Commerce Minister Piyush Goyal has decided to keep data localisation out of the e-commerce policy and let the Ministry of Electronic and Information Technology (MeitY) tackle the issue through the data protection bill, Livemint reports. Goyal said this at a meeting with representatives of 25 major e-commerce companies, including Amazon and Flipkart, on Monday. The draft national e-commerce policy, released in February, included rules on data localisation even though the issue was already addressed in the draft data protection bill. IT Minister Ravi Shankar Prasad is expected to introduce the personal data protection bill in the ongoing budget session of Parliament.

Last month the Finance Ministry had suggested that provisions relating to data protection be excluded from the national e-commerce policy, on grounds that the issue was best handled by MeitY. A government official said that the draft data protection bill, drafted by MeitY, was not restricted to e-commerce companies but applied to every industry and sector. Moreover, according to the official, the e-commerce policy should look at data from the point of view of competition and should list provisions such that data is not misused to influence prices, and to ensure a level playing field for all sellers.

Piyush Goyal’s warning about steep discounts

At Monday’s meeting, Goyal also warned e-commerce companies to strictly comply with the new foreign investment rules and refrain from offering steep discounts on their platforms, Reuters reported. He urged the companies to not violate the new FDI rules “in letter or spirit”. Goyal said that while the government was prepared to listen to concerns about its new foreign direct investment rules (FDI), it was committed to protecting small traders from predatory behaviour by foreign-funded companies. The Department of Industrial Policy and Promotion (DIPP) had released the revised FDI in e-commerce policy in December and said it would come into effect from February 1, 2019. Here’s what the policy says about the role of platforms such as Amazon and Flipkart:

  1. The updated policy does not allow marketplaces to exercise control or ownership over the inventory of vendors on their platforms. For example, if a marketplace such as Amazon or Flipkart exercises ownership of control over inventory, this platform would no longer be a marketplace, but an inventory-based e-commerce business.
  2. The new policy reiterates that if a vendor sells over 25% of goods (presumably of all the goods sold on the platform) on the e-commerce marketplace, the marketplace will become an inventory based model in which FDI in not allowed. To be clear, the earlier FDI in ecommerce policy from 2017 had the same 25% cap on vendor sales, but now it places the responsibility on the marketplaces to ensure this does not happen.
  3. If a marketplace has an equity stake in a vendor/seller, or if it controls its inventory, the vendor is not permitted to sell its products on the marketplace.
  4. Warranty and guarantee of goods and services sold on marketplaces is the responsibility of the seller/vendor, and not the platform.
  5. The marketplace cannot influence prices directly or indirectly and has to offer a level-playing field all vendors/players – those controlled by marketplaces, or other vendors. Platforms will provide the same services of cashbacks, fulfillment, logistics, warehousing, advertisements, marketing, payments, finance, etc across all vendors.
  6. The new norms dictate that marketplaces cannot mandate any seller to sell any product exclusively on the marketplace.

Read: The GOQii vs Flipkart battle over deep discounting will impact India’s e-commerce policy and FDI regulations

What the draft e-commerce policy says about data protection and localisation

Among the goals of the e-commerce policy, released in February this year, was to address the regulatory gaps from the Personal Data Protection Bill. It recognised data as a national asset and collective resource, saying that Indians have a sovereign right over their data and this right cannot be extended to non Indians.

Data availability, data sharing and data sovereignty

The policy states that arguments that data held by large corporations should be available to other companies through ‘compulsory licensing’ or FRAND terms forgets that these companies do not own the data which they have processed and monetised.

  • The data of a country, therefore, is best thought of a collective resource, a national assetthat the government holds in trust, but rights to which can be permitted.
  • India and its citizens have a sovereign right to their data. This right cannot be extended to non-Indians (the same way that non-Indians do not have any prima-facie right or claim to, say, an Indian coal mine).”
  • “This understanding flows from the acknowledgement that data about an Indian, is his/her own.”
  • Even after anonymization, the interests of the individual cannot be completely separated from the derivatives that may be obtained by analyzing and drawing inferences from a certain set of data.”

Data can, therefore, best be likened to a societal ‘commons’.

  • National data of various forms is a national resource that should be equitably accessed by all Indians.
  • The same way that non-Indians do not have access to the national resources on the same footing as Indians, non-Indians do not have equal rights to access Indian data. However, access to it can be negotiated, in national Interest.”

Why cross-border data flow is a problem according to the current draft

  • At this juncture there is no legal framework that would permit the government to impose restrictions on cross-border flow of data. Without having access to the huge trove of data that would be generated within India, the possibility of Indian business entities creating high value digital products would be almost nil. Domestic technology companies would be merely processing outsourced data work.”
  • Further, by not imposing restrictions on cross-border data flow, India would itself be shutting the doors for creation of high-value digital products in the country.
  • “Location of the computing facilities like data centres and server farms within the country will not only give a fillip to computing in India but will also lead to local job creation.”
  • “In the future, economic activity is likely to follow data. It is hence vital that we retain control of data to ensure job creation within India. Cloud computing should become an economic activity in India. Data analytics in the era of industry 4.0 should become a major job creator.”