Legal analysis of a Subscription-based business in India
Updated: Jul 28
The evolution in the Indian economy has evolved with the new conversation of the subscription-based economy. In the new era, a Subscription model is like a foothold for the people who don't want to purchase it but can have the subscription for a certain period of time. The customers have now shifted the focus on subscriptions than on ownership. The successful big brands like Amazon Prime, Hotstar, and Netflix have made their success stand in this competitive massive market in the business of Subscription in the country. In this massive internet upgrading growth, the Indian economy has seen the shift toward the growth of Subscription-based businesses in India.
In the ongoing Covid-19 Pandemic the digital activity of the subscription model has been one of the mediums consumers have surveyed with the digital activity of services like viewing the live-streaming, events, and watching the videos. The media and entertainment never thought of it as the medium of the content, but with certain changes, it’s one of the great changes.
Benefits of the Subscription-based Business Model
The beginning of the subscription economy has been recurring in India; the tradition of subscription is not new but has got the leverage from the use of more online media and publishing business. Gradually, Hospitality apps like UrbanClap, Urban, MakeMy Trip (MMT), Zomato, and many others have seen the potential in the subscription model and have made a shift in the delivery of their services.
The major benefit of the subscription model has been for the customers for the seamless service, the friction of the checkout journey for the services has increased and the customers have only pay on the monthly basis or for the yearly lumps for the amount. That amount for the affordability for the consumers, this creates the retention of customers for the services. The delivery of the expectations of consumers is just a click away from the prescribed format. The loyalty of the brand has been on time that it is associated with the consumer. The value of the services has been seen by personalities as they expect they pay and also expect a personalized experience. This business model works on the nail of the pricing strategy. This helps in capitalizing on the compounding value of the relationship with the consumers.
The Driving force for the subscription revolution in India is named in the growth of E-Commerce with the industry to be worth $200 million by 2027. The transaction on the digital platforms have taken a leap UPI BHIM, Paytm, and GooglePay, are some of the options for the experience of the services that have ranged the flexibility in the payment options. Urbanization has increased speeding in the country’s urban and rural-urban areas, which is set to make India the third-largest consumer economy by 2025.
Modes of Online Platforms
The two models of E-commerce in India's Foreign Direct Investment policy are:
1. Marketplace Model: This model of e-commerce means it provides a platform by an e-commerce entity for the digital and the electronic network to facilitate the buyer and the seller network. The marketplace for multiple sellers to interact with the buyers to sell the goods. The marketplace charges a commission from the sellers for the services which it provides, like Naptol and shopclues,etc.
2. Inventory Model: The inventory model is for e-commerce activities where the inventory goods and services are allowed to be sold to the consumers directly. The seller is the e-commerce company that has the source from all of the brands and the sellers, like Myntra, Amazon, etc.
In the Government's guidelines on FDI in E-commerce, the 100% FDI under the automatic route is permitted in the marketplace for the mode of E-commerce whereas the FDI is not permitted in the inventory-based model of E-commerce.
I.) B2B: A business-to-business where the buyer sells the product or services to the intermediate buyer who sells the product to the final customer. The B2B includes the distribution of the services in the digital online market and the services for the company website or through the physical retail store.
II.) B2C: In the business-to-consumer like where the manufacturer deals with the consumer directly and the consumer can choose the products and place the order on the company’s website without any intermediary in between.
III.) C2C: The consumer-to-consumer communication where the consumer sells the product they have bought without involving a third party. The best example for the sane could be OLX and Quickr.
The Technology and Data Protection Laws
The Government of India enacted the Information Technology Act, 2000 deals with the aspects relating to electronic records and facilitating E-commerce in the country. The electronic transitions under the IT Act are to be seen as the economic translation when it’s legal if there has been the offer and acceptance in the ‘reasonable’ mode between the parties. The Act lays down the procedure for the civil wrongs and offenses for the operation of the networking. The Technology Act does explicitly talk about the validity of the formation of the online contracts but, conveying the offer to the offeree through an indirect medium such as maybe by the e-mail or message per se or direct message are some of the accepted reasonable modes of the acceptance by conduct.
The IT Act is the new form of the act that governs the transaction relating to e-commerce offers and acceptance. The offeror has the liberty to terminate the offer if the acceptance has not been received by the offeree. The act was amended in 2008 to increase the security in e-commerce transactions, which includes the special provision of Section 43A of the IRAA that holds e-commerce companies are accountable for the protection of the personal data of consumers; the legal recognition has also been given to the Digital Signature and electronic documents. If the E-commerce companies failed to protect the data of the customers and are negligent in maintaining and the implementing the security practice which has been established and if it results in a wrongful loss for the online consumer then the law states that the body corporate will be accountable for the monetary compensation for the loss which has occurred to the person.
The Regulatory statutes Applied
The Payment and Settlement System Act, 2007 act indicates the system that provides the consumers to make the payment effect between the payer and the beneficiary. The payment will include the payments, settlement, or services but does not include the stock exchanges. E-commerce has to comply with the RBI relevant rules to make the online payment system qualify. It is mandatory for the intimidator who is receiving the payment through the electronic mode to have the nodal account for the operation of the settlement of the merchants on its online e-commerce platforms.
The E-commerce labeling and the packaging of the goods have to comply with certain rules like Legal Metrology Act,2006; Food Safety and Standard Act,2006; Drugs and Cosmetics Act,1940, etc and the online platform must display the requisite information about the goods on display with the proper of the weight and other features on the products pages itself. The Sale Goods Act, 1930 is applied for the products in relation to the warranties, conditions, and for the transfer of the property in the goods.
All the Trademark and Copyright laws in India products/ text /symbols of the intended have to be secured from the rules and regulatory framework for the protection of Intellectual property rights. The jurisprudence of the e-commerce sector is the issue in the B2C model of challenge where there are multiple Transactions involved. They are arranging the delivery, ordering, and receiving of the e-payments in the places, though the local status has provided the long-arm jurisdiction for the operation of the local laws for the extraterritorial application.
The strategy that is behind the building of the subscription of the business model has been stepped up for the managing of ounces for the running in the competition. The customer base for the subscription model is here to stay for more vertical picks. Certain shortcomings are also there like consumer fatigue, the client may only be aware of certain products and the service in the market. This model also confined the business the stick to scheduled delivery and the minimum deviation. The subscription model should be made with a few adequate factors in mind while making the business suitable for the market, because if the supply side of the party is not suitable then there might not be the maintenance of delivery of services to the consumers.
The article first published on Lexology.com and the same can be accessed here.