Digital Economy in Nepal: Laws and Challenges.
A Seminar Paper
Non-Doctrinal(Law 575)
Submitted to:
National Law College (NaLC)
(Affiliated to Tribhuvan University)
Sanepa, Lalitpur.
(In partial fulfillment of the requirement for BA LLB degree)
Submitted by:
Praveen Bhattarai
BA LLB 7th Semester
Symbol no: 73036
TU registration no: 8-2-1012-35-2016
National Law College (NaLC)
Sanepa, Lalitpur.
1
PREFACE
This seminar paper entitled “Digital Economy in Nepal: Laws and Challenges” has been
prepared for the seminar program as the course of study of the BA.LLB program conducted by
National Law College. Tribhuvan University, Nepal.
This report attempts to explore the legal provision on Digital Economy in the UK and India and
compare those with Nepalese provision and how Nepal should develop the legal provision for
promoting and developing the Digital Economy in Nepal with reference to UK and India. This
report includes critical analysis of the Nepalese law for Digital Economy and comparing it with
the laws of UK and India. This paper was prepared due to the backwardness of Nepal in the
Digital Economy and lack of laws for guiding it. Due to which a lot of Digital businesses are
facing a lot of problems which needs to be addressed soon for the promotion and development of
Digital Economy in Nepal.
2
ACKNOWLEDGEMENT
First of all, I would like to extend my thanks to Pushpa Pokharel, Seminar Convenor, for her
Constant Support and Encouragement in academic Endeavors for her scholarly guidance and
also for all the support during the preparation of the research and Seminar paper.
Secondly, I am grateful to College Principal Dr. Ram Krishna Timilsina Sir, National law
College, for providing me with an academic platform. I also take this opportunity to convey
my regards to my teacher for their moral and academic support.
Lastly, I would like to remember my friends for assisting me during the preparation of this
research and all those people whose support have been taken in the course of preparation of
the seminar paper directly or indirectly.
-Praveen Bhattarai
BALLB,7th Semester
3
TABLE OF ABBREVIATION
AI
:
Artificial Intelligence
ATM
:
Automated Teller Machine
CPA
:
Consumer protection Act
E-Commerce :
Electronic Commerce
EDI
:
Electronic Data Interchange
EEA
:
European Economic Area
EFT
:
Electronic Funds Transfer
E-Sewa
:
Electronic Sewa
ETA
:
Electronic and Transaction Act
Etc.
:
Etcetera
FCA
:
Financial Conduct Authority
GB
:
Giga Bytes
GDP
:
Gross Domestic Product
ICT
:
Information and Communication Technology
ICT
:
Information and Communication Technology
IME
:
International Money Express
IoT
:
Internet of Things
4
IP
:
Internet Protocol
ITA
:
Information Technologies Act
IT
:
Information Technologies
PSR
:
Payment Service Regulation
PSSA
:
Payment and Settlement Act
MNEs
:
Multinational Enterprises
MPEG
:
Moving Picture Experts Group
NRB
:
Nepal Rastra Bank
UK
:
United Kingdom
UNCTAD
:
United Nations Conference on Trade and Development
USA
:
United States of America
SMS
:
Short Message Service
WWW
:
World Wide Web
$
:
Dollar
5
Table of Contents
PREFACE ....................................................................................................................................... 2
ACKNOWLEDGEMENT .............................................................................................................. 3
TABLE OF ABBREVIATION....................................................................................................... 4
CHAPTER I .................................................................................................................................... 8
INTRODUCTION .......................................................................................................................... 8
1.1
Background. ......................................................................................................................... 8
1.2
Statement of the Problem. .................................................................................................... 9
1.3
Objectives of the Study. ....................................................................................................... 9
1.4
Significance of the Study. .................................................................................................. 10
1.5
Methodology of Study. ...................................................................................................... 10
1.6
Scope and Limitation. ........................................................................................................ 10
1.7
Review of Literature . ........................................................................................................ 11
1.8
Organization of Study. ....................................................................................................... 11
CHAPTER II................................................................................................................................. 12
CONCEPTUAL FRAMEWORK OF DIGITAL ECONOMY .................................................... 12
2.1
Concept of Digital Economy. ............................................................................................ 12
2.1.1 Concept of E-Commerce............................................................................................... 13
I. Types of E-Commerce Models. ....................................................................................... 14
2.1.2
I.
Concept of Digital Payment. ...................................................................................... 15
Types of Digital Payment Methods. ............................................................................... 16
2.2
Components of Digital Economy....................................................................................... 19
2.3
History of Digital Economy. .............................................................................................. 19
2.4
Present Scenario of Digital Economy. ............................................................................... 20
2.4.1
What is value in the Digital Economy? ...................................................................... 22
2.5
Present Scenario of Digital Economy in Nepal. ................................................................. 24
2.6
Present Scenario of Digital Economy in India. .................................................................. 27
2.7
Present Scenario of Digital Economy in UK. ..................................................................... 28
CHAPTER III ............................................................................................................................... 30
LEGAL FRAMEWORK .............................................................................................................. 30
6
3.1
Legal Provision in the UK. ................................................................................................. 30
3.1.1
The E-Commerce Regulations 2002 .......................................................................... 30
3.1.2
Consumer Rights Act 2015......................................................................................... 31
3.1.3
Payment Services Regulations 2017........................................................................... 32
3.2
Legal Framework in India. ................................................................................................. 33
3.2.1
The Consumer Protection (E-Commerce) Rules, 2020. ............................................. 34
3.2.2
Payment and Settlement Systems Act 2007 (PSSA). ................................................. 37
3.3
Legal Framework in Nepal. ............................................................................................... 38
3.4
Comparison and Analysis of Legal Framework of UK, India with Nepal. ........................ 40
CHAPTER IV ............................................................................................................................... 42
FINDINGS, CONCLUSION AND RECOMMENDATIONS ..................................................... 42
4.1
Findings................................................................................................................................ 42
4.2
Conclusion. .......................................................................................................................... 43
4.3
Recommendations. ............................................................................................................... 44
BIBILOGRAPHY ......................................................................................................................... 46
7
CHAPTER I
INTRODUCTION
1.1 Background.
Digital economy refers to a n economy that is based on digital computing technologies, although
we increasingly perceive this as conducting business through markets based on the internet and
the World Wide Web. The digital economy is also referred to as the Internet Economy, New
Economy, or Web Economy. Increasingly, the digital economy is intertwined with the traditional
economy, making a clear delineation harder.
The rise of the digital economy is one of the defining features of the 21st century. Digital
technologies affect societies and economies in many ways, including via new means of
communication and collaboration; new products that feature a strong service component; the role
of data as driver of economic growth; the automation of tasks with artificial intelligence (AI);
and the emergence of new business models such as platforms. Digitalization is therefore
fundamentally transforming the way we live and work together. It has consequences for the wellbeing and cohesion of society as a whole; as well as deep impacts for businesses in all sectors,
through effects on productivity, employment, skills, income distribution, trade and the
environment.
In the intervening years, the dynamics of the digital economy (e-commerce, online payment,
etc.) has witnessed many changes. However, Nepalese laws have not been changed in tandem
with changes in the global scenario. Though, there is no proper or exact law to guide ecommerce, digital payment, etc. (Digital Economy) because the popularity and growth of this in
Nepal is completely new. But countries like the USA, UK, etc. are completely older than us.
And, in our neighbor country India, although E-commerce, digital payments, etc. (digital
Economy) is quite old but it's regulating is being evolving separately from traditional economy
as she might have realized. Digital economy is a completely different operational/model from
traditional which needs separate rules and regulations.
8
Thus, this paper focuses on Digital economy And Is separate rules and regulation necessary for
proper utilization and promotion of Digital Economy relevant to Nepalese economy by taking
reference from international and foreign law and policies.
1.2 Statement of the Problem.
The Nepal government hasn’t come up with the rules and regulations that favor e-commerce
business, digital payment, social media and other digital ecosystems due to which digital
economy like e-commerce, online payment, etc. can be regulated to make proper trust amongst
users and to promote digital economy which is the next new tradition of running economy. This
paper is highly based on limited digital economy such as: e-commerce, digital payment, etc.
Thus, this seminar paper focuses on:
1)
How can the digital economy be regulated in the context of Nepal?
2)
What are the problems/obstacles created by/for the digital economy in Nepal?
3)
Are there any specific provisions/ Laws for regulating and promoting Digital Economy
(like: e-commerce, Digital payment, etc.) in Nepal?
4)
How international and foreign law and policy can be taken as reference in regulating and
promoting Digital Economy in Nepal?
1.3 Objectives of the Study.
This seminar might be helpful in making and studying rules and regulation on digital economy in
the context of Nepal. It will also guide policy makers and the government to find our standing
and shortcomings. The objectives of the study are as follows:
a)
To find out the obstacles faced by the digital economy due to lack of rules and regulation
on digital economy in the context of Nepal.
b)
To find out provisions about Laws regarding digital economy in Nepal.
c)
To find out the present scenario of digital economy (e-commerce & digital payment) in
the world and in Nepal and how Nepal can adopt it.
d)
To suggest the government regarding the laws to be made by taking reference from
neighboring countries India, and the UK.
