India’s Draft E-Commerce Policy Promises More Government Oversight, Tougher Rules

India’s second attempt at framing a draft e-commerce policy aims at providing a regulatory framework to ensure fair competition, consumer protection and handling of data in the world’s fastest-growing market for online trade.

The draft policy will be India’s latest effort to tighten control over e-commerce companies such as Amazon Inc, Walmart-owned Flipkart, Alphabet Inc.’s Google and others and is likely to increase compliance worries for the tech behemoths that have been battling stricter foreign investment rules since last year.

“In order to deal with novel matter arising with the rapid evolution of this (e-commerce) sector, appropriate legislation is required to provide regulatory framework for governing unique aspects of e-commerce,” according to the draft e-commerce policy issued by Department of Promotion of Industry and Internal Trade. BloombergQuint has reviewed a copy.

The legislation, it said, will ensure fair competition, consumer protection and handling of e-commerce-related data issues.

What’s more, the government, according to the guidelines, will be empowered by the e-commerce legislation to review, investigate and take action where it feels that the entry of a player in the Indian market, or certain e-commerce activities can lead to a security risk.

The proposed new e-commerce law and a sector regulator will also identify information that will be restricted for harvesting, storage, use, transfer, assignment, processing and analysis, the 15-page draft said.

Additionally, the definition of e-commerce has been widened, and will now include buying, selling, marketing, distribution or providing access to goods, including digital products, or services; through any electronic network for a price. These will include entities such as B2C/ B2B e-commerce marketplaces, internet-based consumer facing content platforms, app-based e-commerce, connected device-based services, and a hybrid combination of any of the above.

This comes nearly two years after the ministry said it was reworking rules after concerns were raised.

Here’s a closer look at the draft.

Data

• Certain types of data may need mirroring or localisation on both personal and non-personal data governance. Government, in consultation with relevant stakeholders, will define the categories of e-commerce that would require mirroring or localisation.
• The government retains the right to enforce measures to mandate that information related to activities in India (including data of Indians) is stored only in India.
• For those categories of data which can be stored/ mirrored abroad, companies will be subject to comprehensive periodic audit, and such audits would be carried out by an Indian entity only.
• All requests for information made by law enforcement agencies are to be complied with and provided in less than 72 hours, and the entities must ensure that information in India is stored in such a way that it’s provided to the law enforcement agencies without delay. Failure to do so may invite costs and penalties for the e-commerce player concerned.
• If any platform is collecting non-personal data of consumers, the entity must, through appropriate notification, disclose the reasons for its collection, storage and usage, at the time of collection.
• The draft also called for promotion of computing facilities like data centres and server farms within the country.

Exports

• The Government of India will promote and facilitate exports through e-commerce by streamlining logistics for e-commerce and by reducing administrative requirements and costs and simplifying procedures related to compliance.
• For that, it aims to set up a dedicated e-commerce export promotion cells and specialise export support policies for MSMEs, and a logistics infrastructure will be created using India Post.
• For goods being imported via e-commerce entities or being exported from India, the detail of country of origin and value addition done in India should be clearly specified.
• All product shipments from other countries to India must be channelised through the customs route, and an integrated system that connects Customs Department, RBI and India Post is to be developed to track imports.

Customer Protection

• The guidelines also said a system of acknowledgement of consumer complaints must be in place along with clear timelines that are to be displayed prominently on the website/application.
• Also, e-commerce firms must provide all options of products and services available to the consumers without favouring any specific product, supplier or group, and a regulatory framework will be created.

Fair Competition

• The draft acknowledged there’s a tendency for one or two strong companies to emerge as leaders and exercise control over big part of information repository, that can lead to emergence of monopolistic tendencies and subversion of competition.
• It said the regulator or empowered ministry concerned will make necessary regulations or guidelines to that extent.
• The government can seek disclosure of source code and algorithms for e-commerce to ensure that there are no biases and there’s no discrimination due to digitally induced biases.
• E-commerce entity/ platforms not complying with the rules won’t be given approval to operate in India.

Rogue E-Commerce

• A body of industry stakeholders will also be created to identify, ‘rogue e-commerce entities’ that host predominantly pirated content. After verification, such entities would be included among ‘Infringing E-Commerce Entities (IEE)’, and the body can ask internet service providers, search engine/app stores to remove or disable access to such websites within the set timelines.

Other Guidelines

• All e-commerce platforms/ apps available for download in India must have a registered business entity in India as the importer on record or as the entity through which sales in India are transacted.
• All those foreign e-commerce entities that are using live video streaming services and are creating tokens to pay service providers must ensure that such transactions go through regulated channels, such as the liberalised remittance scheme, prepaid wallets or online payment gateways authorised by the RBI.
• Seller details should be made available on marketplace website for all products, including full name of the seller, address and contact details, including email and phone number. The e-commerce entity must bear any liability arising out of the sale of the item in the absence of such details.