On January 31, 2020, the High Court of Delhi struck down an injunction that had restrained several e-commerce platforms, including Amazon, from selling products of Amway, Oriflame and Modivare without their consent. The Court held that the "Direct Selling Guidelines of 2016" were purely advisory in nature and did not qualify as law. The Court also refused to distinguish between passive and active intermediaries in regard to the applicability of the safe harbor provisions under India’s IT Act.
Facts of the Case
In July 2019, a single bench judge of the High Court granted an interim injunction in favor of Amway and other entities regarding the unauthorized sale of their products on e-commerce platforms. Such judge held that the Direct Selling Guidelines of 2016 (DSGs) were fully binding in nature. He also held that the sellers as well as the platforms were bound to take the Direct Selling Entities' (DSE) consent to offer, display and sell the products. Due diligence was required by the e-commerce platforms to continue to enjoy the intermediary status.
Judgment
The High Court of Delhi struck down the injunction issued by the single bench judge. The Court held that DSGs did not attain the status of law just by merely being notified in the official gazette. Moreover, the judge failed to distinguish between rules, regulations and guidelines. Additionally, a fundamental error was committed by the judge in noting that plaintiffs were owners of their respective trademarks, since that was neither shown nor evidenced in the pleadings. Finally, the Court held that the judge misinterpreted Section 79 of the Information Technology Act (IT Act, 2000) in concluding that it was restricted to “passive’ intermediaries”. As per section 79, the Court held there is no distinction between passive and active intermediaries so far as the availability of the safe harbor provisions are concerned. In terms of Section 79, an intermediary shall not be liable for any third-party information, data or communication link made available or posted by it, as long as it complies with Sections 79(2) or (3) of the IT Act.