Consumer Protection in E Commerce activities of Hospitality Industry

The 21st century the digitization era. We as consumers of Hospitality Service have faced one time or the other a situation where the service Hospitality service providers provide is quite different from what they portrayed they would do. We just accept it, and keep going. But there are few consumers who are strict with availing the service that they were expected to get and file the service providers, to get protected as a consumer. This is going to be the key aspect of my work. Consumer Protection in E-commerce Hospitality.

The industrial revolution brought with it sweeping social, economic changes. In areas such as human resource, land ownership, establishment of business outside the country/kingdom, expansion of empires through colonialization of territories and the need to retain control on the wealth and power necessitated a new set of laws that were based on the prevailing circumstances. Just as the industrial revolution of the 18th century impacted lives globally, the digital revolution of 20th century has changed the way we live. The change due to digital revolution is however continuous, rapid and in ways that were unimaginable even a few years ago !.

The virtual world has taken over the real world by storm.  There are companies which run travel business with owing any modes of transport. There are companies that cater to the hospitality sector without owing any hotels themselves. There are educational companies without any campuses. There is money that one can never keep in their pocket. Such immense changes bring with immense possibilities and challenges.

E-commerce and Hospitality

E-commerce- Hospitality is a broad term. It is a conglomeration five distinct services namely:

  1. Food and Beverages
  2. Travel and Tourism
  3. Lodging
  4. Recreation.

The aspect of Hotel booking, is just one example of a hospitality which can be boxed under Lodging.

Let us have a brief outlook on each of these individual segments

Food And Beverage Service :

Food and Beverage Service can be broadly defined as the process of preparing, presentation and serving food and beverages to the consumers. Here we will not be dealing with how they prepare, and we will leave it to the people pursuing Hotel Management as a course. He we will only be dealing the fact that Hospitality service is inclusive of Food and Beverages as well.

Travel and Tourism :

The most common and the most stereotyped to be the only service to be included in the hospitality. This service provides the consumer with the necessary Travel and tourism packages.

Lodging :

This is the aspect which is mostly included and is considered as prerequisite to all other services mentioned. This aspect of Hospitality deals with providing accommodation to consumers.

Recreation :

The most basic, yet quintessential aspect of any trip. Any activity that aims at providing relaxation to an individual’s physical or mental state through choices of enjoyment and rest, can be termed as a Recreational activity. Further, any business organization that provides such services are said to be in Recreational Services.

Quite obviously, Hospitality aspect of the E.commerce falls into the broad category of both B2C and C2C, mostly depending on the service they offer. Hospitality Sector can be categorized to be a B2C type because the considered business organization provides good and services to the consumers. Yet there are other organizations that relate connect consumers to consumers.

Market Share of E-commerce.

The Indian tourism and hospitality industry has emerged as one of India’s biggest growth engines for the services sector. Tourism in India has considerable potential considering the rich cultural and historical heritage, ecological diversity, terrains and natural beauty sites spread throughout the country. Besides being a significant source of foreign exchange for the country, tourism is also a potentially large generator of jobs. As of 2019, 4.2 crore jobs were generated in India’s tourism industry, which represented 8.1 per cent of the country’s total employment. The figure is expected to grow to 52.3 million workers by 2028 by two percent annually. India became the world’s third-largest travel and tourism investment with an inflow of US$ 45.7 billion in 2018, representing 5.9 per cent of the country’s overall investment. Between April 2000 and March 2020, the hotel and tourism sector received a cumulative FDI inflow of USD 15.28 billion.

International tourist arrivals (FTAs) in India stood at 10.89 million during 2019, hitting a 3.20 per cent y-o – y growth rate. Tourism FEEs rose 4.8 per cent y-o – y to Rs 1.94.881 (US$ 29.96 billion) during 2019. Arrivals via e-Tourist Visa increased to 2.9 million by 23.6 per cent y-o – y in 2019.

Domestic Market Share :

The Indian hotel industry can be segmented into independent / unbranded hotels, alternative lodging, the new-age hotel chain, and the branded / traditional chain based on size. The separate / unbranded category comprises more than ~70 per cent of the total hotel rooms available. Alternate accommodation is the second-largest segment due to the growing popularity of visitor homestays.

During the forecast period , the new-age hotel chain is projected to experience the most promising growth from ~7.36 per cent in FY 2018 to ~14.80 per cent in FY 2024. In addition to this , in terms of room supply, the branded / traditional hotel segment, which dominates the consolidated market, accounts for about 5 percent of the overall hotel industry.

