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Delhi HC stops ecommerce firms from selling direct sellers' products without consent

The interim direction from the Delhi HC came on the pleas of the three direct sellers alleging that their products were being sold on ecommerce platforms at cheaper rates resulting in financial loss.

Press Trust of India
9th Jul 2019
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The Delhi High Court has restrained ecommerce majors like Amazon, Flipkart and Snapdeal from selling health and beauty products of direct sellers like Amway, Modicare, and Oriflame without their consent.


The interim direction by Justice Pratibha M Singh came on the pleas of the three direct sellers alleging that products under their brands were being sold on ecommerce platforms at cheaper rates resulting in financial losses to them.


Ecommerce



They also raised apprehension that the goods may be tampered with or counterfeited.


The court observed that according to the report submitted by local commissioners who inspected the warehouses of the ecommerce platforms, also including 1MG and Healthkart, the conditions of the goods had been changed.


Besides, it said, the MRPs were on the higher side, there was wrong attribution of names, codes and inner seals had been tampered with, and expired products were being given new manufacturing dates.


Quoting an adage -- with great power comes great responsibility -- which was popularised by the Spiderman movie, the court said ecommerce platforms, which has penetrated all forms of business, have the obligation to maintain the sanctity of contracts and should not encourage or induce a breach.


It said the manner in which these platforms operate, makes it extremely convenient and easy for sellers to sell products without any quality controls.


"The minimum conduct expected of the platforms is adherence to their own policies, which they have failed to do in the present case.


"Thus, this court has no hesitation in holding that the continued sale of the plaintiffs' (Amway, Modicare and Oriflame) products on the ecommerce platforms, without their consent, results in inducement of breach of contract, and tortious interference with contractual relationships of the plaintiffs with their distributors," the court said in its 225-page interim order.


It noted in its order that the manner in which Amway, Modicare and Oriflame's marks, logos, company names and product images, were being used was "clearly misleading to a consumer" as seller names were not fully disclosed.


"Contact details are not disclosed. The consumer would find it extremely difficult to contact a seller. Consumers cannot be expected to do a fine and detailed examination to find out the actual source.


"The consumer is not being told that the seller is not authorised by the consumer would, literally, require investigative capabilities to trace the actual seller," the court added.


The judge said the facts "clearly show that at the prima facie stage, the apprehension of the plaintiffs that the products are being sourced through unauthorised channels and that the products are tampered, conditions changed and impaired, is completely valid." 


The court said that the companies' right to carry on business was being affected and jeopardised by the "large scale violations on the ecommerce platforms".


It said that such activities also affect the rights of genuine consumers.


"The plaintiffs have, therefore, established a prima facie case. Balance of convenience is in favour of plaintiffs. Irreparable injury would be caused to plaintiffs, their businesses, and all those who depend on plaintiffs' successful business, such as employees, distributors/direct sellers, agents, and finally the consumers, if interim relief is not granted," the court said.


It directed that only those sellers who have obtained the consent of Amway, Oriflame and Modicare be allowed to sell their products on the ecommerce platforms.


The court also directed the ecommerce platforms to display the complete contact details of the sellers who had obtained the consent of the plaintiffs to sell their products.




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