Can platforms be held liable for manipulative pricing or deceptive marketing during festive sales?

Festive sales, such as Diwali, Christmas, Black Friday, and New Year sales, are major events for e-commerce platforms to attract customers with attractive discounts and promotional offers. However, such events have also been associated with manipulative pricing, false advertising, and deceptive marketing practices, where platforms or sellers inflate prices before offering what appear to be massive discounts.

Indian laws, including the Consumer Protection Act, 2019, and the Consumer Protection (E-Commerce) Rules, 2020, are designed to protect consumers from unfair trade practices and deceptive conduct. This includes ensuring that pricing, discounts, and promotional claims during sales events are transparent, accurate, and not misleading. Platforms can be held liable if they engage in unfair trade practices such as price manipulation or false advertising during festive sales.

1. Legal Framework Governing Manipulative Pricing and Deceptive Marketing

a. Consumer Protection Act, 2019

The Consumer Protection Act, 2019, provides a robust framework to safeguard consumer rights in India and holds e-commerce platforms responsible for any unfair trade practices, including misleading pricing and deceptive marketing. Key provisions of the Act relevant to festive sales include:

• Unfair trade practices: The Act prohibits any act that misleads or deceives consumers, including false advertising and price manipulation.
• False or misleading claims: Platforms must ensure that advertisements about discounts or offers are genuine and not deceptive. Misleading claims such as offering 50% off when the price was artificially inflated are prohibited.
• Consumer rights: Consumers are entitled to accurate product information, including actual prices, before making a purchase.

b. Consumer Protection (E-Commerce) Rules, 2020

The Consumer Protection (E-Commerce) Rules, 2020, under the Consumer Protection Act, specifically address e-commerce transactions and ensure that platforms comply with certain ethical standards during promotional events like festive sales. The Rules require platforms to:

• Disclose pricing information: Platforms must provide consumers with clear and transparent pricing, including the original price, discounted price, and the percentage of discount.
• Ensure no deceptive practices: Platforms must avoid practices that create a false impression of a discounted price, such as inflating prices before offering discounts.
• Grievance redressal: E-commerce platforms must have a grievance redressal mechanism in place for handling consumer complaints about unfair pricing or deceptive practices during sales events.

c. The Advertising Standards Council of India (ASCI) Guidelines

The ASCI lays down guidelines for advertisements in India, including e-commerce ads. These guidelines emphasize that:

• Price reductions must be genuine: Advertisements that show products as being offered at a discount must reflect actual savings and cannot mislead consumers with inflated prices.
• Clear product descriptions: Any claims related to discounts or promotional offers must be substantiated and clear to avoid misleading consumers.

2. Manipulative Pricing Practices During Festive Sales

a. Price Inflation Before Discounting

One of the most common manipulative practices during festive sales is the tactic of inflating prices before offering discounts, making the discount seem larger than it actually is. This creates a misleading impression of high savings, when in fact, the product may be sold at a price similar to or even higher than its usual cost.

Example: A platform lists a product at ₹2,000 but raises the price to ₹3,000 just before the sale, offering a 50% discount (₹1,500). This gives the illusion of a ₹1,500 discount, but the product is actually sold at ₹2,000, the original price.

b. Fake Discounts and Exclusive Offers

Platforms may also promote fake discounts or exclusive offers during festive sales events. For instance, they might advertise a product at 50% off while the product is typically available at the same price year-round.

c. Deceptive Advertising

During festive sales, some e-commerce platforms may engage in deceptive marketing by exaggerating the benefits or discounts in ads, using terms like limited time offer, flash sale, or best price guaranteed without any evidence to back up such claims.

3. Legal Consequences for Platforms Engaging in Deceptive Practices

a. Penalties Under the Consumer Protection Act, 2019

E-commerce platforms can face serious legal consequences if they are found to engage in manipulative pricing or deceptive marketing during festive sales. The Consumer Protection Act, 2019 imposes penalties, which may include:

• Monetary fines: Platforms may be fined up to ₹10 lakh for deceptive practices, and in case of repeated violations, the fine can be increased to ₹50 lakh.
• Cancellation of registration: In extreme cases, platforms may face the suspension or cancellation of their business license to operate in India.
• Compensation to consumers: If a consumer is misled by deceptive practices, the platform may be required to provide a refund, replacement, or compensation.

b. Consumer Complaints and Legal Action

Consumers who are misled by inflated prices or fake discounts can file complaints with:

• Consumer forums: Consumers can approach district consumer forums or consumer courts to seek redressal for unfair pricing practices.
• Regulatory authorities: The Central Consumer Protection Authority (CCPA) can investigate platforms for unfair trade practices and take necessary action.

4. Example Scenario

An online shopping platform promotes a smartphone with a 70% off banner during the Diwali sale. However, the original price of ₹25,000 is first raised to ₹40,000 before the discount is applied, making it seem like the consumer is saving ₹28,000 when in fact they are saving just ₹5,000.

In this case:

• The platform has engaged in price inflation and deceptive advertising.
• The consumer can file a complaint under the Consumer Protection Act, 2019 and claim compensation for the misleading advertising.
• The platform can be penalized for unfair trade practices and may be required to refund affected consumers.

Conclusion

Yes, platforms can be held liable for manipulative pricing or deceptive marketing practices during festive sales under Indian law. The Consumer Protection Act, 2019 and the Consumer Protection (E-Commerce) Rules, 2020 prohibit any form of false advertising, price inflation, or misleading discount claims. Platforms must ensure transparency in pricing and offer genuine discounts. Failure to comply can lead to penalties, consumer compensation, and legal action, affecting the platform's reputation and business operations in India.