Tier I cities such as New Delhi and Mumbai posted the highest number of rooms, followed by Bengaluru and Chennai, based on the city-wise availability of rooms, and together account for ~30% of the country’s total market share. Approximately 27% of the industry is dominated by smaller towns such as Varanasi, Vijaywada, Tiruchirapalli etc. where the sector is largely unorganized and controlled by independent / unbranded hotels.

Consumer Expectations :

With the changing global trends and awareness consumers have expectations which are reasonable keeping in mind the recent trends. Some of the major expectations that consumers have are certainly :

  • Fraud free service
  • Faster Refund policy
  • Quicker consumer grievance realization centers
  • More transparency pertaining to manufacturing, origin etc
  • Personal data security
  • Access to reviews without restrictions (some websites or service providers were reported to have control over reviews published)
  •  Healthy place for lodging
  • Safety during recreation
  • Quality in aspects pertaining to food and beverage
  • Basic security to avoid theft
  • Co-operative staff.

These are some common expectations the consumers have. But of these expectations some are not met quite frequently which leaves the consumer dissatisfied and results in decrease in the rate of growth of industry.

Frequently Reported instances of areas of Deficiency :

Some of the above mentioned short comings, have a larger impact on the industry, these are :

Free of unfair trade practices :

Another most common area of deficiency is indulgence of the service provider in unfair trade practices. An act can be called an unfair trade practice if the service provider manipulates the consumer reviews, does not notify consumers about all the cost details,etc.

Security of Personal Information :

Information is wealth. While booking a room/ service/event consumers are obligated to share personal information like phone numbers and emails. Some organization sell such consumer data to others, which is also a growing concern among consumers. Booking for availing hospitality service through E.commerce can be completed only by providing information such as name, age, sex, mobile number and email. Thought this is for obvious security reasons for the company/organization, it raises concern due to sharing of this information to a third party without knowledge or consent of the consumer.    

What are the redressals available?

The Consumer Protection Act of 2019 made several substantial reforms thereby safe guarding consumer rights. This can be observed from the detailed interpretation of words such as ‘Customer’ and ‘Unfair Trade Practice’, when compared to the earlier Act of 1986. The 2019 Act expanded the scope of use of word to include consumers participating in online transactions and now covers the E-commerce aspects. The 2019 Act also expanded the concept of unfair market practices compared to the 1986 Act, which now includes false ads online within its scope; the practice of not issuing bill / memo for goods and services;failing to take back faulty products or deactivate faulty services and refund the amount within the stipulated period specified in the bill or memo or within 30 days in the absence of such stipulation; and revealing personal details of a customer unless such disclosure is in compliance with law.

“consumer rights” includes,—

(i) the right to be protected against the marketing of goods, products or services which are hazardous to life and property;

(ii) the right to be informed about the quality, quantity, potency, purity, standard and price of goods, products or services, as the case may be, so as to protect the consumer against unfair trade practices

As per Section 2(1)(g) of Consumer Protection Act of 2019

“ “deficiency” means any fault, imperfection, shortcoming or inadequacy in the quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service and includes—

  • any act of negligence or omission or commission by such person which causes loss or injury to the consumer”

The main meaning of the word was addressed by Supreme Court in the case of The Supreme Court in M.S. Grewal and Another vs. Deep Chand Sood and Others, (2001) 8 SCC 151, where the apex court stated that

“Negligence in common parlance mean and imply failure to exercise due care, expected of a reasonable prudent person. It is a breach of duty and negligence in law ranging from inadvertence to shameful disregard of safety of others. In most instances, it is caused by heedlessness or inadvertence, by which the negligent party is unaware of the results which may follow from his act. Negligence is thus a breach of duty or lack of proper care in doing something, in short, it is want of attention and doing of something which a prudent and a reasonable man would not do (vide Blacks Law Dictionary). Though sometimes, the word inadvertence stands and used as a synonym to negligence, but in effect negligence represents a state of the mind which however is much serious in nature than mere inadvertence. There is thus existing a differentiation between the two expressions whereas inadvertence is a milder form of negligence, negligence by itself mean and imply a state of mind where there is no regard for duty or the supposed care and attention which one ought to bestow.”

