Answer By law4u team
Festive sales on e-commerce platforms often attract millions of consumers with promises of deep discounts and special offers. However, if marketplaces allow or facilitate unfair trade practices—like misleading advertisements, deceptive pricing, manipulation of discount tags, or anti-competitive behavior—the law can hold them accountable and impose penalties to protect consumer interests and maintain market fairness. ([law4u.in](https://law4u.in/top-answer/20481/can-platforms-be-held-liable-for-manipulative-pricing-or-deceptive-marketing-during-festive-sales?utm_source=chatgpt.com))
Legal Framework Governing Marketplaces
1. Consumer Protection Act, 2019
India’s Consumer Protection Act, 2019 broadly defines unfair trade practices and provides mechanisms to penalize businesses—including online marketplaces—that engage in or fail to prevent such practices. Under this law: - Central Consumer Protection Authority (CCPA) can investigate and take action against unfair trade practices, misleading advertising, or deceptive conduct online. ([dalvoy.com](https://www.dalvoy.com/en/upsc/mains/previous-years/2023/law-paper-ii/ecommerce-consumer-protection-act?utm_source=chatgpt.com)) - Failure to comply with CCPA orders can attract additional penalties or prosecution. ([dalvoy.com](https://www.dalvoy.com/en/upsc/mains/previous-years/2023/law-paper-ii/ecommerce-consumer-protection-act?utm_source=chatgpt.com))
2. Consumer Protection (E-Commerce) Rules, 2020
These rules, issued under the Act, impose specific duties on e-commerce entities to ensure transparency, accurate information about products/services, and adequate grievance redressal mechanisms. Non-compliance with these rules may lead to penalties, suspension of operations, or even criminal liability for responsible officers. ([teamleaseregtech.com](https://www.teamleaseregtech.com/blogs/134/e-commerce-compliance-in-india-understanding-the-consumer-protection-e-commerce-rules-2020?utm_source=chatgpt.com))
3. Competition Act, 2002
The Competition Act prohibits: - Anti-competitive agreements (like collusion on prices during sales). - Abuse of dominant position (e.g., predatory pricing to eliminate rivals). If a marketplace engages in such practices during festive sales, the Competition Commission of India (CCI) can initiate investigation and impose fines—potentially up to 10% of average turnover. ([law4u.in](https://law4u.in/top-answer/20679/can-marketplaces-be-penalized-for-violating-competition-act-provisions-during-festive-sales?utm_source=chatgpt.com))
Penalties and Consequences
A. Penalties Under Consumer Protection Law
Marketplaces that fail to prevent unfair trade practices may face: 1. Monetary Fines: Regulators can levy fines for misleading ads or unfair trade conduct. Penalty amounts can vary based on severity and frequency of violations, and repeated offenses may attract higher penalties. ([dalvoy.com](https://www.dalvoy.com/en/upsc/mains/previous-years/2023/law-paper-ii/ecommerce-consumer-protection-act?utm_source=chatgpt.com)) 2. Compensation & Redressal Orders: CCPA or consumer forums can order compensation to affected consumers. ([law4u.in](https://law4u.in/top-answer/20481/can-platforms-be-held-liable-for-manipulative-pricing-or-deceptive-marketing-during-festive-sales?utm_source=chatgpt.com)) 3. Regulatory Directions: Authorities may issue directives to stop unfair practices, recall products, or change business practices. ([dalvoy.com](https://www.dalvoy.com/en/upsc/mains/previous-years/2023/law-paper-ii/ecommerce-consumer-protection-act?utm_source=chatgpt.com)) 4. Criminal Liability: In some cases, non-compliance with CCPA directives or e-commerce rules can attract imprisonment or additional fines against responsible officers. ([teamleaseregtech.com](https://www.teamleaseregtech.com/blogs/134/e-commerce-compliance-in-india-understanding-the-consumer-protection-e-commerce-rules-2020?utm_source=chatgpt.com))
Recent Example: The CCPA imposed penalties of around ₹10 lakh on major e-commerce players (e.g., Flipkart, Amazon, Meesho, Meta Marketplace) for listing and selling unauthorized walkie-talkies without proper disclosures, holding them responsible for facilitating unfair trade practices. ([business-standard.com](https://www.business-standard.com/industry/news/ccpa-fines-e-commerce-platformsfor-selling-unauthorised-walkie-talkies-126011600180_1.html?utm_source=chatgpt.com))
B. Penalties Under Competition Law
If an unfair trade practice also amounts to anti-competitive behavior: - CCI can impose substantial fines (up to 10% of the average turnover). - The marketplace may be ordered to cease the anti-competitive conduct. ([law4u.in](https://law4u.in/top-answer/20679/can-marketplaces-be-penalized-for-violating-competition-act-provisions-during-festive-sales?utm_source=chatgpt.com))
Liability for Not Preventing Seller Misconduct
Marketplaces cannot always dodge liability by merely claiming to be intermediaries. If they fail to exercise due diligence to prevent sellers from engaging in unfair practices (like false discounts), regulators may still hold the marketplace accountable. ([law4u.in](https://law4u.in/top-answer/20466/can-platforms-be-held-responsible-for-fraudulent-or-misrepresented-product-claims-by-sellers?utm_source=chatgpt.com))
Practical Compliance Measures for Marketplaces
To avoid penalties during festive selling periods, marketplaces are expected to: - Ensure Pricing Transparency: No artificial inflation before discounts. - Accurate Product Information: Correct descriptions, certifications, and approvals. - Effective Grievance Redressal: Quick resolution mechanisms per law. - Prevent Deceptive Ads & Dark Patterns: Avoid misleading UI tactics or false scarcity claims. ([economictimes.indiatimes.com](https://economictimes.indiatimes.com/industry/services/retail/ecommerce-companies-are-under-scrutiny-for-violating-dark-pattern-norms-during-sales/articleshow/114128636.cms?utm_source=chatgpt.com))
Example
Scenario: During a Diwali sale, a popular e-commerce platform advertises “70% off” on electronics. In reality, the original prices had been first increased just days before the sale, making discounts misleading. Consumers file complaints, and the CCPA initiates action.
Consequences: 1. The CCPA finds deceptive pricing and initiates an investigation under the Consumer Protection Act. 2. The marketplace is fined and ordered to compensate affected buyers. 3. CCI also examines whether the practice was anti-competitive and imposes additional penalties. 4. The platform must revise its pricing algorithms and disclosure practices to comply with regulations.
This demonstrates that marketplaces can face legal penalties and regulatory action for failing to prevent unfair trade practices during festive sales.