9
1.4 Significance of the Study.
A critical study of Challenges of Rules and Regulation for Promoting Digital Economy in Nepal
will be of value from both the academic and business points of view. The study will extend
previous research conducted in the areas of laws related to the digital economy. It will also
provide a platform for further research into rules and regulation on digital economy in Nepal. It
will also help the Government to find the loopholes in the Promotion and regulation of Digital
Economy due to which Nepal is backing from other countries because Digital Economy is the
Next New biggest economy. Digital economy is the booming economy and digital platform is
the backbone of the digital economy and due to the emerging new way of practice of economy, it
needs proper rules and regulation in Nepal. Thus, this will help the government and others for
studying and making laws to regulate the digital economy.
This study is hoped to be useful to ICT lawyers, Digital Economy practitioners and students.
1.5 Methodology of Study.
This seminar paper is mainly based on doctrinal, analytical and comparative methods.
Authorities have been collected from primary and secondary sources. Statutes have been
collected from primary sources. Reports published by OECD and other various international
institutions and countries on various matters of digital economy have been collected online. And
Acts and cases of various countries have been too collected online. After the collection of these
authorities, they were interpreted and analyzed.
The Blue Book citation system has been followed.
1.6 Scope and Limitation.
The limitation of this paper is that this paper is based on Rules and Regulation related Digital
Economy (specially limited to e-commerce and digital payment which are one of the biggest
parts of digital economy) and international and foreign laws and policies. Due to constraints in
budget, time and literature the researcher is unable to cover and analyze the whole issues on
digital economy, only prominent issues have been dealt with.
10
Our experience and encounter with rules and regulation on digital economy provisions is very
few and far between. We have to take resort to the experiences of foreign countries in this
regard. The number of digital economy cases in Nepal is also very less or is equal to no. The
unavailability of relevant decided case laws of Nepal, this research is highly based on some cases
of Nepal as it is based on Nepalese problem and it is highly based on comparative approaches of
rules and regulation of our ally nation of Nepal like India & UK with rules and regulation of
Nepal.
1.7 Review of Literature .
All those related and available literatures were reviewed during the course of this study. Books
of the authors and articles published in the journals related to rules, regulations and cases were
extensively surveyed as the literatures. The books of eminent authors, periodicals and articles
published by various prestigious institutions has been reviewed. Some of articles are “Digital
payment system in pandemic situation” by Rudra prasad Adhikari, “Rise of e-commerce in
Nepal: A pioneer explains”, “New legal trouble for Pathao” by Tshering D. Gurung and similarly
reports such as UNCTAD, Digital Economy Report, Economic discussion etc. has been
reviewed. In this way to achieve the purpose of this study other various literatures available
materials also have been reviewed. A detail of the reviewed literatures and other relevant
materials has been mentioned in the bibliography.
1.8 Organization of Study.
The study is divided into four chapter which are as follows: chapter 1 deals with the background
of the study, statement of the problem, objective of the study, significance of the study,
methodology of the study, scope and limitation, review of literature, and organization of the
study. Chapter 2 deals with the conceptual framework of the digital Economy by talking about its
component and the history. Along with that it discusses the present scenario of the digital
economy with its value. Chapter 3 deals with the legal framework of the digital economy, it
majorly discusses the provision in the UK and India along with the provision made in Nepal. A
comparative analysis among all the three nation is done in this chapter. Finally, the chapter 4
provides the researcher’s finding and the conclusions.
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CHAPTER II
CONCEPTUAL FRAMEWORK OF DIGITAL ECONOMY
2.1
Concept of Digital Economy.
The world as we know it is continuously changing, and one of the fundamental drivers is digital
transformation. At its core, digital transformation isn’t about Internet “unicorns.” It’s about using
the latest technology to do what you already do – but better. The global economy is undergoing a
digital transformation as well, and it’s happening at breakneck speed. So, what is the digital
economy? It′s the economic activity that results from billions of everyday online connections
among people, businesses, devices, data, and processes. The backbone of the digital economy is
hyperconnectivity which means growing interconnectedness of people, organizations, and
machines that results from the Internet, mobile technology and the internet of things (IoT)1.
Digital economy is defined as an economy that focuses on digital technologies i.e., it is based on
digital
and
computing
technologies.
It
essentially
covers
all business, economic,
social, cultural etc. activities that are supported by the web and other digital communication
technologies. The term was first coined in a book “The Digital Economy: Promise and Peril in
the Age of Networked Intelligence” by author Don Tapscott in 19952.
The digital economy is sometimes called the Internet Economy, the New Economy, or Web
Economy3. It is often perceived as conducting business through markets based on the internet
and World Wide Web. Digital economy is not just internet things only but it is defined as
network economy conducted through different mediums of digital network.
Actually, the digital economy refers to a broad range of economic activities that use digitized
information and knowledge as key factors of production. The internet, cloud computing, big
data, fintech, and other new digital technologies are used to collect, store, analyze, and share
information digitally and transform social interactions. The digitization of the economy creates
1
Damian Heath, what is digital economy? Unicorns, Transformation and the internet of things, DELOITTE (oct11,2020, 11:45 pm), https://www2.deloitte.com/mt/en/pages/technology/articles/mt-what-is-digital-economy.html
2
Toppr, Digital economy, What is digital economy? (oct-112020, 11:30 pm)
https://www.toppr.com/guides/business-environment/emerging-trends-in-business/digital.
3
SCIENCEDAILY, https://www.sciencedaily.com/terms/digital_economy.(last access at oct-11 2020) .
12
benefits and efficiencies as digital technologies drive innovation and fuel job opportunities and
economic growth. The digital economy also permeates all aspects of society, influencing the way
people interact and bringing about broad sociological changes4. Thus, digital economy can be
defined in two ways: one in narrow sense which is limited to the ICT sector only, but another in
broad sense economic activities that includes using digitized information and knowledge as the
key factor of production, and modern information networks as the important activity space.
This seminar paper is highly focused on rules and regulation on the digital economy. (Especially
e-commerce and digital payment). Thus, the concept of e-commerce and digital payment systems
are mentioned below.
2.1.1 Concept of E-Commerce.
Ecommerce, or electronic commerce, refers to transactions conducted via the internet. Every
time individuals and companies are buying or selling products and services online, they’re
engaging in ecommerce. The term e commerce also encompasses other activities including
online auctions, internet banking, payment gateways, and online ticketing5.
E-commerce (electronic commerce) is the buying and selling of goods and services, or the
transmitting of funds or data, over an electronic network, primarily the internet. These business
transactions occur either as business-to-business (B2B), business-to-consumer (B2C), consumerto-consumer or consumer-to-business. The terms e-commerce and e-business are often used
interchangeably. The term e-tail is also sometimes used in reference to the transactional
processes for online shopping.
4
Rillo, Aladdin D, Understanding the Digital Economy: what is it and how can it transform Asia?, ADB,(oct-112020, 10:30 PM ), https://www.adb.org/news/events/understanding-digital-economy-what-it-and-how-can-ittransform-asia.
5
ECOMMERCE GUIDE, https://ecommerceguide.com/guides/what-is-ecommerce/ (last access at Oc15, 2020).
13
In the last decade, widespread use of e-commerce platforms such as Amazon and eBay have
contributed to substantial growth in online retail. In 2007, e-commerce accounted for 5.1% of
total retail sales; in 2019, e-commerce made up 16.0%6.
E-commerce cannot be defined in an exact term and condition because the way and speed of
evolution of technology and innovation is going around the world in the form of digitalization.
Along with evolution and innovation in the digital world, the definition of e-commerce is also
changing daily. But however, E-commerce has different models of businesses which can be
defined somehow. And they are as follows
I. Types of E-Commerce Models.
Electronic commerce can be classified into four main categories7. The basis for this simple
classification is the parties that are involved in the transactions. So, the four basic electronic
commerce models are as follows,
a. Business to Business.
This is Business to Business transactions. Here the companies are doing business with each
other. The final consumer is not involved. So, the online transactions only involve
the manufacturers, wholesalers, retailers etc.
b. Business to Consumer.
Business to Consumer. Here the company will sell their goods and/or services directly to the
consumer. The consumer can browse their websites and look at products, pictures, and read
reviews. Then they place their order and the company ships the goods directly to them. Popular
examples are Amazon, Flipkart, Jabong etc.
c. Consumer to Consumer.
6
Wesley Chai, What is E-Commerce? Definition and Meaning, SEARCHCIO,(oct-12 2020, 9:30 am),
https://searchcio.techtarget.com/definition/e-commerce.
