[Amazon v. Amway] Delhi HC Sets Aside Order Restraining E-Commerce Platforms From Selling Amway And Other DSE's Products[Read Judgment]

A division bench of the Delhi High Court on Friday held that products of 'Direct Selling Entities' such as Amway, Oriflamme, etc. may be offered for sale on e-commerce platforms, as the Direct Selling Guidelines are merely advisory in nature. In doing so, the division bench of Justice S. Muralidhar and Justice Talwant Singh have overruled the judgment rendered by a single-Judge of the high court in July last year, whereby Amazon (originally respondent) was injuncted from selling the goods of Amway (originally Plaintiff), in terms of the Model Framework for Guidelines on Direct Selling (DSGs), dated October 26, 2016 issued by the Department of Consumer Affairs. The division bench held that the impugned judgment was passed without considering whether the grant of injunction would have an adverse impact on online marketing. "What was not considered is whether the requirement of online marketing entities to seek prior consent of the DSEs would not deprive the consumer of exercising the choice to buy such products on online platforms, while ensuring free flow of trade," the court said. The judgment is significant as it addresses the legal issue pertaining to obligation of intermediaries to ensure that products of direct selling entities are not sold on their marketplaces without the authorization of such direct selling entities. The division bench, while setting aside the impugned judgment, observed that the single-Judge of the high court had held that DSGs were binding in nature since they do not impinge on any fundamental rights of either the sellers or the platforms. However, the division bench has clarified that DSGs are not law and thus, are not enforceable. "Merely because the DSGs are notified in the Gazette, they do not attain the status of "law" within the meaning of Article 13 of the Constitution. The source of the power to frame such guidelines is traceable only to the CPA. With the CPA, 2019 itself not having been notified, these draft guidelines could not have attained the character of ―binding Rules‖ under the CPA, 2019, or for that matter, even under the CPA, 1986," it held. The high court further held that once the title to a product passes through sale, no further condition can be imposed on the buyer to restrict "post-sale alienation". "Once the title passes to the ABO, no condition could be further imposed upon the buyer. Clause 7 (6) of the DSGs imposes one such condition on the buyer that the buyer cannot resell the product online. With such a condition not being an enforceable law vis-a-vis the third party, even if it were to be considered binding as such, by means of the contract between Amway and the ABO, Amway can at best seek to proceed against the ABO for breach of such condition. This is because there is no privity of contract between Amway, or for that matter between Oriflame and Modicare, with the online platforms," the court explained. In fact, the high court held, "by permitting private entities like Amway to restrict downstream distribution of genuine goods, by enforcing contractual stipulations against third parties, the judgment of the learned Single Judge recognizes a monopoly that can be exercised in perpetuity. There is also force in the contention that this runs contrary to the legal position explained in Kapil Wadhwa v. Samsung Electronics (supra)." Notably, the single-Judge had also found Amazon to be guilty of infringing Amway's trademarks and of diluting it and passing off as their own, thus misrepresenting their association with Amway. Making an observation to the contrary, the division bench said that the Amway had not asserted or even mentioned anything about trademark registration in its plaint. It said, "There was no occasion for the Plaintiffs to assert ownership of such trademarks. In fact, there is no such pleading to that effect at all. How the learned Single Judge could have come to such a conclusion and, that too, in a categorical manner, in the absence of any pleadings, is a mystery." In Kapil Wadhwa v. Samsung Electronics Company Limited, MIPR 2012 (3) 0191 it was held that, if a trademark was registered, subject to any conditions of limitations, the use of that trademark in relation to the goods to be sold or traded in any place and in relation to the goods to be exported to any market, would not constitute an infringement. It was held that once the goods have been lawfully acquired, if they are put into market and further sold, there would be no infringement of the trademark irrespective of the fact that whether such a market is an international market or a domestic market Another issue raised before the bench was whether e-commerce platforms are "intermediaries" and are entitled to protection under the 'safe harbour' provided in Section 79 of the IT Act and the Intermediary Guidelines of 2011? Section 79 is a safe harbour provision which grants ...

[Amazon v. Amway] Delhi HC Sets Aside Order Restraining E-Commerce Platforms From Selling Amway And Other DSE's Products[Read Judgment]

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