COD charge: What is the COD charge? This is how e-commerce companies earn money...

The government has launched an investigation into e-commerce platforms charging extra fees on cash-on-delivery (COD) orders. This has been described as a "dark pattern" that misleads and exploits customers. Let's explain in detail what these COD charges and dark patterns are, and how e-commerce companies make money through them.

Earlier this year, customers complained that some platforms were imposing a "cash handling charge" on COD orders. In July, Zepto users complained on social media about hidden charges being levied at checkout. These charges may be part of "drip pricing," which is one of 13 dark patterns in India and is considered illegal.

What is a COD charge?
Cash-on-delivery (COD) is a payment method in which a customer makes a cash or digital payment upon delivery of an order. E-commerce companies offer this to enhance customer trust and convenience in online shopping. They work with delivery partners to implement COD, where the courier collects payment. For example, if you order something from an online e-commerce company, there are two or three payment options: credit card payment, UPI payment, and cash-on-delivery. If you choose COD and order a mobile cover for, say, ₹1,500, you'll have to pay the delivery partner ₹1,500 in cash upon delivery.

What are dark patterns?

Dark patterns are tricks used by websites or apps to deceive customers. These can be hidden designs or misleading language that forces users to do something they don't want.

Hiding delivery charges until the last step.
Pre-checking consent boxes.
Showing false messages, such as "Only 1 product left."
In November 2023, the government banned 13 such dark patterns under "unfair trade practices," including drip pricing, pretenses, subscription traps, and hidden advertising.

How widespread is this problem in India?
According to the 2024 ASCI report, 52 of India's top 53 apps were found to have at least one dark pattern. These could be hidden charges, repeated pop-ups, or misleading designs. This is particularly common in e-commerce, fintech, and gaming apps. Customers often discover they have been defrauded later.

What is the government doing?
In addition to investigating COD charges, the government is cracking down on digital fraud. On May 28, the ministry held a meeting with e-commerce companies and asked them to audit their apps. Additionally, there are plans to form a joint working group to monitor these issues. The investigation will examine whether charges were clearly communicated to customers.

What happens next?
If a platform is found to be using dark patterns, it could face fines, design changes, or stricter regulations. COD is a very popular payment method in India, especially in smaller cities. Therefore, this investigation is crucial. This government move demonstrates that fees and design will now be scrutinized as rigorously as pricing and advertising.

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