Are Ed-tech Companies Amenable to the Consumer Protection (E-Commerce) Rules, 2020?

By Aniket A. Panchal and Gauransh Gaur, second-year students at GNLU, Gandhinagar

Introduction

Ever since the introduction of the Consumer Protection (E-Commerce) Rules,2020 (hereinafter referred to as ‘Rules‘), the vexing question is whether Ed-tech companies would be subjected to these rules and if they are subjected, whether they would come under the inventory-based e-commerce or marketplace e-commerce model. The applicability of the Rules will differ according to the category to which an Ed-Tech entity belongs. Moreover, if the definition provided under the Consumer Protection Act, 2019 (hereinafter referred to as ‘Act‘) and the Rules is dissected, it can be concluded that the all-embracing definition of ‘e-commerce entities’ could, in fact, capture entities that create and disseminate products or services over digital or online media. However, it is not unequivocally answered in the Rules if they apply to Ed-Tech companies which primarily impart their services through online websites, mobile applications, and similar digital platforms. This article seeks to analyse the newly introduced Rules and their applicability to Ed-tech platforms after a thorough perusal of the diverse judicial opinions regarding the categorization of ‘education’ as a service under the Act. In doing so, the article will also outline how different models of Ed-tech companies are subject to different regulations in light of these Rules.

Analysis of the Consumer Protection (E-Commerce) Rules, 2020

As per the Rules, the definition of an e-commerce entity encompasses any Ed-tech platform which provides or facilitates the provision of educational services (online courses, examination preparation, online tutoring, etc.) in return for a fee. There are two models of an e-commerce entity as per the rules, namely: inventory e-commerce entity and marketplace e-commerce entity.

To contextualise the same, an inventory e-commerce entity would include an “e-commerce entity which owns the inventory of goods or services and sells such good or services directly to the consumers”. This model is used by many Ed-tech platforms wherein they curate their own educational services and provide them to the consumers directly through this platform.

The other e-commerce model referred to under the rules is the marketplace e-commerce entity. According to the Rules, this e-commerce entity provides “an information technology platform on a digital or electronic network to facilitate transactions between buyers and sellers”. It covers Ed-tech platforms which connect the students to teachers and allow the students to purchase courses offered by various teachers and educational institutions. These platforms could be said to have “facilitated the transactions” between the course offerors and the students.

Therefore, the determination of compliance requirements by an Ed-tech company regarding inventory-based e-commerce entity or marketplace e-commerce entity would be on a case-to-case basis depending upon their operating procedures among other features.

Education as a Service? Unravelling The Conundrum

The question whether education would be considered as a service is a murky one under consumer protection law. Different opinions have emerged on this subject through a myriad of judgements by the Supreme Court, the National Consumer Disputes Redressal Commission (hereinafter referred as ‘National Commission‘) and the State Consumer Disputes Redressal Commission. This part of the article analyses this tumultuous area of consumer protection law, and highlights its implications on the central question- whether Ed-tech companies are covered under the new E-Commerce Rules.

This question was considered by the Apex court in Bihar School Examination Board v. Suresh Prasad Sinha(hereinafter referred as ‘Bihar School Case‘) Here, the issue for adjudication was whether there was any deficiency in services provided by the Bihar School Examination Board (hereinafter referred as ‘Board‘) when they failed to issue correct roll numbers to the candidates, and subsequently failed to declare the result of one of the candidates. The court held that the Board, in discharging its statutory functions, could not be subject to the consumer protection law. Further, the fees paid by the candidates to the Board to conduct the exams and other related activities could not be equated with ‘consideration’, and hence, the students could not be brought under the definition of ‘consumers’.

A different stance was taken in Oza Nirav Kanubhai v. Centre Head Apple Industries Ltd,[i] where a student was alleged to have been treated prejudicially by a private college. When the faculty member learned that the student had brought his misbehaviour to the attention of the institution’s head, he insulted him and treated him with bias, even refusing to check the complainant’s homework. He was not even refunded his fees after being rusticated from the college. The National Commission, after observing the misconduct of the faculty, emphasized upon the contractual relationship between the student and the teacher, and thus, brought educational activities under the ambit of ‘services’. The court, through this decision, made a distinction between private and statutory bodies by bringing educational services rendered by a private institution under the consumer protection laws, and exempting the services rendered by a statutory educational institution.

