India will monitor the activities of e-commerce companies including details of the sale, import and customs duties, and compliance with other laws in a periodic manner, according to a draft policy of the government seen by Entrackr.
E-commerce companies will have to mandatorily register with an authority identified by the government in order to ensure that their platforms aren’t used to defraud customers, the draft said. This was first reported by Reuters.
According to the draft, e-commerce companies will also have to ensure that all sellers on their platform are treated equally, and not use algorithms that end up prioritising certain select sellers.
This is at least India’s third attempt at forming policies around e-commerce activities in India. In 2019, India’s Department for Promotion of Industry and Internal Trade or DPIIT had released the first draft of its National E-Commerce Policy, and a second iteration was leaked in July 2020.
Two industry sources have confirmed the authenticity of the latest draft and we have also reached out to the DPIIT for confirmation.
The latest draft comes in the backdrop of accusations made by Indian retailers—of preferential treatment to select sellers, deep discounting, and violation of foreign investment rules—against e-commerce companies like Amazon and Flipkart.
The draft, once finalised, would impact both Amazon and Flipkart, along with other e-commerce companies operating in India.
E-commerce companies “must ensure” transparent policies on discounts, including “the basis of discount rates funded by platforms for different products/suppliers and implications of participation/non-participation in discount schemes, so as to ensure fair and equal treatment,” the draft said.
E-commerce companies will have to ensure that information collected from their platforms is not used to obtain a market advantage against sellers on their own platform.
Data sharing for ‘industrial development’
The government also acknowledged the importance of “data as an asset” and the “need to use data emanating from India for Indian entities first”. Sharing of data for “industrial development” will be encouraged, the draft added. However, unlike the previous draft, the latest version does not mandate unhindered access of data to government agencies.
“Government shall lay down principles for the usage of data for the purpose of development of any industry, e-Commerce, consumer protection, national security, economic security and law enforcement including taxation,” the draft said.
It is worth noting that a separate draft framework to regulate non-personal data, released in January 2021, does not mandate data sharing between two private entities. However, under this proposed framework, a certain type of non-personal dataset called a High-Value Dataset—which is beneficial to the community at large—may be shared as a public good.
In order to prevent the misuse of data or access of data by an unauthorised person, the government may regulate the cross-border flow of data of Indian nationals such as their transaction details, the draft said. Indian e-commerce companies could be needed to carry out adequacy audits.
“By the nature of e-Commerce activity, there is a tendency for one or two strong companies to emerge as leaders and exercise control over the repository of data collected,” the draft said. “An entity that has access to maximum information about the market, is in a position to dominate it. This leads to the subversion of competition. The greater benefits of e-Commerce can be reaped only when the field remains competitive and barriers to new entrants are minimized.”
The draft also requires e-commerce companies to show the country of origin of products on their platforms — something which the Legal Metrology Act, and e-commerce consumer protection rules already mandate. “Consumers have a right to be made aware of all relevant details about the goods and services offered for sale including country of origin, value addition in India, and any other such information which may be necessary for making an informed decision at the pre-purchase stage,” the draft said.
In the “interest of the Indian consumer”, and the “local startup ecosystem”, the government will ensure that there are more e-commerce companies in India, so that “network effects do not lead to the creation of digital monopolies misusing their dominant market position”. How the government will ensure that more e-commerce companies crop up in the country hasn’t been specified in the draft.
However, a long run endeavour of the government would be to convert the Government-e-Marketplace (GeM) into a marketplace where ordinary consumers can procure, the draft said.
In order to make “necessary decisions”, the government will collect information from e-commerce platforms to “aid it in making necessary decisions”. The draft did not specify what type of information the government will ask for, and what the “necessary decisions” could possibly be.
Dealing with counterfeit goods, and piracy
The draft placed the onus of creating safeguards for ensuring that products offered by sellers are genuine and that sellers are traceable, on e-commerce companies. “For products fulfilled end-to-end by the e-commerce entity, the liability for a counterfeit product shall be jointly and severally of the e-commerce entity and the seller,” the draft said.
If a seller fails to establish the genuineness of the products offered by them in a “reasonable” time frame, the e-commerce platform will have to delist them.
In the case of high-value luxury goods, cosmetics or goods, which have an impact on public health, trademark owners can approach e-commerce companies for requiring the trademark owner’s authorisation before listing their product.
E-commerce companies will have to put in place adequate measures to prevent the dissemination of pirated content and identify trusted entities on a voluntary basis. If a certain piece of copyright-protected content is available on a platform without the authorisation of the rights holder, e-commerce platforms will have to disable access to that content, the draft said.
The draft requires a body of industry stakeholders and identified trusted parties to identify “rogue e-commerce entities”. These entities host predominantly pirated content, per the definition in the draft.
Once these entities are verified as being rogue, they will be labelled as “Infringing e-Commerce Entities”. Once that happens, internet service providers will have to disable access to these entities and payment gateways will have to bar transactions on these sites, the draft said. Advertisers cannot run advertisements on these sites.