7
TOPPR, https://www.toppr.com/guides/business-environment/emerging-trends-in-business/electroniccommerce/,(last access at nov 02, 2020).
14
Consumer to consumer, where the consumers are in direct contact with each other. No company
is involved. It helps people sell their personal goods and assets directly to an interested party.
Usually, goods traded are cars, bikes, electronics etc. OLX, Quikr etc. follow this model.
d. Consumer to Business.
This is the reverse of B2C, it is a consumer to business. So, the consumer provides a good or
some service to the company. Say for example an IT freelancer who demos and sells his software
to a company. This would be a C2B transaction.
Thus, e-commerce is the buying and selling of goods or services which may be physical or
digital products through internet networks which has different model of doing business.
2.1.2 Concept of Digital Payment.
Digital payment is a way of paying for goods and services digitally, thus replacing traditional
methods of paying via cash or cheque. This includes all mobile and web applications following
secure and authorized payment gateways. One can load an amount on his/her digital wallet either
from his/her bank account directly through e-banking/internet banking or mobile banking or
using his/her debit /credit card or depositing cash on the specified accounts going to the bank.
Along with the facility of transferring amounts from bank account to the digital wallet or vice
versa, the facilities like electricity bill payment, drinking water bill payment, internet bill
payment, mobile top up, digital tv payment, air, bus and cable car online ticket booking, online
shopping and various other utility payments are commonly available in such digital wallets and
banking applications.8.
Digital payment services are forms of contactless, cashless and paperless payment methods.
Technology has allowed the world to embrace these more convenient exchanges of payments
through services like mobile apps and AI/machine learning. According to Statista, the number of
digital payment users is projected to grow by 5.4% in 20209.
8
Rudra prashad adhikari, Digital payment system in pandemic situation, The Rising Nepal, May-22-2020.
https://risingnepaldaily.com/opinion/digital-payment-system-in-pandemic-situation.
9
Sammi Cramela, 5 Trending Digital Payment Methods: Is your Business ready for them? BUSINESS.COM, (oct13-2020), https://www.business.com/articles/4-trending-digital-payment-methods-is-your-business-ready-for-them/.
15
There are different forms/modes of digital transactions/payment services in Nepal such as; ewallet, mobile banking, internet banking, connect IPS, etc. But in the present scenario, the
methods of digital payment have taken drastic changes in the world and some of the methods.
I. Types of Digital Payment Methods.
Various digital payment methods are trending today10. Here are five of the most popular payment
types to implement as a business:
a) Devices with Biometric Authentication.
Customers are going digital with their payments, increasing the need for security. Biometric
authentication is a form of verification that uses fingerprinting scanners, facial recognition, iris
recognition, heartbeat analysis and vein mapping to prevent identity theft and fraud.
Currently, many phones with digital wallets like Apple Pay and Google Pay use fingerprint or
facial recognition, but additional options are in the works. For instance, Visa is piloting
a biometric payment card that will allow users to authenticate a transaction by touching a sensor
on the card that can determine if the fingerprint is a match instead of entering a PIN code or
signing a receipt.
By 2021, there is expected to be over 18 billion biometric transactions happening each year. As a
business owner, it's important to protect your data, as well as your customers' information, and
biometric authentication is a promising way to achieve both intents.
b) Mobile Point of Sales (mPOS).
Convenient payment processing should be a top priority for businesses today, since there will be
27.7 million mPOS devices by 2021, compared to 3.2 million in 2014. Mobile POS systems are
tablets, smartphones or other wireless devices that use an app and a card reader to process
payments as a cash register would.
10
Sammi Cramela, 5 Trending Digital Payment Methods: Is your Business ready for them?BUSINESS.COM, (oct13-2020), https://www.business.com/articles/4-trending-digital-payment-methods-is-your-business-ready-for-them/.
16
This offers businesses the freedom to eliminate a central checkout area and accept payments
from anywhere in their store, and even off-site. For example, you can bring your payment system
to a trade show and other off-site locations without worrying about how you'll carry out
transactions. Customers can swipe their credit cards or debit cards using the card reader attached
to your device and instantly make a purchase – it's that simple.
c) Smart Speakers.
Voice commands are no longer a futuristic concept. Through smart speakers like Google Home,
Apple Home Pod and Amazon Echo, consumers can give a voice command to make an instant
payment or purchase. In fact, 35% of users buy products like home care, groceries and clothing
through their smart speakers.
Some consumers fear this isn't the most secure method of making purchases. Still, this digital
payment trend is projected to grow to 77.9 million users by 2022 (up from 18.4 million users in
2017). With this type of growth on the horizon, it will be important to optimize your online store
for voice search so your business is easily recognizable through tools like smart speakers.
d) Contactless Payment.
There are various mobile payment apps that allow users to transfer money, purchase products,
pay bills and complete virtually any other type of financial transaction, all with the tap of a
finger. By creating an account and storing your payment details in it, purchasing goods and
services using a mobile phone is quick and easy.
Examples of this technology include Venmo (which is also great for peer-to-peer
payments), PayPal, Google Pay (previously known as Google Wallet), Apple Pay and Samsung
Pay. Allowing customers to make electronic payments with their wallet app/digital wallet or
other mobile payment apps offers a convenience that can't be matched.
There are costs involved with contactless payment methods. First, you will need to purchase card
terminals that are enabled with near-field communication technology. There's no fee to accept
Apple Pay and Google Pay, but just like all other credit card transactions, rates and fees do apply
when consumers use a credit card to pay for goods or services in your store. (These transactions
17
are considered card-present transactions.) You can check with your processor about these
specific rates.
Many consumers are turning to these methods because they feel that it's a safer option and that
it's quicker than counting out cash or swiping a card. And, for the many consumers who
perpetually have their phone in hand, it's much easier to access.
Contactless payments aren't limited to mobile wallets. New credit cards are also equipped with
the RFID technology used for contactless payments. With a contactless credit card, customers
simply hold the card close to the card reader – they no longer need to swipe their card, insert it
into a card reader or even tap it against the terminal.
e) Social Media Payment Options.
Social media networks have expanded their reach to include payment solutions such as
transferring money from one user to the next (P2P payments) or from consumers to retailers,
directly within the network.
An overwhelming number of millennials turn to social media when looking to purchase. An
Animoto study found that 75% of millennials' purchasing decisions are influenced by a brand's
presence on social media.
Facebook, Instagram and Pinterest all offer business accounts that allow brands to sell to
consumers, with digital payment transactions conducted directly on the site for a small fee.
According to a 2018 study from Avionos, 55% of online shoppers had made a purchase through
a social media channel.
Changes in payment methods have been propelled forward by consumers. We will continue to
see the rise of various alternative payment methods, such as those above, while the use of cash
and credit cards, in particular, as the Avionos consumer survey illustrates, will continue to
decline.
18
2.2 Components of Digital Economy.
The digital economy consists of various components, key among which include11:
●
Government;
●
Policy and Regulation;
●
Internet, the world wide web (WWW) and electricity infrastructure;
●
Telecommunication Industry;
●
Digital Service Providers;
●
E-business and E-commerce Industry;
●
Information and Knowledge Management Systems;
●
Intellectual Property Rights;
●
Human Capital and Knowledge Workers;
●
Research and Development;
●
Emerging Technologies.
2.3 History of Digital Economy.
The history of E-commerce begins with the invention of the telephone at the end of last century.
EDI (Electronic Data Interchange) is widely viewed as the beginning of ecommerce if we
consider ecommerce as the networking of business communities and digitalization of business
information. Large organizations have been investing in development of EDI since the sixties. It
did not gain reasonable acceptance until the eighties. The meaning of electronic commerce has
changed over the last 30 years.
Originally, electronic commerce meant the facilitation of commercial transactions electronically,
using technology such as Electronic Data Interchange (EDI) and Electronic Funds Transfer
(EFT). These were both introduced in the late 1970s, allowing businesses to send commercial
documents like purchase orders or invoices electronically. The growth and acceptance of credit
cards, automated teller machines (ATM) and telephone banking in the 1980s were also forms of
electronic commerce. Another form of E-commerce was the airline and railway reservation
system.
11
Stephen M. Mutula, Digital Economics, 29, 2010.
19
Online shopping, an important component of electronic commerce, was invented by Michael
Aldrich in the UK in 1979. The world’s first recorded business to business was Thomson
Holidays in 1981. The first recorded Business to consumer was Gateshead SIS/Tesco in 1984.
During the 1980s, online shopping was also used extensively in the UK by auto manufacturers
such as Ford, General Motors and Nissan. The systems used the switched public telephone
network in dial-up and leased line modes.12
E-commerce was introduced in Nepal with an aim of letting Nepalis residing abroad send gifts to
their families, friends, and relatives living here. The shift from physical stores to virtual ones
began in the late 1990s.