Following this, a private coaching institute was also brought under the ambit of consumer protection laws in Jai Kumar Mittal v. Brilliant Tutorials, where the coaching institution provided outdated study material to their students.

However, the Supreme Court has always been reserved in bringing educational institutions under the ambit of consumer protection law. For instance, when the court was confronted with this question in the case of Maharshi Dayanand University v. Surjeet Kaur, it nearly expanded the ratio of Bihar School Case. Nonetheless, it seems to have ‘ostensibly’ settled the debate in P.T. Koshy v. Ellen charitable trust[ii] (hereinafter referred as ‘P.T. Koshy‘), where it ruled that educational institutions do not render any services through their “performance of educational activities”. Consequently, no complaints regarding deficiency in educational services can be entertained against the educational institutions as consumer forums do not have jurisdiction to entertain these complaints.

Therefore, if the P.T. Koshy decision is taken as the final answer on this quintessentially tumultuous question, the current position of law can be ascertained. It would mean that statutorily and privately established educational institutions providing educational services are not subject to consumer protection laws. Conversely, as a settled law, private coaching institutions are amenable to consumer protection laws as they are recognizably different in nature from private institutions.

The Implications of Judicial Pronouncements on Ed-tech companies’ amenability to the rules

The ratio propounded in P.T. Koshy will not have much effect on the amenability of coaching institutions which are providing educational training through virtual learning platforms, as they are different from the regular schools and colleges. In fact, they would be subject to consumer protection laws for the following reasons: fees charged for their services, profit making objective (the element of ‘commercialization’ in dissemination of courses and training), and the ‘consumer and a service provider’ relationship that is established between a student and a teacher respectively. However, the situation would become tantalizing when any online course would be offered directly by the educational institutions, or through any intermediary acting as a facilitator between the students and the teachers.

Any statutorily established institution would clearly be exempted the Rules in light of the Apex court’s ruling in Bihar School Examination Board case. Nonetheless, the moot point would be whether private educational institutions would be exempted from the Rules if they provide online courses. If the issue is addressed, considering the decision in P.T. Koshy, they would not be held liable for their educational activities. Therefore, it could be fairly argued that private educational institutions (except coaching centres) would not be subject to the Rules even if their courses go online.

Ed-tech companies acting as an intermediary between the students and any other education institution, would not be liable under the E-commerce Rules as educational institutions are not amenable to the consumer protection laws. However, the definition of e-commerce entity which includes the marketplace e-commerce model does not exempt Ed-tech companies, which are acting as an intermediary between the students and coaching centres.

Furthermore, the daunting question is the one concerning the amenability of coaching institutions which operate on a Freemium Model. This model is premised on a combination of free and premium services, where the consumer can avail the basic services free of cost and would be charged only for premium features in case he/she wishes to use them. Thus, a Freemium model operates on two-tiered user acquisition where free users have limited access to the product/services while the premium users get greater access to the product/services. Resultantly, only the premium users can be regarded as true consumers who are receiving education as a service; primarily for the reason that they are paying for availing some extra features/services. Therefore, coaching institutions operating on a freemium model ought to be made liable as far as their services are concerned with respect to the premium users.

Conclusion

In light of the foregoing analysis, the authors have arrived at the following conclusion. Firstly, Ed-tech companies operating as private coaching institutes would be subject to consumer protection laws under the Rules. However, when they are operating on a freemium model, they will be amenable to the Rules but only for those aspects which are being provided for a fee. Secondly, these companies would also be required to comply with the Rules when they would be operating in the form of a marketplace e-commerce model by acting as an intermediary between students and private coaching centres. Lastly, educational institutes providing online courses or educational training, or any Ed-tech company providing online courses and training, would not be subject to the Rules owing to the ratio propounded in the P.T. Koshy judgement.


[i] (1992) 1 CPR 736.

[ii]P.T. Koshy v. Ellen Charitable Trust, (2012) 3 CPC 615 (SC).

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