Monthly Archives: March 2014

Nutraceutical E-Commerce Legal Issues In India Are Ignored By Entrepreneurs

Nutraceutical E-Commerce Legal Issues In India Are Ignored By EntrepreneursHealthcare, food and nutrition are the upcoming fields in India. Many Indian and foreign entrepreneurs and business houses are looking toward Indian market in these fields. Most of them are aiming at the e-commerce segment to expand the reach of their products and services to maximum possible consumer base in India.

There are very specific and complicated techno legal requirements in these fields that must be followed by these stakeholders before they start their businesses in India. Fields like online pharmacies, ayurveda, healthcare technology, nutraceuticals, etc are required to comply with techno legal requirements as prescribed by various legislations of India.

An indicative list of Indian laws applicable to nutraceutical include the Prevention of Food Adulteration Act, 1954 and Rules 1955 (PDF), the Fruit Products Order, 1955, the Meat Food Products Order, 1973, the Edible Oils Packaging Order, 1998, the Vegetable Oil Products Order, 1998, Food Safety and Standards Act, 2006 (PDF), the Milk and Milk Product Amendment Regulations-2009, etc.

The foreign investors making investment in these healthcare, food and nutrition fields are also required to ensure cyber law due diligence (PDF) so that they may escape from civil and criminal liabilities in India. Even the IT companies developing e-commerce websites in India are required to ensure that the websites created by them are in compliance with Indian laws. However, in the ultimate analysis it is the responsibility of the website owner to ensure that he/she/it is complying with legal issues of e-commerce in India.

Most of the healthcare, food and nutrition entrepreneurs of India are not complying with the regulatory requirements of India and other jurisdictions. Further, the conflicts of law in cyberspace have made them liable under different jurisdictions at the same time. For instance, illegal online pharmacies are on scrutiny of Google and Federal Authorities of U.S. Similarly, healthcare, food and nutrition entrepreneurs of India targeting foreign markets like U.S. would also be required to comply with the laws of atleast India and U.S. Unfortunately, as on date this is not happening and this is also making these entrepreneurs liable to penal actions.

India is emerging as a business hub for domestic and international manufactures of nutraceuticals, health and food products. With an increasing awareness about nutraceutical products, India is expected to be the largest market for fast-moving health goods (FMHG) in the near future. None can doubt the importance of micronutrient and protein management in preventing diseases and improving the health. However, India is also the place where maximum numbers of nutraceutical entrepreneurs are operating without complying with Indian laws.

Lack of awareness about the applicable legal provisions is the main reason why nutraceutical e-commerce legal issues in India are ignored by entrepreneurs. Nutraceutical combines the fields of “nutrition” and “pharmaceutical” and this make their regulatory governance tedious and difficult to manage. Under Canadian law, a nutraceutical can either be marketed as a food or as a drug and the terms “nutraceutical” and “functional food” have no legal distinction. In U.S. law, the term has no meaning, and “nutraceutical” products are regulated as drugs, dietary supplements, food ingredients, or food.

Due to lack of international harmonisation and conflict of laws, international market of nutraceuticals has still not matured. Nutraceuticals from the international market may claim to use organic or exotic ingredients, yet the lack of regulation may compromise the safety and effectiveness of products. Companies looking to create a wide profit margin may create unregulated products overseas with low-quality or ineffective ingredients.

Consignments of such products may be seized and destroyed at the borders while crossing the territorial limits of the country of export. The websites of such companies may also be shut down in foreign countries like U.S.

India nutraceutical e-commerce companies must not only comply with Indian laws but they must also comply with laws of other countries like U.S. if they intend to export their products in such countries.

E-Commerce Due Diligence In India Is Neglected By Investors And Financial Institutions

E-Commerce Due Diligence In India Is Neglected By Investors And Financial InstitutionsAny law abiding e-commerce business activity is compulsorily required to comply with numerous legal provisions of not only the place where it is operating but also the potential markets that such venture is exploring. With the conflict of laws in cyberspace, the legal compliance requirements regarding e-commerce ventures have become really cumbersome.

E-commerce stakeholders like healthcare technology, online pharmacies, ayurvedic companies, e-health, m-health, telemedicine, websites developers and owners, mobile application developers, online poker websites, online gaming websites, online lottery websites, online gaming and online gambling websites, e-gaming websites, payment gateways and POS terminal services, mobile payment makers, etc are required to comply with numerous techno legal compliances.

However, as on date most all of the e-commerce stakeholders of India are not complying with the techno legal requirements as prescribed by various laws of India.  The issues of privacy rights, data protection (PDF), cyber security, data security, cyber security breach reporting, biometric collection compliances, etc are still ignored by Indian e-commerce businesses.

In particular, e-commerce due diligence in India (PDF) is grossly neglected by Indian e-commerce businesses. What is most surprising is the fact that even venture capitalists and private equity makers are also investing without ensuring that these e-commerce ventures are complying with techno legal requirements of Indian laws. Perry4Law believes that cyber law due diligence is an absolute must for foreign investors in e-commerce and technology ventures of India. Similarly, online payment platforms, financial institutions, banks, etc are also required to comply with techno legal laws of India.

Effective, speedier and economical dispute resolution is also an essential component of successful and effective e-commerce platform. Online dispute resolution (ODR) must be suitably integrated into the e-commerce dispute resolution structure of all e-commerce websites. The European Union is very particular in this regard and it is encouraging its member countries to use alternative dispute resolution (ADR) and ODR for resolving consumer and e-commerce disputes. The U.K. government has even started consultation on use of ADR to help U.K. consumers resolve complaints and disputes.

In nutshell, e-commerce websites and their investors/financers must absolutely ensure that their ventures are in strict compliance with the cyber law, cyber security norms, data protection requirements, privacy protection requirements, cyber crime protection, financial and e-commerce frauds protection, encryption laws, cloud computing compliances, etc. Collectively these techno legal compliances would constitute the regulatory regime for various e-commerce businesses of India.