Bal Krishna Joshi, a co-founder of thamel.com, claims his company is the first-ever e-commerce
company in Nepal.13
The era of modern banking in Nepal started with Nabil Bank introducing credit cards in the early
1990s. Himalayan Bank introduced ATM and Nepali credit card for the domestic market
in 1995. In 2002, Kumari Bank introduced E-Banking (Internet Banking) service for the first
time in Nepal. Likewise, in 2004, Laxmi Bank introduced SMS Banking (Mobile Banking)
service for the first time in the country. The era of digital payment (mobile wallet) in Nepal
started with the launch of eSewa in 2009.14
2.4 Present Scenario of Digital Economy.
The digital economy continues to evolve at breakneck speed, driven by the ability to collect, use
and analyses massive amounts of machine-readable information (digital data) about practically
everything. These digital data arise from the digital footprints of personal, social and business
activities taking place on various digital platforms. Global Internet Protocol (IP) traffic, a proxy
for data flows, grew from about 100 gigabytes (GB) per day in 1992 to more than 45,000 GB per
second in 2017 (figure). And yet the world is only in the early days of the data-driven economy;
12
Ruhaniika singh, E-commerce, Economic Discussion, 5-2019.
Bijeesha Budhathoki, Rise of e-commerce in Nepal: A pioneer explains, ONLINE KHABAR, (aug-28 2020,5:45
pm), https://english.onlinekhabar.com/rise-of-e-commerce-in-nepal-a-pioneer-explains.
14
Bhanu Khatri, History of digital payment in Nepal, Startups Nepal, 4-2018.
13
20
by 2022 global IP traffic is projected to reach 150,700 GB per second, fueled by more and more
people coming online for the first time and by the expansion of the Internet of Things (IoT).15
Platformization is the second driver. In the past decade, a plethora of digital platforms have
emerged around the world using data-driven business models, and disrupting existing industries
in their wake. The power of platforms is reflected in the fact that seven of the world’s top eight
companies by market capitalization use platform-based business models. Digital platforms
provide the mechanisms for bringing together a set of parties to interact online. A distinction can
be made between transaction platforms and innovation platforms. Transaction platforms are
two/multi-sided markets with an online infrastructure that supports exchanges between a number
of different parties. They have become a core business model for major digital corporations
(such as Amazon, Alibaba, Facebook and eBay), as well as for those that are supporting digitally
enabled sectors (such as Uber, Didi Chuxing or Airbnb). Innovation platforms create
environments for code and content producers to develop applications and software in the form
of, for example, operating systems (e.g., Android or Linux) or technology standards (e.g., MPEG
video).16
Governments and regulators play a major role in encouraging digital innovation and in
incentivizing the development of these technologies for the benefit of society. They can foster
broad public and consumer interests and limit any potential unintended negative consequences of
these developments by providing general rules that reflect societal values and preferences. Often,
however, regulatory frameworks lack the agility to accommodate the increasing pace of
technological developments. Digital technologies also challenge deeply the way governments
regulate: by blurring the traditional definition of markets; challenging enforcement; and by
transcending administrative boundaries domestically and internationally. The pace of
digitalization and its impacts on society and markets have been widely addressed by the OECD
and others. Yet much less is understood and said on how the traditional regulatory functions of
governments, including the application of good regulatory practices, should evolve with these
transformative changes. It is therefore timely to engage in such work, especially since the digital
transformation is an ongoing process that challenges regulations in place and creates new
UNCTAD, Digital Economic report 2019, The digital economy’s expansion is driven by digital data, 1, 2019.
UNCTAD, Digital Economic report 2019, The digital economy’s expansionsutya is driven by digital data, 1,2,
2019.
15
16
21
regulatory needs. Domains such as retail, finance, communication and entertainment have
already “digitalized”. Others, such as healthcare or education, are still expected to change
fundamentally with the growing use of data analytics and AI.
The digital economy is massive and still growing. Seven tech giants are now among the top 10
public companies by market capitalization.
The rise of digital business models is laying a barrier on the Economic System of the country due
to lose regulation of it. Due to this, money is disappearing from the eco-system and fraud cases
are increasing as well as customers are not getting proper standard services from respective
digital platforms.
There is a gap and mismatch on revenue factor and standard of regulation on the digital
economy, which may make money disappear from the economy of the country. Thus, the
Government of Nepal should also worry about it. There are no proper/Exact laws to guide the
digital economy in Nepal. However, the world is progressing in it.
2.4.1 What is value in the Digital Economy?
Measuring the digital economy and related value creation and capture is fraught with difficulties.
Firstly, there is no widely accepted definition of the digital economy. Secondly, reliable statistics
on its key components and dimensions, especially in developing countries, are lacking. Although
several initiatives are under way to improve the situation, they remain insufficient, and are
struggling to cope with the rapid pace of evolution of the digital economy. Depending on the
definition, estimates of the size of the digital economy range from 4.5 to 15.5 percent of world
GDP. Regarding value added in the information and communications technology (ICT) sector,
the United States and China together account for almost 40 per cent of the world total. As a share
of GDP, however, the sector is the largest in Taiwan Province of China, Ireland and Malaysia.
Global employment in the ICT sector increased from 34 million in 2010 to 39 million in 2015,
with computer services accounting for the largest share (38 per cent). The share of the ICT sector
in total employment rose over the same period, from 1.8 per cent to 2 per cent.17
17
UNCTAD, Digital Economic report 2019, 3,4, 2019.
22
Within the ICT sector, computer services are the largest component, with a 40 per cent share of
total value added. The global computer services industry is dominated by the United States; its
share of that industry’s value added is almost as big as that of the combined total of the next nine
largest economies. India has the largest share among developing countries in this context.
Computer services, which is the only sub sector that is growing across all regions, is one of the
main drivers of employment in the sector. Value added in ICT manufacturing is highly
concentrated in East Asia (led by China), and the scope for more developing countries to extract
value from this sector is likely to be limited. In the past decade, global exports of ICT services
and services that can be delivered digitally grew considerably faster than overall services
exports, reflecting the increasing digitalization of the world economy. In 2018, digitally
deliverable service exports amounted to $2.9 trillion, or 50 per cent of global services exports. In
LDCs, such services accounted for an estimated 16 per cent of total services exports, and they
more than tripled from 2005 to 2018.18
Digital platforms are increasingly important in the world economy. The combined value of the
platform companies with a market capitalization of more than $100 million was estimated at
more than $7 trillion in 2017 – 67 per cent higher than in 2015. Some global digital platforms
have achieved very strong market positions in certain areas. For example, Google has some 90
per cent of the market for Internet searches. Facebook accounts for two thirds of the global social
media market, and is the top social media platform in more than 90 per cent of the world’s
economies. Amazon boasts an almost 40 per cent share of the world’s online retail activity, and
its Amazon Web Services accounts for a similar share of the global cloud infrastructure services
market. In China, WeChat (owned by Tencent) has more than one billion active users and,
together with Alipay (Alibaba), its payment solution has captured virtually the entire Chinese
market for mobile payments. Meanwhile, Alibaba has been estimated to have close to 60 per cent
of the Chinese e-commerce market. Several factors help explain the rapid rise to dominance of
these digital giants. The first is related to network effects (i.e., the more users on a platform, the
more valuable it becomes for everyone). The second is the platforms’ ability to extract, control
and analyses data. As with network effects, more users mean more data, and more data mean a
stronger ability to outcompete potential rivals and capitalize on first-mover advantages. Thirdly,
18
UNCTAD, Digital Economic report 2019, Measuring value in the digital economy is difficult, 6, 2019.
23
once a platform begins to gain traction and starts offering different OVERVIEW 7 integrated
services, the costs to users of switching to an alternative service provider start to increase. Global
digital platforms have taken steps to consolidate their competitive positions, including by
acquiring potential competitors and expanding into complementary products or services. Major
acquisitions by digital platform companies include Microsoft’s takeover of LinkedIn and
Facebook’s acquisition of WhatsApp. Alphabet (Google) and Microsoft have invested in
telecommunications equipment by acquiring Motorola and Nokia, respectively. Major platforms
have also made other large acquisitions in the retail industry, advertising and marketing industry,
and in non-residential real estate. Other steps include investing strategically in research and
development (R&D) and lobbying in domestic and international policy-making circles. At the
same time, strategic partnering between multinational enterprises (MNEs) in traditional sectors
and global digital platform corporations is also being explored. For example, Walmart has
partnered with Google to use Google Assistant; Ford and Daimler have joined Baidu in its
Apollo platform; Google has built the Android Automotive platform with Volvo and Audi; GE
has partnered with Microsoft to use its Azure cloud services; and Intel and Facebook are
collaborating on the development of a new artificial intelligence (AI) chip.19
As above, data shows that the market capital of the digital economy is huge and it is increasing
in the upstairs with rapid speed. Due to the pandemic(covid-19), the market capital of the digital
economy has been increased almost double. As we can see, In Nepal too, use of e-commerce,
digital payment has increased almost double. Habit of using online platforms has increased in
developing countries like Nepal due to lockdown situations. Which shows that the digital
economy is the future of the world. Almost, all economies will run under digital platforms in the
upcoming years.
