Introduction
Imagine ordering a mobile phone, a pair of shoes, or even a household product from an online marketplace. You see the product on the platform, read the description and reviews, make the payment, and wait for delivery.
But what happens if the product turns out to be counterfeit, defective, illegally advertised, or completely different from what was promised?
The immediate question for the consumer is simple: Who is responsible?
Is it the seller who uploaded the product?
Is it the manufacturer?
Or can the e-commerce platform itself be held responsible?
This question has become increasingly important as online marketplaces have evolved. Platforms today do much more than simply connect buyers and sellers. They may provide warehousing, logistics, payment facilities, advertising, product recommendations, customer support and even fulfilment services.
This brings us to Section 79 of the Information Technology Act, 2000, commonly associated with the concept of “safe harbour.”
But safe harbour does not mean unlimited immunity.
The real question today is whether an e-commerce platform can continue to claim protection when its involvement in a transaction becomes so significant that it is no longer merely facilitating communication between a buyer and an independent seller.
What Does Section 79 Actually Protect?
Section 79 of the Information Technology Act provides certain protections to intermediaries against liability for third-party information, data or communication links hosted or made available through their systems.
In simple terms, if a seller independently uploads a product listing on an online marketplace, the platform may not automatically become legally responsible for every statement or representation made by that seller.
However, the protection comes with conditions.
An intermediary must satisfy the statutory requirements and comply with applicable due-diligence obligations. Section 79 also contains circumstances in which the protection may not be available, including where the intermediary participates in the unlawful activity or fails to comply with applicable legal requirements.
Therefore, Section 79 is better understood as conditional protection rather than a blanket exemption from liability.
Why E-Commerce Platforms Are Different Today
The online marketplace of today is very different from the internet environment in which intermediary liability originally developed.
A modern e-commerce platform may decide:
- Which products appear first in search results;
- Which products receive promotional visibility;
- Which sellers receive advertising support;
- How products are stored and delivered;
- How customer complaints are handled;
- How payments are processed;
- Which products are recommended to consumers; and
- How sellers are onboarded and monitored.
In other words, the platform can have a significant influence on the consumer’s purchasing experience.
This does not automatically mean that the platform becomes the seller.
But it does raise a legitimate legal question:
At what point does a platform’s involvement become substantial enough to affect its claim to intermediary protection?
The Courts Are Moving Towards a More Practical Approach
Indian courts have increasingly recognised that the distinction between an “active” and “passive” intermediary cannot always provide a complete answer.
In Flipkart Internet Pvt. Ltd. v. State of U.P., the Allahabad High Court considered the application of Section 79 to an e-commerce marketplace and recognised the importance of examining the statutory conditions governing intermediary protection.
More recently, the Delhi High Court in Mahboob Alam v. Flipkart Internet Pvt. Ltd. & Ors. considered the role of an online marketplace providing additional services to sellers.
The important takeaway is that simply providing value-added services does not automatically destroy safe-harbour protection. At the same time, the actual nature and extent of the platform’s involvement may become relevant when determining whether statutory protection is available in a particular dispute.
This is an important development because modern e-commerce cannot realistically be divided into two simple categories:
“Passive platform = protected”
and
“Active platform = liable.”
The reality is much more complicated.
The Real Issue: How Much Control Does the Platform Exercise?
A useful way of looking at intermediary liability is to ask how much control the platform actually exercises over the transaction.
For example, there is a significant difference between a platform that simply hosts a seller’s listing and a platform that:
- controls the product description;
- determines how the product is promoted;
- stores the product;
- handles the delivery;
- provides customer support;
- repeatedly receives complaints about the same seller; and
- continues facilitating the sale despite legally sufficient notice of unlawful conduct.
The greater the platform’s involvement, the more carefully its claim to safe harbour may need to be examined.
This does not mean that every additional service should automatically create liability. It means that courts may need to look at the entire commercial arrangement rather than focusing on a single function.
What Happens When a Product Is Counterfeit?
Counterfeit products present one of the most difficult challenges.
Suppose a consumer purchases a branded product from an online marketplace and later discovers that it is counterfeit. The brand owner then approaches the platform and provides evidence of infringement.
At this stage, the platform’s response becomes important.
Did it investigate the complaint?
