EdTech Companies under the Consumer Protection (E-Commerce) Rules, 2020.
“When you educate one person you can change a life, when you educate many you can change the world”- Shai Reshef
Today, we stand at the crossroads of indefinite technological advancement and globalization. The past decade has witnessed the disruptive effect of the internet on the world, Artificial Intelligence, Internet of Things, deep learning have facilitated a new era of learning. Teaching and learning have become a transcendental and technological phenomenon, spreading across all social, cultural, space and time barriers. In this scenario, ‘Education Technology’ (EdTech), a mutation of technology and conventional education system to transform the whole learning and teaching experience, has gained immense popularity. It is a $700 million industry in India and is headed for 8-10 times the growth in the next 5 years. Furthermore, the onset of the current unprecedented period of the global pandemic has propelled EdTech, and it has become all the more relevant to us. The National Education Policy 2020 also stresses on integration of technology across classrooms. In light of this, many practical, legal and ethical concerns are raised about the use and integration of technology and business for learning. These questions are addressed by the recent Consumer Protection (E-Commerce) Rules, 2020. This paper traces the current legal treatment of the EdTech companies under the Consumer Protection (E-Commerce) Rules, 2020 and the recent changes under the Consumer Protection (E-Commerce) Rules, 2020 in relation to EdTech commerce. Further, it analyses recent landmark judgements and provides a comparative analysis of EdTech laws in India and abroad. Lastly, the paper also provides certain suggestions in order to address the ambiguities that are still present.
Education is one of the greatest tools at the hands of an individual. The Indian Constitution declares education to be one of the basic rights of an individual. India is the second largest market for e-learning in the world, with a four times increase in investment in the Indian EdTech sector in 2020. The different models of EdTech have been plied, including the flipped classroom model, linear and collaborative learning, online tutorials, online certificate courses, synchronous and asynchronous mode of teaching, credit transfer courses from foreign universities, gamification of education, online library etc. With the rapid growth of EdTech companies, many different questions need to be given immediate attention. Protection of data privacy, legal recourse in case of fraud and non-compliance of rules, jurisdiction in matters relating to education e-commerce, business regulations to be adhered to by EdTech companies, child privacy, online defamation, misleading advertisements, false claims are some of the myriad of concerns to be addressed.
EdTech Companies: Provider of Educational ‘Services’
In order to ascertain the legal status of EdTech Companies, it is necessary to understand the legal status of education providers over the years. The legal jurisprudence surrounding the status of education as a service is not static, therefore, its status under the Consumer Protection Act, 1986 was ambiguous. While certain cases have held educational institutions to be providers of a service, and hence within the ambit of the 1986 act, others have ruled that imparting education cannot be a ‘service’, and students cannot be ‘consumers’. However, in the case of P.A. Inamdar, it has been ruled that educational institutions and coaching centres/test prep centres are not at par. Coaching institutions are not regulated by a regulatory body, students do not receive any certification, no examinations are conducted and are profitable and commercial in nature. EdTech Companies are similar to coaching institutions and provide a myriad of services. They do not fall within the ambit of an educational institution. Hence, EdTech Companies will be subject to the Consumer Protection Act, 2019 and the Consumer Protection (E-Commerce) Rules, 2020 as a service provider. However, based on the business model, a case by case analysis may be required.
Legal Status of EdTech Companies under the Consumer Protection (E-Commerce) Rules, 2020
In order to understand the significance of the Consumer Protection (E-Commerce) Rules 2020, it is important to trace the legal status of EdTech Companies under the same. The Rules were introduced with a view to formulate rules for entities that transact in the digital space. The Consumer Protection Act, 2019 defines e-commerce to mean “buying or selling of goods or services including digital products over digital or electronic network” This is a very wide and vague definition, by virtue of which any entity offering services over the internet will become an “e-commerce entity.” The Rules, on the other hand, define an “e-commerce entity” as any person who owns, operates or manages digital or electronic facility or platform for electronic commerce. This definition is narrower and allows less scope for ambiguities. According to this definition, an EdTech Company providing skill-based, teaching or tutoring services for a fee is an “e-commerce entity”, subject to the provisions of the said Act and Rules.