2.5 Present Scenario of Digital Economy in Nepal.
19
UNCTAD, Digital Economic report 2019, The growing power of digital platforms has global implications, 6,7,
2019.
24
The Covid-19 pandemic has affected nearly every country. It is impacting not just global
financial markets and businesses but also disrupting every aspect of people’s day-to-day lives. In
the battle against Covid-19 pandemic, technology-driven companies have strongly stood by and
contributed to normalize the indoor lives of people through their innovative solutions. But the
Covid-19 crisis has come as a great opportunity for the government and startup tech companies.
The government of Nepal too has started providing some online services. For instance, it has
started delivering essentials through the state-owned companies like Food and Trading
Company, and Salt Trading Corporation.
The government has also ordered stores like the Bhatbhateni and Big Market to start home
delivery to the people. Cell Pay, eSewa, Food mandu, Daraz and other online companies are
making everyday lives easy for the people. In the transport sector, too, online transactions will
soon become popular. In short, we can say the digital economy is the future of Nepal. Digital
connectivity to the outside world will help Nepal overcome the challenges of being landlocked.
Last year, the government introduced a strategy named Digital Nepal Framework that underlined
eight sectors and 80 digital initiatives to transform the country fully into digitization. Of the
initiatives, infrastructure like a fiber broadband network, 5G and supporting economic zone for
the IT sector have been listed as the major agendas to boost the country’s connectivity
sector. According to the framework, Nepal’s entire population has now access to mobile
services while 60 percent of them have access to the internet as of last year. The digitized system
is accessible mostly to smartphone users, but does not incorporate the users of normal mobile
sets in rural areas, according to the experts.20
The growth and expansion of information and communication technology to rural areas have
created fertile grounds for e-commerce. According to Nepal Telecom Authority, mobile phone
penetration has reached 130 percent, meaning there are more mobile connections than the
population itself, and 62 percent of the population is connected to the internet. Social media
platforms such as Facebook and Viber are now widely used for socialization. Not only are they
20
Republica, Govt has to promote full digitization to save country from economic impacts of lockdown: Experts,
MyRepublica, , https://myrepublica.nagariknetwork.com/news/govt-has-to-promote-full-digitisation-to-savecountry-from-economic-impacts-of-lockdown-experts/ (last access at nov -11, 2020).
25
used for establishing people to people contacts, but they are slowly and steadily being used to
connect
businesses
to
people
or
other
businesses
as
well.
Despite the potential, Nepal is already lagging behind in localizing e-commerce as a business
tool compared to many Asian countries, including our immediate neighbors. However, there are
private-sector providers that have been pushing digital development. Ride-sharing applications
such as Tootle and Pathao; payment platforms such as eSewa, IME pay, and Khalti; or online
shopping apps and websites such as Daraz and Muncha.com have already shown that ecommerce can become an alternative for transforming domestic business. Likewise, small scale
enterprises—mostly handicraft entrepreneurs—have also been marketing their products in the
international market by using e-commerce channels. The challenge, however, is to cultivate such
entrepreneurs and provide a level playing field for their advancement to make e-commerce a
means of economic transformation. 21
There has been international support for countries like Nepal that need help in localizing ecommerce. We should mobilize the support from multinational financial institutions such as the
World Bank Group or Asian Development Bank, as well as from the international private sector.
1. Cases of Legal Trouble faced by E-Commerce (Digital Economy) in Nepal.
In Nepal, due to lack of proper regulation and guidance on e-commerce, e-commerce giants are
facing many legal problems from time to time and one of the examples is writ filed against
Pathao Nepal, a riding app service of Nepal.
Advocate Shyam Kumar Shrestha, a member of the Nepal Bar Association, filed the writ,
arguing Pathao, a subsidiary of the US-based Pathao Inc, has violated multiple foreign
investment laws by offering services beyond its stated objectives and engaging in foreign
exchange without following due process.
21
Madhu K Marasini, Digital development and e-commerce in Nepal, THE KATHMANDU POST, (AUG15,2019), https://kathmandupost.com/columns/2019/07/15/digital-development-and-e-commerce-in-nepal.
26
The petition states the company violated the Companies Act 2006 by providing transport service
that differs from its original objective listed in the Memorandum of Association, a document
prepared for registering a company. Pathao received permission to operate in Nepal based on its
objective which states that it provides IT support services, but it has been providing transport
services which is unlawful, reads the petition.22
Due to lack of specific law on e-commerce, pathao had to register it as a non-e-commerce
company and is being regulated as a non-e-commerce company which is totally different things
in nature. E-commerce needs a separate law for its regulation as it has a new way of doing
business and is always innovative which has to be regulated by a specific law.
Similarly, in another writ against pathao, the Patan High Court on Wednesday directed the
government to promulgate law to regulate ‘ride sharing’ services like Tootle and Pathao
operating in the Kathmandu Valley. The court issued the order in response to a writ petition filed
some three months ago by a Taxi Special District Committee of Nepal Labor Association. 23
These two legal troubles are just an example of legal problems faced by pathao, but there are
more legal troubles facing other e-commerce in Nepal due to lack of specific rules and regulation
for these platforms.
2.6 Present Scenario of Digital Economy in India.
According to a recent report, India has the potential to create over US $1 trillion of economic
value from the digital economy by 2025, up from around US $200 billion currently. Released by
the Ministry of Electronics and Information Technology (MeitY), the report takes stock of the
digitally-enabled change that is underway and outlines a roadmap for the country over the next
few years.
Tsering D Gurung, New legal trouble for Pathao, THE KATHMANDU POST, (feb-24-2019) ,
https://kathmandupost.com/national/2019/02/24/new-legal-trouble-for-pathao.
23
Republica, Make law to regulate ride-sharing services: High Court to govt, My Republica, (Feb-14-2020),
https://myrepublica.nagariknetwork.com/news/make-law-to-regulate-ride-sharing-services-high-court-to-govt.
22
27
India’s digital consumer base is the second largest in the world and is rapidly growing. The
government’s digital model is narrowing the digital divide and bringing technology to even the
most remote parts of the country.
About 50 percent of the potential economic value of the US $1 trillion could come from new
digital ecosystems in diverse sectors, including, among others, financial services, agriculture,
healthcare, logistics, jobs, and e-governance.24
Digital India is the government’s flagship program and has been transforming the country into a
digitally empowered society and knowledge economy. The rate of technology adoption increased
between 2013 and 2018, bolstered by government initiatives and mobile penetration. During this
time, the country clocked 1.22 billion Aadhaar registrations, 870 million Aadhaar-linked bank
accounts, and 98 million daily e-government transactions. Building on this foundation, India can
further scale-up its digital economy.
A press release said that India has nearly half a billion Internet users. This will create a huge
market for digital services, platforms, applications, content, and solutions.25
2.7 Present Scenario of Digital Economy in UK.
New government figures show the country’s thriving digital sector contributed £149 billion to
the UK in 2018, accounting for 7.7 per cent of the UK economy.
This is up 7.9 per cent on the previous year meaning growth in the sector is nearly six times
larger than growth across the economy as a whole, which increased by 1.4 per cent.
Up until the mid-2010s, the sector had been growing in line with the wider rate of UK economy
growth. But the official figures show that in 2015 the digital sector’s growth started to outstrip
the economy as a whole and has continued on an upward trajectory since.
24
Samaya Dharmaraj, India could be a trillion dollar digital economy by 2025, OPENGOV, (feb-24, 2019, 4:30
Pm), https://opengovasia.com/india-could-be-a-1-trillion-digital-economy-by-2025.
25
Samaya Dharmaraj, India could be a trillion dollar digital economy by 2025, OPENGOV, (feb-24, 2019, 4:30
Pm), https://opengovasia.com/india-could-be-a-1-trillion-digital-economy-by-2025.
28
The digital sector figures published today take into account the contributions of digital
businesses up and down the country across a range of specialisms.26
The present scenario shows that the digital economy is being developing rapidly at an upward
growth across the world. Then, what is the problem with it? This is not the problem. This sector
is a totally new and innovative sector. Everyday digital platforms come with new products and
new innovations. Digital Economy (Mainly in e-commerce and digital payment) cannot be
defined in a fixed way because these sectors are so innovative and fast growing that it's narrow
definition would not be fair for the digital economy. Thus, the problem is that these need
separate laws/rules & regulation which can address all these broad definitions of these digital
economies (e-commerce, Digital Payments, etc.)
26
Department of Digital, Cultural and Sports, Digital sector worth more than £400 million a day to the UK
economy, GOV.UK, 2-5-2020.
29
CHAPTER III
LEGAL FRAMEWORK
3.1 Legal Provision in the UK.
In the UK, there are specific laws for e-commerce and digital payment. They are: The ECommerce Regulations 2002 (E-Commerce Regulations), The Consumer Rights Act 2015
(Chapter 3), and The Payment Services Regulations 2017.
