to the operators. If the option is not exercised by January 31^st, pay channels will be disrupted from February 1^st and the customer will only get the base package. In cases where annual subscription charges are paid by a subscriber in advance, the already availed plan will continue without charge until the expiry of the lock-in period. However, if the subscriber wishes to switch over to a new package after 1^st February, 2019 then the proportional balance amount of existing package as on the date of switch over may be adjusted for the new package prices after 1^st February, 2019.

In the end, it is a step in favor of the consumer, as not only do the user get a freedom to personalize his Electronic Program Guide via picking-and-choosing of his desired channels, but also will lead to reduction of his DTH bills due to illogical subscription packages being offered to him at the first place. Furthermore, it will ensue greater competition in the entertainment sector as the channels will be pushed to showcase quality content, and will weed out channels, if any, which are not upto to the standards and tastes of the customer.

Jashan Preet Sidhu

Associate Partner at Aggarwal & Associates

[email protected]

New FDI Policy on E-commerce in India

by Aggarwal Associates | Jan 14, 2019 | General

The Department of Industrial Policy and Promotion (DIPP) recently released a Press Note (PN) 2 of 2018 by introducing sleuth of additional parameters in the ever growing e-commerce sector under the Foreign Direct Investment (FDI) Policy of India on 26^th December, 2018 which will come into effect from 1^st February, 2019. To shed some light on the objectives of that policy and to further cast away the doubts settling in the industry regarding the policy, the Government of India (GOI) on 3^rd January, 2019 released a clarification on it.

Prior to these amendments, the FDI Policy permitted foreign direct investments in entities engaged in marketplace model of e-commerce with no government approval (via automatic route), and prohibited FDI in entities engaged in inventory based model of e-commerce.  A marketplace model of e-commerce means where an information technology platform of a digital and electronic network is provided by an e-commerce entity, which acts as a facilitator between buyer and seller. On the other hand, inventory based model of e-commerce means an e-commerce activity where inventory of goods and services is owned by e-commerce entity and is sold to the customers directly.

It is evident from the PN 2 of 2018 that government is desirous for better implementation of FDI in the e-commerce sector by introducing a myriad of changes. This includes new regulations relating to inventory control, affiliated sellers, and exclusive arrangements. According to the clarification, the government had received numerous complaints that certain e-commerce marketplace platforms were indirectly engaging in inventory based model. These changes are not really new but simply a clarification for better implementation of existing regulations.

Highlights:

1. Fair and transparent business practices:

As per the clarification, marketplace entities are required to provide the same suite of services to all sellers under similar circumstances.  Additionally, cashback offers provided to the buyers by group companies of marketplace entities will have to be fair and non-discriminating. PN 2 of 2018 specifies the that service terms offered by the service providers to one or more sellers, but that are not offered to other sellers in similar circumstances, will be deemed to be unfair and discriminatory. But it becomes tedious for the players in absence of any guidelines from the government to determine that whether those two sellers are in similar circumstances or not.

2. Exclusivity arrangements:

PN 2 of 2018 requires that an e-commerce marketplace entity will not mandate any seller to sell any product exclusively on its platform only. The e-commerce entities cannot enter into agreement for the exclusive sale of products. There is no guidance on how the enforcing authorities would determine whether a seller has been coerced to sell its products exclusively on that platform, or if the seller is choosing to do so voluntarily. For instance, some brands with limited sale in India have made a conscious decision to have an online presence only, so as to be on a better footing to control their operational costs and reduce logistical challenges around pan–India offline distribution network. For them it might make business sense to have an exclusive tie-up with one e-commerce platform.

3. Control over inventory:

The existing FDI policy provides that e-commerce marketplace entities should not exercise ownership over goods sold on such marketplaces. It also requires that a single seller/group should not account for more than 25 % of the aggregate sales on that marketplace. While e-commerce entities complied with the requirement to not own inventory, there were complaints that some of them exercised indirect control over such inventory through warehousing, packaging and handling arrangements. PN 2 of 2018 has introduced a new provision under which an e-commerce platform will be deemed to exercise control over a seller’s inventory, if 25% or more of such vendor‘s purchases are from e-commerce entity or its group companies. PN 2 of 2018 prohibits the vendor from selling their products on platform of e-commerce marketplace entities, if such e-commerce entity is deemed to have a control over the inventory of a vendor. The regulatory objective behind this is to limit the ability of e-commerce marketplaces to sell products to a vendor on a B2B basis, and thereby control pricing or reduce the inventory carriage risk for the vendors themselves.

4. Compliance:

PN 2 of 2018 requires an e-commerce entity to furnish a certificate annually, confirming compliance with these guidelines. However, it is hard for the e-commerce entities to provide this certificate because of the unclear compliances related to vendors. These changes will come into effect from 1^st February, 2019, by giving the.