In the case of Vinay Rajkumar Rajpal vs. Parkhyatt Goa Resort & Spa, before the Goa State Consumer Disputes Redressal Commission, Vinay Rajpal and his wife had checked into Park Hyatt Goa Resort & Spa. Vinay slipped while entering the bathroom, and the fall resulted in several injuries and fractures to his person. The Goa State Consumer Disputes Redressal Commission vide its order dated January 25, 2012 held as follows:

“The photographs produced and the evidence on record proves that the bath room of room no.321 was indeed peculiar, and, though the complainant has not explained the said expression, in our view, it was peculiar because it was a sunken bathroom which could be used for a shower as well as a bathtub and to go there were three slanting steps to be climbed down without proper support. The floor of the bath room or the bath tub was made of unpolished natural stone known as Tumble Rock while the steps leading to the bathroom were made of polished egyptian marble with a slant towards the bathroom to ensure that excess water does not accumulate on the steps, when in fact the arrangement of steps ought to have been at one level if not in reverse direction. It is admitted that there was another incident on 15/09/2007 similar to the present one involving one Mr. Neeraj Goenkar and only thereafter that the anti-skid precautionary measures were taken by the opposite party as regards the said steps. A late realization indeed of duty to care! As regards the hand railing, as already noticed, it was short and was not available for support to be taken while taking the second or third step apart from the fact that it was inconveniently placed at a lower level and even a person of average height had to bend to hold it. In other words, it was no support to get down slanting polished marble steps. In other words the bathroom was defective and negligently maintained. It was waiting for an accident to happen. This was not expected of a Five Star hotel. It would hardly be relevant to find out whether the complainant fell with his face down or on the back or on the bath tub or on the steps but the fact remain that the complainant suffered injuries on his right mandible and left ramus.”

In Klaus Mittelbachert (deceased) vs. The East India Hotels Limited and Others, AIR 1997 Delhi 201, the High Court of Delhi was dealing with a case regarding injuries caused to a diver in the swimming pool of Hotel Oberoi Intercontinental and it observed as follows:

“degree of care is not a phrase with static connotation. Its meaning would depend on given fact situation-the person who owes a duty to take care, the person whose care is to be taken and the subject-matter by reference to which degree of care is to be determined. A person who enters or walks into any premises, if the premises be open to accept entry, and there be nothing warning against his entry, has a right to assume that he is walking  into a safe premises.”

If a hotel serves food or beverages to its consumers, knowing that the quality of the aforementioned refreshments/meals is far below the requisite standards then it shows utter disregard for the health and safety of the consumers. Such an instance can be deemed as negligence because the hotel authority had the knowledge of the potential health hazard.There have also been instances where consumers were charged but later not provided with the promised services. In one such case, addressed by State of Haryana, Consumer dispute redressal commission, it was held that  

“It is well settled principle of law that no party should ordinarily be denied the opportunity of participating in the process of justice dispensation. Therefore, this Commission deems it appropriate to allow the petitioner to contest the complaint. And should be granted immediate compensation along with the refund.”

This is an example of a case that can be classified under Deficiency of service- Non Refund of ticket.

Negligence can may also result in theft a case in lieu is Taj Mahal Hotel vs. United India Insurance Company, I (2018) CPJ 546 (NC) the National Consumer Disputes Redressal Commission held as follows:

“Having regard to the fact that the Hotel admitted to the car owner having dinner at their restaurant; the doctrine of ‘infra hospitium’ which provides that the Hotel’s ‘duty of care’ towards guests’ vehicle does not stop with mere parking of the vehicles; by providing free car parking and valet service for the convenience of its guests, the Hotel extended an invitation to park the car which is sufficient to constitute the valet parking as within the hospitium; mere printing of ‘owner’s risk’ on the parking tag does not absolve the Hotel of its liability when the loss of vehicle from its parking space is construed as ‘negligence’; it is held that the hotel indirectly benefits from providing such facilities and when the Parking Tag is issued in the name of the Hotel, it can be reasonably inferred by the ‘car owner’ that the car would be in the ‘duty of care’ and custody of the Hotel, which in the instant case, it failed to exercise and is held liable to pay damages.”

Vicarious Liability of Hotel Management

In the case of Sitatram Motilal kalal v. Santanuprasad Jaishankar Bhatt, The Supreme court of India while referring to the case of Storey v. Ashton I.L.R held that

“The true rule is that the master is vicariously liable so long as the servant can be said to be doing the act, in doing of which he is guilty of negligence, in course of his employment as the servant ”

Apart from the above mentioned case the same issue was also addressed in the case of Lakshminarayan Ram Gopal and Son Ltd. v Govt of Hyderabad, [AIR1954SC364] relying on Powell’s Law of Agency

“The terms “master” and “servant” are used to describe the legal relationship between the employer viz. the master and the employee viz. the servant and is based on the control exercised by the employer over the services provided by the employee.”

