Draft e-commerce policy set for overhaul, online players submit objections

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With most online retailers registering their protest against various provisions of the draft e-commerce policy, the new government that will be taking over after the upcoming Lok Sabha elections is expected to make significant changes to it.  

Online players have demanded more clarity on e-commerce norms, trademark rights, and the extent to which their services will come under the policy hammer.

The deadline for sending comments and suggestions on the draft policy ended on Friday. 

According to sources, as the model code of conduct is in place, the process of formulation of the final policy might have to wait till a new government assumes charge.

With a tagline ‘India’s data for India’s development’, the draft policy focuses on various aspects of data, including the use of artificial intelligence to track consumer behaviour for targeted marketing. 

However, companies have claimed that this has been done at the expense of other clear policy moves in the regulatory space.  

Senior officials from the Department for Promotion of Industry and Internal Trade (DPIIT) said most online majors, especially e-marketplaces such as Amazon and Walmart, had requested the government to amend the policy. 

Earlier, the DPIIT had decided to extend the date of submission of stakeholder comments on the draft policy, which was first put out on February 23.

Tussle over data


From information on the frequency of visiting a website to search results to the time spent in reading an article simultaneously stored in the cloud, the report deals with all this and more in detail. “By tracking the search and browsing histories, online retail websites are able to target consumers with tailor-made marketing content,” the draft says.

In what is likely to be a controversial move, the policy wants the government to be able to access source code and algorithms of artificial intelligence (AI)-based systems. “There is a need to strike a balance between commercial interests and consumer protection issues, as well as issues of larger public concern like preventing racial profiling and maintaining constitutionally mandated rights, such as the right to equality,” the policy states. Reiterating its earlier demand, the draft makes it clear that global online giants in the sector must appoint local representatives in India.


Discussions on the policy have focused on the need for a pushback against issues of data ownership and data localisation, which will impact smaller businesses more than the big technology firms like Flipkart or Amazon. 


“Most troubling is the overarching approach to data management, which misclassifies data as a national asset, thus depriving individuals of autonomy over and consent for their personal data, a protected right in India,” said the Asia Internet Coalition, which counts Apple, Facebook, Google and LinkedIn as its members.


“The goal of the e-commerce policy should be to move India up the e-commerce curve. The policy should have addressed how we can encourage our start-ups to play on the global scale. It should have talked about building security in our transactions and make other countries believe that. This policy does not answer these questions and in fact is constricting for our domestic players," said a participant at a round table discussion organised by the Software Freedom Law Centre.


Trademark and services


Industry experts say if the draft policy is enforced, trademarks or brands will have the right to refuse any e-commerce platform to sell their products. 


However, firms have supported the government's decision to crack down on below-the-radar players doing business in India. 

Any foreign e-commerce player planning to sell in India needs to set up local offices and have representatives present onshore, making it tough for many international businesses to survive in the country. “This is the proposal on which we have received almost unanimous support since these firms, mostly from China, have undercut the business of most domestic firms, big or small," a senior DPIIT official said.


The policy also applies to digital services, increasing the ambit of the application of the policy to companies like Netflix, Microsoft, Hotstar, IBM or any other company  that makes and sells a digital product or service. 


The proposed policy further alludes to the foreign direct investment (FDI) policy in e-commerce, also released by the DPIIT, whose press note 2 (2018) says an e-commerce platform in which foreign investment has been made cannot exercise ownership or control over the inventory sold on its platform.


While e-marketplaces such as Flipkart and Amazon have managed to dodge the restrictions posed by the press note 2, arguing they operate only as a platform, OTT players find themselves in a more complicated position.


What the draft proposes


For companies:

  • Govt be given access to source code and algorithms of AI systems
  • Foreign players need to register biz locally, have representatives
  • Firms to get a 3-yr window to put in domestic data storage requirements
For consumers:

  • Scrapping 'gifting' clause, predominantly used by Chinese sellers to dodge Customs duty
  • E-consumer courts to be developed to address grievances
  • Taxation of electronic transactions in near future, under Section 9(1)(i) of IT Act 

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