By Siddharth Manohar and Nikhil Pahwa
We’ve submitted our comments to DPIIT in the public consultation on the draft of the National E-Commerce Policy. The draft was riddled with problems of lacking specificity and clarity of how to chart a path towards its stated vision. It states that the objective is to provide “a level playing field for all stakeholders”, but in trying to do so the policy takes positions that would severely hamper the free flow of data and reduce competitiveness in the market. In our submission, we have attempted to argue for regulations that help maintain an open and free Internet as well as a competitive market, in line with our core mandate to help develop an open, fair and competitive digital ecosystem. Our full submission is available here.
Key points from our submission:
Draft policy’s mandate to localise data is fundamentally opposed to the idea of an open and free Internet: Prohibiting the transfer of data collected from Indians outside the country will divide services and consumers based on location. The dangers posed by this decision outweigh the benefits, as companies will no longer be incentivised (or indeed able) to offer cutting edge digital services to Indian consumers.
Indian companies would be unable to export any data based on processing within India, which would affect services being provided to customers outside India. Being unable to freely transfer data, Indian companies would also be forced to opt for local, more expensive options in cloud service providers. As discussed at #NAMAecommerce, Indian companies currently make use of cheaper options outside India. A requirement to find new cloud storage options will lead to greater costs for Indian companies, which SMEs and startups will find difficult to sustain.
Data Sharing vs Network Effect
The draft Policy makes reference to the power derived by companies with access to large datasets and their substantial control over the market, dubbing this the ‘network effect’. It is used to explain how some companies remain powerful in the market despite undergoing losses over a continued period, and being able to dictate prices in the market.
Enabling of access to data for firms listed under ‘infant industries’, i.e. smaller Indian firms entering the digital sector, is not implementable as suggested in the policy: Medianama argues that companies in possession of datasets based on collection from users would not be at liberty to share this data with other entities owing to the fact that they would be under a fiduciary duty to prevent unauthorised third-party access to the data. As far as metadata and datasets derived from user data are concerned, these would be proprietary datasets, the sharing of which would put the company in question at a competitive disadvantage.
This level of specific measures needs more detailed analysis from a competition perspective and is not best left to an industry-specific policy. Medianama has asked for the removal of coercive requirements of data sharing from the draft policy.
Data Portability: An alternative to increase Competition
We have suggested enabling of data portability to the DPIIT as a measure to increase competitiveness in the e-commerce market. This was raised during the #NAMA discussion, where it was explained as users being able to remove their data from one service and transfer it to another. Enabling interoperability between services collecting user data would empower consumers to shift easily between competing services, irrespective of the service they have been using. This helps counters the data network effect where users remain invested in a service that they sign up for.
We argue that in order to effectively create a policy on community data, the authority will need to exhibit a more robust understanding of the concept: This is fundamental to creating a framework to regulate data. Apart from explaining Community data as data “collected by publicly installed IoT devices”, the draft policy has also referred to data as a ‘national asset’ and compares it to a natural resource, laying down a subsequent question of how best to exploit this resource. Medianama has argued that this approach ignores the fact that data collected by companies exists in individual separate silos controlled by the respective entities.
Takedown Regime and Platforms
The responsibility of determination of infringement of trademark should not be placed on the e-commerce platform: The draft places a responsibility on platforms to actively police their inventory for products in violation of trademarks, and provide notice of infringements to TM owners within 12 hours and remove listing of the product. Such a heavy regulatory burden on platforms will lead to risk-averse behaviour where content tends to be taken down regularly.
The framework for copyright infringement is equally restrictive, where a notice to the platform is sufficient to require it to remove the allegedly infringing content. The system is prone to abuse without any checks, and can lead to a privatised system of censorship where the exchange of ideas and opinions, much of which is through new media formats, gets illegally restricted.
Disclosure of Source Code
Requirement for companies to disclose their source code to the authorities on demand would make the market less competitive. Medianama has submitted that the code on which platforms operate forms a large part of how companies derive a competitive advantage. The objective being protection of consumers, we suggest that the authority look at alternatives such as RegTech solutions that can test algorithms for bias without sharing of the source code.
Other Issues: Local Incorporation, Advertising Rates
Companies providing applications within India are required to incorporate local entities in India to register as the transacting party. The policy tries to control advertising rates charged by online platforms, including social media websites, in an effort to improve the access of Indian companies to advertising on these platforms. Medianama has argues that these measures are excessive and do not bring about the desired results of helping the position of Indian companies in the e-commerce market.
The position can be summed up regarding the draft policy as a whole: the only objective in mind to help the Indian e-commerce market, but without a vision as to how to do so. The result is a set of excessive measures to exert maximum control over e-commerce entities, much of which harms Indian companies as much as helps them.