In a nutshell, these changes would have a significant impact on the e-commerce sector as the entire sector has less than a month to re-organize itself to comply with the present policy. The Government of the day should have veered off from such drastic changes introduced via this policy and should have been considerate to the fact that these players are now one of the major drivers of the economy. The more apt way should have been to gradually introduce these changes over a long haul so that the players have ample buffer to adapt their business practices in compliance with the policy. These new guidelines could have an impact on the digital payments sector, and the broader financial technology industry, especially vis-à-vis the obligation to adopt a fair and non-discriminatory approach. It will be interesting to see how the e-commerce sector adapts to the multiple regulatory changes with already some discontent brewing from the heavy hitters of the sector.

– Kiranpreet Kaur

Associate at Aggarwals & Associates, S.A.S. Nagar, Mohali

Consumer Protection Bill, 2018

by Aggarwals & Associates | Jan 8, 2019 | General

Consumer Protection Bill, 2018

The Consumer Protection Bill, 2018 was recently passed by the Lok Sabha and is likely to replace the archaic Consumer Protection Act, 1986. The bill has mostly been untouched with respect to the mechanisms and protections put in place by the 1986 act. However, certain new features have been introduced to reinforce the consumer protection law. Here are the 5 things which a consumer needs to know about the new Consumer Protection Bill, 2018:

1. Central Consumer Protection Authority (CCPA):

The bill proposes creation of a new Central Authority, in addition to the already existing 3-tiered consumer dispute redressal forums. This new authority is empowered to regulate on matters relating to violation of consumers rights, unfair trade practices and false or misleading advertisements. It is also tasked with generally promoting, protecting and enforcing the rights of the consumers. On this account, its function includes:

• Referring complaints to the consumer protection authorities;
• Intervening in commission proceedings;
• Reviewing measures for consumer protection.

As part of its general mandate to protect consumer interest, it is empowered to conduct or direct inquiry or investigation into consumer complaints, either suo motu or on a referral by the government. Furthermore, it has punitive powers which includes the authority to penalize those complicit in broadcasting false or misleading advertisements through fines, bans or withdrawal/modification orders. It can also direct the withdrawal of defective/hazardous goods or discontinuation of such services. CCPA’s power has been given further impetus by empowering it to conduct search and seizure. In fact, it is to have an Investigation Wing headed by the Director General.

2. Addressing the rise of e–commerce: Among the new features, is its attempt to address consumer concerns stemming from the rise of e-commerce and false or misleading ads. This is apparent from the definition clause itself where a slew of new definitions are proposed to be added which includes but not restricted to words like advertisement, e-commerce, electric service provider and endorsement, among others. Consequently, the definition of ‘consumer’ includes those who buy goods or avail services online via e-commerce outlets. Furthermore, consumer complaints can be made not only in the written form, but also in electronic form to the appropriate authorities.
3. Combating false or Misleading Ads: Specific provisions of the proposed bill target false or misleading advertisements, which can be penalized with fines or bans on exhibition/appearance. On a complaint being made to such an ad, and the same being proved, the CCPA can slap a fine upto Rs. 10 lakhs on those complicit in broadcasting such false or misleading ads, as well as a one year ban. Such liability would extend to endorsers as well including celebrities who are associated with such advertisement. Repeated violators may attract a penalty upto Rs 50 lakhs and a ban on appearance/exhibition upto 3 years. The CCPA has been further empowered to direct the withdrawal or modification of such misleading advertisement. This penalty may, however, be avoided, if the concerned person/company is able to show that due diligence was exercised to verify the claims made in such advertisement.
4. Product liability: Product liability refers to the responsibility of the manufacturer or the producer of the consumer product with respect to the safety and quality of that product. This entails an obligation to compensate for any harm caused by a defective product or a deficiency in service to the aggrieved consumer. Moreover, a product manufacturer would be liable in a product liability action even if he proves that he was not negligent or fraudulent in making the express warranty of the product. The product seller would be liable if:
   • He exercised substantial control over manufacturing, processing, labeling etc. of the product.
   • He altered or modified product which contributed to the harm.
   • The express warranty made by him fails.
   • The manufacturer is not known or cannot be reached.
   • There is failure of reasonable care.

Product liability provision would be attracted in any of the following scenarios are triggered:

• The product suffers from manufacturing defect, or a deviation in design.
• If there is a deviation from manufacturing specification.
• If the product fails to contain adequate instructions of correct usage to prevent any harm or if there is no warning regarding improper or incorrect usage.

5. Changes in pecuniary jurisdiction: There has been a revision vis-à-vis the pecuniary jurisdiction for the 3-tiered dispute redressal commissions which is as follows:
6. District Commissions: complaints valued upto Rs. 1 crore.
7. State Commissions: complaints valued between Rs. 1 crore- Rs 10 crore.
8. National Commission: complaints valued at Rs 10 crore and above.

Although the legislature misses the mark where it could have dedicated more discussions and provisions safeguarding the consumers with respect to their interaction with e-commerce platforms, which is a billion dollar industry in India, but, in the end, the proposed Consumer Protection Bill, 2018 with its consumer-oriented amendments is a delayed but welcome modifications which definitely reinforce the consumer rights in today’s market economics.

Jashan Preet Singh Sidhu

Associate Partner at Aggarwals & Associates, Mohali.