3.1.1 The E-Commerce Regulations 2002 .
In regulation, e-commerce is named as an information society service and which is being
regulated under this regulation. Some of the below provisions show how e-commerce is
regulated as a separate economy other than traditional economy.

These laws have mentioned the provision for internal market which explicitly mentions
about requirement of the any coordinated field will be subjected to the Information
society service by service provider established in UK itself irrespective of the country
where the service is provided27.

It further mentions an enforcement authority who is entitled to take measures which are
necessary for the reason of public Policy, protection of public health, public security,
protection of Consumers, etc.28

The person who is providing the information Society service should make the recipient of
the service easily, directly and permanently accessible with all the required information
for it such as the name of the service providers, the geographical location of the service
providers, all the details of the service providers, registration number, email and all
another necessary and relevant information about the service providers and so on.

Similarly, the person should keep the records whether the service provider exercises a
regulated profession or not. He must keep the detail of the professional body to which the
27
The E-Commerce (EC Directive) Regulations 2002, regulation 4(1), SI 2002/2013,
https://www.legislation.gov.uk/uksi/2002/2013/pdfs/uksi_20022013_en.pdf.
28
i.d. at regulation 5(1).
30
service provider is registered and other details too such as the professional title and the
member state where the title has been granted. If it is established in the member state
then, it must be known about the professional rules which is applicable to the service
provider in the member state and the necessary means to access them. All the services
provider are subjected to value added tax29.

It clearly states Where a person providing an information society service refers to prices,
these shall be indicated clearly and unambiguously and, in particular, shall indicate
whether they are inclusive of tax and delivery costs.30
Similarly, there are many provisions under this regulation which order the service provider to
do business under the legal framework of the UK laws. Under this regulation, the right of the
consumer is fully protected and duties of e-commerce are mentioned clearly as shown above.
Moreover, regulation 7-22 has also mentioned many more in order to make e-commerce more
liable and customer friendly. This regulation tries to protect all the rights of the consumer but
moreover there is Consumer Rights Act 2015(chapter 3) which talks about laws protecting the
consumer in digital platforms.
3.1.2 Consumer Rights Act 2015.
This act (especially Chapter 3) is highly focused protection of consumer's rights under digital
platforms. This act has separated a digital consumer from a traditional consumer and protected
their right under a separate chapter of this act. Digital consumers and traditional consumers are
totally different things in nature so these acts of the UK have made an effort in regulating and
promoting the digital economy.
This chapter tries to address the digital consumers on the content such as What digital content
contracts are covered? What statutory rights are there under a digital content contract? What
remedies are there if statutory rights under a digital content contract are not met? Compensation
29
i.d. regulation 6(1).
30
i.d. regulation 6(2).
31
for damage to device or to other digital content. Can a trader contract out of statutory rights and
remedies under a digital content contract? 31
As above Act shows that this is trying to address all the problems and rights of the
consumer which uses digital platforms for commercial purpose. This chapter has mentioned all
about the rights of the consumer under digital content that they may consume from the digital
platform. If any e-commerce violates the rights of the consumer then they have to provide
remedies, compensation and liable for all wrong doing to consumers of digital content. Thus, this
act is one of the revolutionary laws to regulate the digital platform in the UK. As we know, the
digital economy, especially e-commerce, is one of the most important and biggest economies of
this generation. Thus, these need separate proper rules and regulation.
3.1.3 Payment Services Regulations 2017.
In the UK, all the payment systems must follow the PSRs. Thus, digital payments must also
follow this regulation and A UK business that provides payment services as a regular occupation
or business activity in the UK needs to apply to Financial conduct authority (FCA) to become
either an authorized payment institution, a small payment institution or a registered account
information service provider unless it is already another type of payment service provider or
exempt. Part 2 of this regulation has clearly mentioned that: The FCA must maintain a register
of— authorized payment institutions and their EEA branches; 32. This means that the 1st payment
service must get authority to operate from FCA.
Thus, FCA regulates all the payment systems as this regulation has given the authority to
regulate payment systems in the UK. But in the UK too there is no separate and clear specific
law on digital payment system's economy as this economy is totally cashless which needs to be
regulated by separate strong laws as it takes the huge transactions daily.
Thus, the above laws show that the UK has been involved in regulation of digital economy(ecommerce) since the beginning of the 21st century with a specific law(regulation) for it. As
practice of e-commerce and digital payment started from the very beginning, evolution of
31
Consumer Right Act 2015 ( c.15),.
Payment Service Regulation 2017, regulation 4(a), (SI 2017 no.752)
https://www.legislation.gov.uk/uksi/2017/752/pdfs/uksi_20170752_en.pdf.
32
32
specific related laws too started in the beginning. And as e-commerce is the most innovative and
revolutionary in nature, the new specific laws and its amendment is being developed and done
with the changing time.
Similarly, beside these laws UK has Digital Economy Act 2017 which address other form
of digital content beside those of above such as Access to digital services, Digital infrastructure,
Online pornography, Intellectual property, Digital government, etc.33
3.2 Legal Framework in India.
In India, digital economy (e-commerce and digital payment) is regulated by the Information
Technology Act 2000 (ITA), the Consumer Protection (E-Commerce) Rules, 2020, And the
Payment and Settlement System Act, 2007. These are some of the specific laws which regulate
e-commerce and digital payments (digital economy) in India.
The ITA Act has some of the special feature of regulating e-commerce and digital payments and
they are:
● Recognizes
and validates (with a few exceptions) contracts concluded through electronic
means, provided that such contracts are otherwise valid under the law.
● Imposes
an obligation on bodies corporate that possess, deal with or handle any sensitive
personal data to maintain reasonable security practices and procedures (RSPPs).
● Imposes
penalties for breach of confidentiality and privacy, violation of privacy, disclosure of
information in breach of any agreement, and identity theft and impersonation.
● Sets
out the liability (and exemptions) of intermediaries that receive, store or transmit
electronic records or provide any service with respect to any record including
telecommunications service providers, network service providers, internet service providers,
online payment sites, online marketplaces, and so on.
Moreover, recently a special rule, the Consumer Protection (E-Commerce) Rules, 2020 has been
implemented in India in order to regulate e-commerce as a separate digital economy
differentiating it from traditional economy.
33
Digital Economy Act 2017.
33
3.2.1 The Consumer Protection (E-Commerce) Rules, 2020.
The Consumer Protection (E-commerce) Rules, 2020 (“Rules”) were notified by the
Government of India on 20.07.2020. The Rules are intended to complement the Consumer
Protection Act, 2020 (“Act”) to by regulating all e-commerce activities and transactions. The
Rules have sought to govern all such e-commerce activities by laying down duties and liabilities
to be adhered by e-commerce entities, marketplace e-commerce entities, sellers on marketplace,
and inventory e-commerce entities. The Act defines ‘e-commerce’ under Section 2(16), as
“buying or selling of goods or services including digital products over digital or electronic
network”.34
This rule has mentioned about the duties and liabilities of the e-commerce entities, duties of
sellers on marketplace and duties and liabilities of inventory e-commerce entities. This rule is
totally made for e-commerce which is the most important in this new generation of economy.
And some of the silent feature of these rules are as follows:
a.)
Duties of E-Commerce Entities
Duties of e-commerce entities has been addressed by this rules such as every entities should give
the information such as legal name of the e-commerce entity; principal geographic address of
its headquarters and all branches; name and details of its website; and contact details like email
address, fax, landline and mobile numbers of customer care as well as of grievance officer. 35
Every e-commerce entity shall provide the information in a clear and accessible manner on its
platform, displayed prominently to its users. Every e-commerce entity shall affect all payments
towards accepted refund requests of the consumers as prescribed by the Reserve Bank of India or
any other competent authority under any law for the time being in force, within a reasonable
period of time, or as prescribed under applicable laws.36 No e-commerce entity shall manipulate
the price of the goods or services offered on its platform in such a manner as to gain
unreasonable profit by imposing on consumers any unjustified price having regard to the
prevailing market conditions, the essential nature of the good or service, any extraordinary
34
The Consumer Protection(E-commerce) Rules, 2020, rule 2(16).
Id. rule 4(2).
36
Id. rule 4(10).
35
34
circumstances under which the good or service is offered, and any other relevant consideration in
determining whether the price charged is justified; No e-commerce entity shall discriminate
between consumers of the same class or make any arbitrary classification of consumers affecting
their rights under the Act37.
b.) Liabilities of Marketplace E-Commerce Entities.
A marketplace e-commerce entity which seeks to avail the exemption from liability, including
the provisions of the Information Technology (Intermediary Guidelines) Rules, 2011.38 Every
marketplace e-commerce entity shall take reasonable efforts to maintain a record of relevant
information allowing for the identification of all sellers who have repeatedly offered goods or
services.39
c.) Duties of Sellers on the Marketplace.