There have been numerous cases reported in which service providers have indulged in false advertising, misrepresenting the facts about their services, etc. Some E.commerce Hospitality service providers exercise the exclusive and complete control over customer reviews. Such a power can potentially be used to manipulate or display specific reviews, thereby misguiding the prospective consumers opinion. Such practices are categorized as Unfair trade practices under section 2(1)(r) of Consumer Protection Act, 2019, quoted below. 

“The practice of making any statement whether orally or writing or by visible means which falsely represents the services are of a particular standard, quality or grade.”

Another major area of concern, with ever increasing online presence of both consumers and service providers, is related the privacy of personal information provided by the consumer while booking for availing of a service. Malpractice of sharing personal information can also be attributed into indulgence into unfair trade practice. In view of this, a new law has been implemented pursuant to Section 2(41)(I) to resolve concerns surrounding the privacy and confidentiality of information in the digital market.The new legislation provides for the disclosure by online outlets of ‘personal information provided in confidence by a customer’ to third parties within the scope of unfair trade practice. The amendment, however, goes on to state that any disclosure of personal information would not be “considered as a service failure” if such disclosure is in compliance with some statute in effect or in the public interest.The term ‘personal information given in confidence by a customer’ requires more clarification because, in general, in all online transactions, the user presumes that the online portal keeps confidential whatever information is provided by him.On the contrary, name, age , gender, user browsing habits etc. may not in the strict sense be confidential information, but personal sensitive information may fall within the scope of the new law, as given in Explanation to Section 43A of the Information Technology Act.

A case appertaining to this issue is American Express Bank Limited v. Priya Puri 2006 Indlaw DEL 362. Wherein it has been held that,

“These clashes are compounded by the fact that the data is collected by hotel employees who are typically employees of the owners, and such data is collected from guests at the hotel premises. Other than this, the nature of the right to guest data may itself be a subject for debate. This is because the protection of such a right would be dependent on its nature. secrets.”

Consumers in the recent times tend to share a lot f personal information I the Internet and, as the name says, internet is a net, meaning everything is connected. This information can be anything like trade secretes which should be protected but, Indian laws do not have any statutory provisions but have a judicial provision, as stated in the case of John Richard Brady and Others v Chemical Process Equipments P. Limited and Another, 1987 Indlaw DEL 10356.

“Trade secrets do not have any statutory recognition of protection in India but have been recognized judicially as a common law right and is, as such, governed by the terms of the contract. However, equitable protection of trade secrets has also been recognized without the requirement of a contract in some cases”.

There have also been instances where people have used internet to save personal literary works, so if the hotels access these literary work, Copyright issues were brought into the issue. One such case was of Vogueserv International Private Limited v Rajesh Gosain and others, 2013 Indlaw DEL 3125.

“Further, Indian courts have also recognized that customer databases can constitute literary works for the purpose of the Copyright Act, 1957, so when infringed can bring up remedies as prescribed by the aforementioned Act.”

Shares with other Acts ?

This sharing of the personal information, has also invoked a lot of other Acts to be applicable, accordingly. As per the constitution of India the right to privacy has been recognized as a facet to the right to life under Article 21 of the Constitution. So needless to say such sharing of the information can of the information can also infringe upon the personal rights of privacy.

Apart from the above mentioned Act, Consumer Protection Rules also included a lot of provisions to uphold our consumer rights, bringing it under, Right to Information Act, 2005,2008. The IT Rules deal with the transfer , storage and transmission of information or data in electronic form and with fair standards and procedures for protection. The IT Rules aim to protect both ‘personal data’ i.e. ‘any information relating to a human individual that, either directly or indirectly, in combination with other information available or likely to be accessible to a corporate body, is capable of identifying that person’ and ‘sensitive personal data’ i.e. other confidential information, including passwords, financial information such as  Bank account or credit card or debit card or other payment instrument details, physical, physiological, and mental health condition, and medical information.Since guest data may identify individual guests and include financial details, compliance with the IT Rules is a must.

A Great Implementation by Europe :

There is always a scope of learning from others. In Europe to address such issues. The General Data Protection and Regulation (GDPR).The General Data Protection Regulation (GDPR) was approved and adopted in April 2016 by the European Parliament, and came into effect on 25 May 2018. GDPR refers not only to entities located within the EU but also to companies located outside the EU where they use EU data subject ‘s personal data to deliver products or services. The Indian managers / owners who collect personal data from European guests must respect the GDPR regulations, where these personal details are kept in the system only after the guests have confirmed to share promotional and information content with these guests.When GDPR is relevant, the guests must receive express permission from the managers / owners to maintain the personal data. GDPR also gives guests more ability to ascertain how the data can be processed. Each manager / owner is expected to maintain a record of the processing activities under his / her responsibility and the notification of personal data breaches is subject to strict conditions. GDPR also imposes significant penalties on non-compliances. The penalty can be up to 4% of worldwide annual turnover. Those hotels which are run by international chains are easily covered by such chains’ global privacy policies and procedures. However, domestic players who do not have a global presence must also be aware of GDPR applicability and criteria for compliance.