The Rules further distinguish between two types of e-commerce entities: inventory e-commerce entity and marketplace e-commerce entity. An inventory e-commerce entity is “an e-commerce entity which owns the inventory of goods or services and sells such goods or services directly to the consumers and shall include single brand retailers and multi-channel single brand retailers” and marketplace e-commerce entity is “an e-commerce entity which provides an information technology platform on a digital or electronic network to facilitate transactions between buyers and sellers”. EdTech companies can fall within either of these definitions. The Rules stipulate varying degree of compliances depending on the type of e-commerce entity. These rules will prompt such companies to adhere to the various requirements and consumers have a platform for the redressal of grievances against EdTech companies.
Hence, it is clear that EdTech Companies are legally recognised as an “e-commerce entity” under the Consumer Protection (e-commerce) Rules, 2020 and is subject to the compliances under the Act as well as the Rules.
Brief Legal History
The Consumer Protection Act, 2019 replaced the Consumer Protection Act, 1986 in an attempt to re-vamp the consumer protection laws to bring in better mechanisms for redressal of disputes, stricter liabilities, protection of data, etc. The Consumer Protection (e-commerce) Rules, 2020 were enacted under the 2019 Act, by the Ministry of Consumer Affairs, Food and Public Distribution on July 23, 2020. It was enacted with an intent to prevent unfair trade practices in e-commerce and protect interests and rights of consumers.
The 1986 Act was enacted in order to address consumer grievances and provide legal redressal to those who were subjected to fraud and misrepresentation. However, the act did not remain relevant in the 21st century as it did not take into account the fast changing new-age economy, e-commerce platforms, online shopping, etc. The government, as a result, decided to enact an altogether new act in order widen the ambit of consumer protection laws in India. The Consumer Protection (E-Commerce) Rules, 2020 were enacted to address the distinct and particular issues that arise in the e-commerce platform. It was enacted, First, to provide the online customer with the same right and protections as available to a traditional customer. Second, EdTech has become a medium of exchange of services and products and has attracted electronic transactions, thereby inviting ECommerce regulations. The rules will play a significant role in regulation. Finally, these rules provide a lot of clarity on the legal construction of an EdTech Company.
The obligations on E-Commerce platforms under Consumer Protection Act, 2019 are very general in nature. EdTech Companies are subject to a number of specific and precise compliances under the 2020 Rules. Some of the most interesting aspects include:
- The appointment of a nodal officer to ensure compliance with the rules and a requirement for explicit consent for any purchase.
- Setting up of a grievance redressal mechanism: E-Commerce entities are required to ensure that a grievance officer is appointed and his details are available on the platform of the entity. He is required to acknowledge the receipt of consumer complaint within forty-eight hours and redresses the complaint within one month from the date of receipt of complaint.
- Information Disclosure: The Rules require platforms to publish pertinent information in a clear and accessible manner. Information differs for inventory and marketplace based entities.
- Prohibition of False Reviews and Ratings: Fake reviews and ratings have the potential of blocking a consumer’s right to an informed choice. The Rules prohibit any inventory based entity or seller from falsely representing itself as a consumer and posting false ratings or reviews.
- Marketing and Warranties: The E-Commerce platforms are required to ensure the accuracy of advertising and marketing materials. This is an interesting aspect for an Ed-tech entity, which uses products purchased on a wholesale basis. The company will be required to ensure the quality of its product despite not having access to the underlying material.
- Obligation of service providers and sellers: The service providers are prohibited from misrepresenting themselves as consumers, misrepresenting their quality, or false advertising. Ed-tech platforms which consist of a number of tutors and teachers, third party course materials, etc, will need to ensure that their services and providers follow these obligations.
- Prohibition of Discriminatory Practices: The Rules prohibit any e-commerce entity from discriminating between consumers of the same class or creating arbitrary distinction between consumers that might affect their rights
There is a myriad of new compliances and rules that have been added that have allowed greater clarity and accountability from EdTech Companies.