As per the duty of sellers on marketplace no seller offering goods or services through a
marketplace e-commerce entity shall adopt any unfair trade practice whether in the course of the
offer on the e-commerce entity’s platform or otherwise40 and shall refuse to take back goods, or
withdraw or discontinue services purchased or agreed to be purchased, or refuse to refund
consideration, if paid, if such goods or services are defective, deficient or spurious, or if the
goods or services are not of the characteristics or features as advertised or as agreed to, or if such
goods or services are delivered late from the stated delivery schedule: Provided that in the case
of late delivery, this sub-rule shall not be applied if such late delivery was due to force majeure.41
Any seller offering goods or services through a marketplace e-commerce entity shall have a
prior written contract with the respective e-commerce entity in order to undertake or solicit such
sale or offer and to appoint a grievance officer for consumer grievance redressal and ensure that
the grievance officer acknowledges the receipt of any consumer complaint within forty-eight
hours and redresses the complaint within one month from the date of receipt of the complaint.
37
Id. rule 4(11).
Id. rule 5(1).
39
Id. rule 5(5).
40
Id. rule 6(1).
41
Id. rule 6(3).
38
35
It ensures that the advertisements for marketing of goods or services are consistent with the
actual characteristics, access and usage conditions of such goods or services and also provide the
e-commerce entity its legal name, principal geographic address of its headquarters and all
branches, the name and details of its website, its e-mail address, customer care contact details
such as fax, landline, and mobile numbers and where applicable, its GSTIN and PAN details.42
d.) Duties and Liabilities of Inventory E-Commerce entities.
Every inventory e-commerce entity shall provide the information in a clear and accessible
manner, displayed prominently to its users: accurate information related to return, refund,
exchange, warranty and guarantee, delivery and shipment, cost of return shipping, mode of
payments, grievance redressal mechanism, and any other similar information which may be
required by consumers to make informed decisions. all mandatory notices and information
required by applicable laws, information on available payment methods, the security of those
payment methods, the procedure to cancel regular payments under those methods, any fees or
charges payable by users, chargeback options, if any, and the contact information of the relevant
payment service provider; all contractual information required to be disclosed by law.
The inventory should mention the total price in single figure of any good or service along with
the breakup price for the good or service, showing all the compulsory and voluntary charges,
such as delivery charges, postage and handling charges, conveyance charges and the applicable
tax; and a ticket number for each complaint lodged, through which the consumer can track the
status of their complaint.43
This law do not allow any
inventory e-commerce entity for falsely represent itself as a
consumer and post reviews about goods and services or misrepresent the quality or the features
of any goods or services.44 and restrict every inventory e-commerce entity shall ensure that the
advertisements for marketing of goods or services are consistent with the actual characteristics,
access and usage conditions of such goods or services.45Any inventory e-commerce entity which
explicitly or implicitly vouches for the authenticity of the goods or services sold by it, or
42
Id. rule 6(4)
Id. rule 7(1).
44
Id. rule 7(2).
45
Id. rule 7(3).
43
36
guarantees that such goods or services are authentic, shall bear appropriate liability in any action
related to the authenticity of such good or service.46
A. Critical Analysis of these Rules.
This rule is made for consumer protection on the digital platform. This is the special provision
differentiating digital economy from the traditional economy because laws which are made for
traditional economy cannot meet the necessity of the digital economy because this platform is
totally new and innovative which has a different way of doing. Thus, it has given a complete
guideline for the e-commerce entities and other sellers who do business under it. This makes the
e-commerce more loyal and liable towards its customers and government and customers can
easily deal with them if wrong happens as all e-commerce comes under this rule. Actually, the
problem in many countries is that the government becomes confused about imposing any laws to
this kind of platform because e-commerce has a new way of doing business in a different
platform different from traditional way of doing business. Thus, this rule in India can be
considered revolutionary because e-commerce will directly come under legal platform under this
rule which makes e-commerce more trustable and more responsible toward its consumers. And
this will help in promotion and protection of e-commerce with proper rules and regulations.
3.2.2 Payment and Settlement Systems Act 2007 (PSSA).
Under the PSSA, anyone commencing a payment system in India must obtain prior authorization
from the Reserve Bank of India (RBI). Examples of payment systems include systems enabling
payment between a payer and a beneficiary, involving clearing, payment and/or settlement
services (including systems enabling credit card, debit card, smart card and/or money transfer
operations), and so on.
In addition, system participants and intermediaries (such as aggregators, payment gateway
service providers, e-commerce/m-commerce platform providers, and so on) must comply with
certain additional security and risk mitigation protocols prescribed by the RBI for online
transactions.
46
Id. rule 7(5).
37
This act has given the RBI all the authority to regulate the payment system including digital
payment system too. According to this act," The Reserve Bank shall be the designated authority
for the regulation and supervision of payment systems under this Act 47.” Moreover, payment
system must apply in RBI for its operation as part 3 has clearly mentioned that," Any person
desirous of commencing or carrying on a payment system may apply to the Reserve Bank for an
authorization under this Act48.
Moreover, some of the features of this act in relation to digital payment are:
(1) The Reserve Bank may, from time to time determine the format of payment instructions and
the size and standards shape of such instructions; the timings to be maintained by payment
systems; the manner of transfer of funds within the payment system, either through paper,
electronic means or in any other manner, between banks or between banks and other system
participants;49
(2) Without prejudice, the Reserve Bank may, from time to time, issue such guidelines, as it may
consider necessary for the proper and efficient management of the payment systems generally or
with reference to any particular payment system.50
Thus, using the power to issue the guidelines, RBI on March 17, 2020 has issued a Guidelines on
Regulation of Payment Aggregators and Payment Gateways by stating that, it may be noted that
these guidelines are issued under the Payment and Settlement Systems Act, 2007. This guideline
guides the digital payment system for the proper operations of digital payment systems in India.
3.3 Legal Framework in Nepal.
Legal framework about the digital economy has not developed in a special way like in the UK
and India but some of the laws are guiding Nepalese digital economy somehow. Laws such as:
Electronic Transaction Act 2063, Consumer protection Act 2075, Payment and Settlement Act
2075 and some policies and directives of Nepal Rastra Bank (NRB), etc. is guiding Digital
Economy assuming a traditional economy.
47
Payment and Settlement Systems Act 2007, §3(1).
Id.§5(1).
49
Id. §10(1)(a)(b)(c).
50
Id. §10(2).
48
38
Electronic Transaction Act 2063 is somehow regulating e-commerce directly/indirectly. It
has not been mentioned directly but this act has legalized digital signature and electronic records
as well as protects the consumer from fraud activity in the name of any e-commerce or other way
through use of computers. Chapter 9 on the offence relating to computer mentions that, “if any
person, with an intention to commit any fraud or any other illegal act, creates, publishes or
otherwise provides digital signature certificate or acquires benefit from the payment of any bill,
balance amount of any one's account, any inventory or ATM card in connivance of or otherwise
by committing any fraud, amount of the financial benefit so acquired shall be recovered from the
offender and be given to the person concerned and such an offender shall be liable to the
punishment with a fine not exceeding one hundred thousand Rupees or with an imprisonment not
exceeding two years or with both."51
There is no clear provision for e-commerce/digital payment system (Digital Economy) but
however these sections of the act somehow cover some of the regulation needed to guide these
platforms. But this too is lossless and unclear in form of its implementation over e-commerce
and digital payment systems.
In recent years, Consumer Protection Act 2075 came into force in 2075. But this too has failed to
protect the digital consumer in a digital economy. As digital economy is totally different from
traditional economy and consumer protection act is totally ignoring the digital consumer and
assuming them as traditional consumer. This act can be used to address the digital consumer but
these will create a lot of confusion due to lack of clearness about its way doing business. Yes,
this act has protected the consumer a lot and impose the good and service provider a lot of
liability but it cannot address the e-commerce and digital payment's consumer as there is
question of digital platform, digital money, digital contracts, digital contents, and many more
which needs digital platform to serve and to be served. Like in UK, there is a separate provision
for digital content under consumer rights act 2015 and in India too there is separate Consumer
Protection (E-Commerce) Rules, 2020 under Consumer Protection Act 2019. But Nepal doesn't
have such provision which is necessity to guide and regulate the digital economy (e-commerce &
digital payment system).
51
Electronic Transaction Act 2063, §52.
39
Similarly, Payment and settlement Act 2075 has the provision about the payment system in
Nepal. Digital payment systems also come under this Act. According to this act, “No one should
operate payment and settlement company/system without the permission/approval of the Nepal
Rastra Bank."52
In Nepal, NRB has been given authority to control the payment system under this act and
NRB can issue different guidelines and directives to control the digital payments in Nepal. And
here too there is no separate provision to regulate the digital payment system in Nepal. And
under NRB policy and guideline, it has banned the digital currency i.e crypto currency to use as
digital payment.