In spite all the provisions that India has and offers,there have been many instances where pleads have been canceled due to party’s lack of knowledge with regards to applicability of laws and the related procedures.

As per Consumer Protection rules ;

Consumer grievance redress procedure. – Every E-commerce entity shall,-

  1. Publish on its website the name of the Grievance Officer and his contact details as well as mechanism by which users can notify their complaints about products and services availed through their web site.
  2. The Grievance Officer shall redress the complaints within one month from the date of receipt of complaint
  3. provide facility to consumers to register their complaints over phone, email or website and shall provide complaint number for tracking the complaint;
  4. Provide consumers with transparent and effective consumer protection that is not less than the level of protection offered in other forms of commerce;
  5. Provide mechanism/system to converge with NCH in grievance redress process.

The Indian Consumer Protection laws, backed by the International guidelines protect the consumer’s rights in E.commerce even in the absence of explicit laws concerning online transactions. In this respect, the person availing a facility through E.commerce would qualify as the consumer and would be able to bring a suit against any online shopping portal as a dealer under any of the above-mentioned grounds.

The court to which a consumer may approach to file his plea depends on the amount of claim and the geographical location as given below:

Amount of claim:

  1. If the amount is less than Rs. 20 Lakh – District Consumers Forum;
  2. If the amount is more than Rs. 20 Lakh & up to Rs. 1 crore – Consumer Disputes Redressal Commission of the concerned State;
  3. If the amount is more than Rs. 1 crore – National Consumer Disputes Redressal Commission, New Delhi.

Area of jurisdiction:

When applying to a District Forum, the court should have local jurisdiction over either:

  1. The place of residence of one of the opposite parties;
  2. The area of business of one of the opposite parties;
  3. The place where the cause of action arises.

The new Consumer Protection Bill, 2015 provides for new laws related to E.commerce and hence will be of great assistance to consumers, as they would have explicit and concrete laws to rely on for their protection of rights as a consumer along with their safety and privacy.

Precautions to be taken by consumers

In addition to the laws protecting consumers, consumers themselves should exercise caution and take precautionary measures while making transactions and purchases online. A few examples are given below:

  1. Be well informed about the dealer before making an online purchase;
  2. Read the privacy policy document of the online portal or the dealer;
  3. Refrain from making purchases from unknown online retailers;
  4. Monitor your bank account from where you make the online transactions regularly.
  5. Prefer using credit cards for online purchases instead of debit cards.

Apart from approaching courts for redressals, consumers in the recent time also have access to a relatively newer segments of law. The standard approach in HMA’s (Hotel Management Agreements) across various hotel operators is to have a two -pronged approach – (a) have disputes resolved either by arbitration; or (b) by determination by an expert in the hospitality sector. However, certain operator’s do opt for resolution of all disputes by arbitration.

Conclusion :

In the new era of digitization, E-commerce has revolutionized the Indian market. It is a great opportunity for both dealers and consumers, but only if the transactions are regulated and monitored to make sure that there are no unfair practices plaguing the market which would prove to be detrimental. With new advancements and technology, the laws need to be up to date to ensure smooth functioning of business and a stable economy. Issues like international E.commerce not falling under the jurisdiction of local consumer forums, promised free services not being protected under the current consumer law, and no proper consumer law mechanism ensuring and enforcing privacy of sensitive personal information shared online for transactions need to be tackled immediately. Either the proposed Bill needs to be passed urgently or separate law for the consumer protection of e-consumers, as present in the UK, needs to be brought into existence as soon as possible. Apart from laws being imposed and implemented, consumers also have a lot of role to play in tackling this situation. As we saw consumer rights include protection from unfair trade practices. Where one situation is, where people are unaware of the remedies they have as consumers, other situation is where they are not exercising the existing rights they have in hand. We as consumers should not back off when it comes to upholding our rights, and should also fight for the same in case of any breach.


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About the Author
Phani Pragneya Vemuri, hails from Hyderabad, Telangana, is a second year law tutee from TamilNadu National Law University, Tiruchirapalli. This article is written part of the research work assigned during internship at La Mintage Legal, Hyderabad.

My special thanks to Shri Tangirala Venkata Satya Kumar & Shri Moksha Kalyanram Abhiramula for their insights, guidance and support.