The Consumer Protection (E-Commerce) Rules, 2020 were introduced with the intent to ensure that consumers on e-commerce platforms are afforded the rights and protections that they are due. The rules prompt EdTech Companies to adhere to the various requirements that are applicable to e-commerce entities. Given that this is a very recent law, there have been sparse instances of legal action against EdTech Companies.
- Joginder Singh Saini v. Byju’s Think & Learn Pvt Ltd
The case was bought to the District Consumer Disputes Redressal Forum, wherein the complainant alleged deficiency in service against the EdTech Company. The complainant purchased the services of the respondent and paid a sum of Rs. 3000/- and provided the details regarding his credit card for the deduction of the remaining amount in instalments. The complainant repeatedly made requests to terminate the service, as he did not like the quality of the service. However, the company paid no attention and deducted the amount due every month.
The Forum found merit in the case, ordered for refund of amounts deducted and to indemnify the litigation expenses of the applicant. The Court held that the act of the Company (respondent) amounted to deficiency of service.
- Anurag v. Byju’s The Learning App
The consumer subscribed to a trial period on the app and was given the option of discontinuation. When the consumer wanted to terminate the services of the company as he was unable to pay and communicated the same, the respondents did not pay heed to them and continued to deduct the amount due in instalments.
The court ruled that the respondent was indulging in unfair trade practice deficiency in service and ordered for the refund and litigation expenses to be paid.
The grounds as well as cases against EdTech companies are very few. This points towards the fact there is an urgent need to spread awareness and empower consumers to seek and advocate for their rights.
Comparative Analysis with Other Jurisdictions
Laws regulation EdTech Companies are not very precise and focused as the consumer protection Laws in India. However, some of the international jurisdictions have formulated certain rules and regulations in order to keep EdTech companies in check and ensure the protection of consumer rights.
EdTech Company Regulations in the United States of America
The largest market for e-learning is that of the United States. Under American jurisdiction, EdTech companies are subject to a number of data protection and consumer protection laws.
As EdTech services mainly focus on minor students, consumer protection laws in the US revolve around the protection of minors. The Children’s Online Privacy Protection Act (COPPA), provides regulations to operators of commercial websites and online services, including EdTech services, to protect student’s privacy and safety online. It regulates the collection of personal data from children below the age of 13. Similar privacy regulations are provided by the Family Educational Rights and Privacy Act (FERPA) and the Protection of Pupil Rights Amendment (PPRA), as well as specific state laws that protect the privacy of students. The state of California has already passed the California Consumer’s Privacy Act, 2018. The CCPA protect and provide regulatory mechanisms to protect the privacy of minors between 13-16 years of age and require businesses to take reasonable steps to ensure that the person consenting for the sale of a child’s data, on his or her behalf is their parent or legal guardian.
With respect to consumer protection from fraud and misrepresentation in case of EdTech Companies, there are no specific laws. However, there are regulatory laws for e-commerce businesses that can be applied in cases of EdTech Companies as well.
There are two regulatory bodies to protect consumer rights in the United States, The Federal Communications Commission is responsible for regulating “internet commerce” reviewing informal consumer complaints and performing investigations where appropriate. The Federal Trade Commission investigates and takes action against those alleged to have violated applicable laws. The Dot Com Disclosures guidance document regulates the form and content of information distributed in e-commerce, thereby preventing unfair or deceptive practices. Further, Section 5(a) of the Federal Trade Commission Act prohibits “unfair or deceptive acts or practices in or affecting commerce.” This prohibition applies to all persons engaged in commerce, including banks. FTC also requires all advertisements and other commercial communications made online to be clear and conspicuous.
Furthermore, the Restore Online Shoppers’ Confidence Act, 2010 (ROSCA) requires online sellers to ensure that consumers signing up for subscription plans, actually intend to enter into such an agreement. Therefore, if a company does not clearly and conspicuously disclose all important terms of the transaction before the consumer submits his/ her billing information, it prohibits a company from initiating a negative option plan. The company must also obtain a consumer’s informed consent, and the law requires simple mechanisms for consumers to prevent unwanted recurring charges. The act have penal provisions as well, that can be as much as $16,000 per violation, in addition to any restitution payments and/or equitable relief ordered by the Court.