Recently, National strategy for e commerce 2076 has been passed by the government for
regulating and promoting the e commerce platform in Nepal.
3.4 Comparison and Analysis of Legal Framework of UK, India with Nepal.
UK is the oldest player in the digital economy and India is not too much but older than Nepal.
UK is regulating digital economy through different specific rules and regulations such as; The ECommerce Regulations 2002 (E-Commerce Regulations), The Consumer Rights Act 2015
(Chapter 3), The Payment Services Regulations 2017, and The Digital Economy Act 2017 are
some of the special laws that regulates the digital economy (e-commerce, digital payment etc.)
UK is involved in making digital economy as separate economy and developing and promoting
digital economy by making rules and regulations guiding digital economy. The UK has realized
from the beginning that the digital economy needs separate rules and regulation as it has a
different nature of doing business.
Similarly, In India, Information Technology Act 2000 (ITA), the Consumer Protection (ECommerce) Rules, 2020, And the Payment and Settlement System Act, 2007 are some of the
specific laws that are guiding the digital economy (e-commerce, digital payments, etc..,). But
however, it is not enough to regulate the digital economy but these laws are the revolutionary
laws as they address the digital economy separately. And has a provision to guide the digital
economy. Most of the digital economy is facing regulation problems. Government also faces the
52
Payment and settlement Act 2075, §5.
40
problem of regulating these platforms. Thus, specific laws on digital economy can be
revolutionary for the promotion of digital economy.
In the context of Nepal, there are no specific laws for regulating the digital economy separately
like in the UK and India. But however, an IT bill has been registered in parliament which
addresses some of the points of the digital economy. But this is not enough, we need separate
laws to regulate the digital economy of Nepal. As digital economy is the trillion-dollar economy
around the world and In Nepal too, it's a million/billion economy as it is developing day by day.
E-commerce and digital payments (digital economy) is the future and if we will be late in
regulating this economy by making rules and regulation and if we fail promoting this economy
then we will be back in economic development of the country.
Due to lack of regulation over the digital platform, it creates consumers and the government a
huge problem on dealing with the digital economy (Especially, E-commerce) for their wrongful
acts. Sometimes, due to new innovation in these sectors even the government becomes confused,
whether they (e-commerce) are running under proper laws of Nepal or not? Therefore, here the
problem is that these sectors don't have any appropriate laws which is the present the most
necessary thing for Nepal to regulate all these digital platforms. Thus, Nepal too needs to take
necessary steps for regulating the digital economy and promoting this.
Nepal is not old in this ecosystem as much as the UK and India. The UK is the oldest in
comparison to Nepal and India. However, due to the large contribution of digital economy in
GDP and economy of India, India is developing rules and regulation for promoting and
regulating the digital economy. And the UK is the oldest player in these fields, so it has been
involved in making such laws for many years but due to the innovative nature of these
economies, they are more involved in amendment with time and context too. But however, Nepal
is a very new and raw player in terms of its regulation but the practice of digital ecosystem has
been done since many years, however in a small quantity. But at present use of digital platforms
for economic activities has increased rapidly due to easy access of digital equipment. Therefore,
to make a proper regulation and healthy competition in the digital economy there is a need for
proper and specific rules and regulation guiding it in Nepalese ecosystem.
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CHAPTER IV
FINDINGS, CONCLUSION AND RECOMMENDATIONS
4.1 Findings.
There is a huge difference between the digital economy and traditional economy. Digital
platforms are increasingly important in the world economy. The combined value of the platform
companies with a market capitalization of more than $100 million was estimated at more than $7
trillion in 2017 – 67 per cent higher than in 2015.53In India too, it is estimated that the digital
economy is going to cross 1 trillion dollars in 2025. Similarly, In Nepal, there is a huge potential
of digital economy as we can see the use of digital platforms is increasing day by day. And due
to the pandemic, the use of digital platforms has increased by more than 50%. Thus, this paper
was focused on its objective to find out the scenario of digital economy. And the major findings
of the study can be encapsulated as follows:
1)
The digital economy refers to a broad range of economic activities that use digitized
information and knowledge as key factors of production. The internet, cloud computing, big
data, fintech, and other new digital technologies are used to collect, store, analyze, and share
information digitally and transform social interactions. Concept of digital economy is not
narrow, it's broad and it's evolving daily with a new concept. Thus, the concept of digital
economy cannot have a certain definition but we can define/say that digital economy always
runs on digital platforms.
2)
Many e-commerce companies are facing legal trouble from time to time due to lack of
specific laws on e-commerce. One of the examples is Pathao Nepal Private ltd which is
facing two times writ petition due to its nature of doing business. Thus, rules and regulations
addressing the traditional economy cannot address the digital economy. It needs separate
rules and regulations to regulate it and promote it.
3)
There are no specific laws on digital economy- like for e-commerce and digital payments but
however ETA 2063, CPA 2075, and payment and settlement act 2075 is somehow addressing
this platform which is not enough for promoting and regulating the digital platform.
53
UNCTAD, Digital Economic report 2019, The growing power of digital platforms has global implications, 6,
2019.
42
Somehow, an IT bill has been registered in parliament but yet to come which may address
more. But this platform needs separate rules and regulations.
4)
In present scenario, the combined value of the platform companies with a market
capitalization of more than $100 million was estimated at more than $7 trillion in 2017 – 67
per cent higher than in 2015. And to regulate this huge economy, in UK - The E-Commerce
Regulations 2002 (E-Commerce Regulations), The Consumer Rights Act 2015 (Chapter 3),
the Payment Services Regulations 2017 and digital economy act 2017 is specific law for ecommerce and digital payment. Similarly, In India- Information Technology Act 2000 (ITA),
the Consumer Protection (E-Commerce) Rules, 2020, And the Payment and Settlement
System Act, 2007, Thus there are rules and regulations as specific laws for guiding digital
economy (especially, e-commerce and digital payments). But till date Nepal is lacking this
which is not good for economy. Thus, Nepal should make rules and regulations addressing
all digital economies.
5)
At last, finding this paper is that the digital economy is a huge economy and needs separate
rules and regulation like in the UK and India, we can take reference. However, they are also
in the development phase but they are in good progress regulating this digital economy and
Nepal should take advantage and should take reference laws from them and make it in the
context of Nepal.
4.2 Conclusion.
Digital economy is not a small thing. This is a huge market place and the future economy. It is
evolving day by day with a new concept and way of doing business. All the physical businesses
somehow are shifting toward the digital platform. So, the portion of the digital economy is
increasing day by day more and more. E-commerce and digital payment systems also cover a
huge part of the digital economy too. There are no proper and specific rules and regulations
around the world including Nepal. Moreover, Nepal is very backward in making rules and
regulations for regulating digital economy like e-commerce which is creating a legal trouble for
them in running the new and innovative digital business.
Countries like the UK are very old players of this economy and it has been involved in making
rules and regulation since 2002 by making e-commerce regulation in 2002. And they are
continuously developing specific rules and regulations for digital platforms as we can see in
43
above research. Similarly, India is not as old as the UK but they are too forward in making rules
and regulations to regulate and promote the digital economy. As we can see IT act 2000,
Consumer protection (ecommerce consumer) rules 2020, etc. which is regulating digital
economy in India.
But in Nepal, there is no IT act or e-commerce rules and regulation, which can regulate the
digital economy like e-commerce, etc. But due to lack of rules and regulation e-commerce,
consumers and government too are facing dealing with each other on legal troubles as there are
no any specific rules and regulation regarding e-commerce or any other digital platforms.
Therefore, in conclusion we can say that the world is adopting and promoting digital economy as
it is the future and Nepal too should adopt and promote the digital economy without delay by
making the specific rules and regulation.
4.3 Recommendations.
1.
Nepal should also define the concept of digital economy in a broad manner as it is an
innovative and digital platform, digital content may not remain the same as before. Thus,
Nepal should to define the concept of digital economy legally with a broad sense.
2.
The Government of Nepal should immediately solve the troubles faced by the e-commerce
and other digital platforms by making the proper rules and regulations addressing the digital
economy such as e-commerce and other digital platforms.
3.
As from research we can see that the Nepal is lacking laws in regulating all this digital
platform. In order to regulate this all-digital economy such as e-commerce and digital
payments, etc. government should make specific laws, if not possible then should circulate
directives immediately. Due to delay in making laws digital economy cannot expand and
move forward as fast as the other our neighboring countries which will make our economy
slowdown.
4.
Nepal should take a reference from its allied nations like the UK and India while making
specific laws on digital economy such as e-commerce, digital payments, etc... as they are
advanced in making such rules and regulation as Nepal is still a raw nation.
5.
Nepal should not delay in making rules and regulation regarding specific laws on digital
economy such as e-commerce, digital payment and many more digital platforms. It will have
44
a bad impact on economy as lack of regulation creates lots of trouble in promotion and
expansion of digital economy.
45
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7. The Consumer Rights Act 2015
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46
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