Did it identify the seller?
Did it remove the offending listing where legally required?
Did it take steps to prevent repeated violations?
Or did it simply tell the complainant that it was “only an intermediary”?
The answer to these questions may become relevant when determining whether the platform has complied with its legal obligations.
Safe harbour should not become a justification for ignoring legitimate and legally supported complaints.
Fulfilment Services: Does Handling the Product Make the Platform the Seller?
Another interesting issue arises when a platform stores and delivers products on behalf of sellers.
Consumers may naturally assume that if the platform stores the product, packs it and delivers it, the platform is legally the seller.
But legally, the position may not be that straightforward.
A platform can provide logistical and fulfilment services without necessarily acquiring ownership of the goods or becoming the contracting seller.
Therefore, physical handling of a product should not automatically be equated with legal ownership or sale.
The contractual relationship, ownership of inventory, control over the transaction and other facts may all become relevant.
This is why intermediary liability requires a factual and functional analysis rather than a one-size-fits-all rule.
Due Diligence Is More Than Having Terms and Conditions
For e-commerce companies, one of the most important aspects of Section 79 is compliance with due-diligence requirements.
A platform should not view its terms of service as its only line of defence.
A stronger compliance framework may include:
- Proper seller onboarding and verification;
- Clear contractual obligations for sellers;
- Procedures for handling complaints;
- Mechanisms for addressing counterfeit and infringing products;
- Appropriate response systems for legally valid notices;
- Preservation of relevant records;
- Internal escalation procedures; and
- Periodic review of compliance practices.
The idea is simple: a responsible intermediary should be able to demonstrate that it took reasonable steps when a genuine legal issue came to its attention.
The Danger of Both Extremes
There are two extreme approaches that should be avoided.
The first is to make platforms automatically responsible for every unlawful act committed by sellers.
Such an approach could make operating large online marketplaces commercially and legally difficult.
The second is to give platforms complete immunity simply because they describe themselves as intermediaries.
That approach could leave consumers, brand owners and other rights-holders without an effective remedy even where a platform has substantial knowledge or involvement.
The law therefore needs to find the middle ground.
Towards a Functional Test for Platform Liability
A more practical approach would be to examine the actual function performed by the platform in relation to the alleged wrong.
For example:
Simply hosting a seller’s listing:
Safe-harbour protection may be stronger.
Providing ordinary payment or logistics facilities:
These services alone may not necessarily remove protection.
Knowingly participating in unlawful conduct:
The platform’s position becomes significantly weaker.
Ignoring legally sufficient notice of unlawful activity:
The platform may face greater legal exposure, depending on the facts and applicable law.
This functional approach recognises the realities of modern technology while maintaining the basic purpose of Section 79.
What Should E-Commerce Platforms Do?
The safest approach for platforms is not to wait until litigation begins.
They should build compliance into their business model.
A responsible e-commerce platform should know:
Who is selling?
What is being sold?
What complaints have been received?
How quickly are legitimate complaints addressed?
What happens when the same seller repeatedly violates the law?
These questions are not merely legal questions anymore. They are also questions of corporate governance, consumer trust and risk management.
Conclusion
Section 79 was never intended to provide e-commerce platforms with unlimited immunity. At the same time, it was also never intended to make platforms automatically liable for every act of every independent seller using their services.
The challenge is to find the correct balance.
E-commerce platforms are becoming increasingly integrated into the transactions they facilitate. They influence visibility, advertising, logistics, payments and consumer experience. As their role evolves, the interpretation of intermediary liability must evolve with it.
The future of Section 79 should therefore not be about choosing between “safe harbour” and “platform liability.”
It should be about determining when safe harbour is justified and when the platform’s own conduct takes it beyond that protection.
The emerging approach of Indian courts suggests that the answer will increasingly depend on facts: the platform’s actual role, the degree of control it exercises, the nature of the alleged wrongdoing, the knowledge available to it and the steps it takes after receiving legally sufficient notice.
Ultimately, the goal should be simple:
Protect genuine intermediaries, but do not allow the intermediary label to become a shield against accountability.
As India’s digital economy continues to grow, achieving this balance will be essential for protecting innovation while also safeguarding consumers, businesses and legal rights in the online marketplace.