In comparison with the Indian e-commerce laws, and their treatment of EdTech companies, the U.S. does not have very comprehensive and precise laws for this sector. The Indian jurisprudence on consumer protection for EdTech related fraud or misrepresentation is far more developed than the US. However, it is interesting to note, that the data privacy and protection laws in the U.S. are clear, precise and stricter than those in the Indian scenario. This is testimony to the fact that the US upholds the privacy of its citizens, especially minor students, in utmost respect and creates strict penal consequences for those who misuse or violate the same.
Changes and Recommendations
While the 2020 Consumer Protection (E-Commerce) Rules, 2020 are a progressive legislation and in line with the ongoing era of globalization and e-commerce, there are certain aspects that still need attention and alteration. Some of the potential changes and amendments are:
- Lack of strong data privacy protection: In May 2020, one of the biggest EdTech companies in India, Unacademy suffered from a data breach, the stolen personal information of millions of users was put up for sale on Dark Web, including thousands of minor students. Information including user names, passwords, joining date for the programme, last login date, location, email addresses, etc, was compromised. While there are a number of provisions in the Rules, regarding data privacy, there is no tangible action that has been taken against such breach. There is lack of implementation. Furthermore, entities such as YouTube will not be governed by these rules as they do not charge for their services.
Currently, the Information Technology Act, 2000 with the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or information) Rules, 2011 regulates the use of personal data. However, it provides a very narrow definition of personal data that is sensitive with no specific rule for the usage of personal data of consumers, these being children in the case of EdTech sector. Although, the Personal Data Protection Bill, 2019 was introduced with the aim to provides protection for privacy of individuals and their personal data. The Bill lays down the manner in which personal data of individuals is to be collected, processed, used, disclosed, stored and transferred. However, this Bill has not been passed yet.
Hence, data privacy is an area wherein proper rules and strict implementation is yet to be effected.
- Deterrent for Small Businesses: While the rules ensure obligations are placed in a manner that ensures utmost safety and protection of consumers, the high number of obligations has created a deterrent effect for small businesses.
- Lack of Clarity on Enforceability in case of Foreign entities: Aspects relating to enforceability of the provisions of the Rules to the foreign EdTech companies also remains to be clarified. Today, the services of these companies have overcome the boundaries of space and time. Given that handling a dispute involving a foreign entity can have jurisdictional and territorial limits, the Rules need to provide more clarity on this issue.
- Second-Hand Products: In instances where the e-commerce entity is offering second hand products, it would be difficult to guarantee the genuineness and authenticity of the product. In case of non-compliance with the rules on quality of products, there can be penal charges. This makes the situation tricky.
- Lack of awareness: The sparsity of consumer complaints and cases against EdTech companies is the greatest testimony to the absence of awareness and proactivity in cases of EdTech companies breaching contracts. Furthermore, the grounds of filing of a suit are also limited to deficiency of service. It is pertinent that consumers are made aware of their rights and that they play a proactive role in advocating for the same.
Though the 2019 Act has brought in several commendable changes in the existing framework so as to protect the interests of the consumers of e-Commerce transactions, the particular obligations and protections against fraud by an EdTech Company are not very well-defined. There is a need to address these issues immediately.
It is amply clear that the EdTech industry has the potential to make education more accessible by destroying the barriers of time and space and allowing every student to benefit from the power of education. The rise of EdTech In India has been termed ‘the next big thing’. The Indian legal scenario, commendably, has developed in line with the development in technology. The Consumer Protection Act, 2019 as well as the Consumer Protection (E-Commerce) Rules, 2020 have appropriately addressed the concerns and issues pertaining to consumers online, while giving them legal recourse in cases of breach of contract. The recent introduction of the 2020 rules have introduced precision and comprehensiveness in e-commerce consumer protection. However, there are a number of issues pertaining to this shift from a traditional classroom to EdTech, that require immediate attention. This includes data protection, lack of clarity in certain aspects, difficult to fulfil obligations for small businesses, lack of awareness, etc. While EdTech Companies are a relatively new phenomenon, new legal issues are bound to arise. It is important that the law-makers of our nation balance commerce, education and technology, to create a holistic environment of growth and learning in the nation.
By: Diya Vaya