That recently, the Hon’ble Delhi High Court in batch of cases filed by Direct Selling Companies against E-commerce entities allowed the interim stay applications filed for restraining the E-commerce entities from selling their products through their respective online platforms till the pendency of the suits.
The following are the key takeaways from the progressive judgment authored by Hon’ble Ms. Justice Pratibha M. Singh.
• Direct Selling Guidelines are executive instructions and it is not necessary for a law to be in existence for the powers of the Executive to be exercised and therefore, the Direct Selling Guidelines are binding on E-commerce platforms and the sellers on the said platforms, and they are required to take the consent of the Direct Selling Entities before selling their products, as required under the Direct Selling Guidelines.
• That unless there is any prohibition in respect of sale of a product, all products can be sold through E-commerce platforms. However, there are two exceptions –
First, there should be no prohibition in selling the same and
Secondly, the condition of goods ought not to be impaired and the goods ought not to be tampered with in any manner.
o That in the present cases, the distributors/sellers who sell the products of the Direct Selling Companies procure the same under specially executed contracts with these companies under which they are prohibited from selling their products in retail stores and E-commerce platforms.
That on inspection of various premises of the sellers and the platforms by the Local Commissioner appointed by the Court, it was found that the products are being tampered with by removal of the codes, removal of the inner seal, etc. As the products are impaired, the doctrine of exhaustion or Section 30 of the Trade Marks Act, 1999 cannot be used as a defense by the E-commerce entities for using the trademark of these Direct Selling Companies.
• That E-commerce entities in order to continue to enjoy the status of intermediaries, would have to fulfil and comply with the due diligence requirements as per the Platform’ own policies, and as per the Intermediary Guidelines, 2011. Non-compliance with such policies would take them out of the ambit of the safe harbor and the alibi of Section 79 of the Information Technology Act, 2000 won’t be available anymore for these companies.
• That the continued sale of the Direct Selling Companies products’ on the Ecommerce platforms, without their consent and even when these E-commerce platforms are being notified by Direct Selling Companies of existing contracts with their distributors and violation of the same on their platforms, result in inducement of breach of contract and tortious interference with contractual relationships of the Direct Selling Companies with their distributors.
The said judgment can be accessed at following link: http://lobis.nic.in/ddir/dhc/PMS/judgement/08-07-2019/PMS08072019S4102018.pdf