Opinion | Draft e-commerce policy focuses excessively on da…


Bala Murali Krishna

When late last year, the commerce ministry cracked down on abuses by the country’s largest e-commerce players with a quick update, it roiled Amazon and Flipkart, and foreign investors, all of whom expected a comprehensive and stable policy that would help sustained expansion of the sunrise sector. Consequently, the national e-commerce policy was eagerly awaited.

While the draft document released last week throws up a number of issues, its focus on data — cross-border flows, ownership, sharing, privacy and a good measure of nationalism — deflects attention from online commerce itself, and the imperative to lay out comprehensive ground rules for fair competition. So much so, it’s hard to see it providing the kind of guidance e-commerce companies may have expected.

One reason might be an overambitious bid by policymakers to “address concerns which go beyond the sale and purchase of products by electronic means.” Consequently, what passes off as a policy draft is a generous sprinkling of digital buzzwords, less than profound observations and an inability to connect the dots across distinct issues such as privacy, data ownership and data security or indeed the Maori data sovereignty network; or technologies such as artificial intelligence and Internet of Things; or policy constructs such as Make in India, Digital India, Skill India and Startup India.

Nevertheless, a few clear-cut policy proposals emerge from the document.

  • India will “invite and encourage foreign investment in the ‘marketplace’ model alone.”
  • “E-commerce entities would be mandated to make a full disclosure to the consumer regarding the purpose and use of data collection.”
  • India will not back World Trade Organisation proposals on e-commerce because of its consequences for import duties, and potentially on trading of agricultural commodities; and,
  • Centre will consider legislation that overrides various state laws that could complicate taxation. It is similar to the reason why India adopted GST.

The first reiterates what the ministry announced last year — vigorous policing to ensure Amazon, Flipkart and any other foreign entities will only run an electronic marketplace for buyers and sellers, and not itself be a seller. This will, in part, ensure a level playing field for all sellers, notably smaller players with little access to data and the choice of only a few platforms. Still, much will also depend on whether or not domestic players will be allowed to operate both a marketplace and act as a seller, or if they will be curbed, say, when they attain a heft in the market and gain pricing or other power.

The second is important in the broader context of consumer privacy and data ownership, but may have been better addressed in a broader privacy law aimed at data hogs such as Google and Facebook. Besides, the importance of privacy and data to e-commerce is not established unless the intention is to force large e-commerce platforms to share data with smaller sellers, or allow consumers to claim or delete their personal data, just like Google and Facebook now allow users to do.

The third point about India not joining the WTO on e-commerce does not materially, or immediately, affect policies that shape domestic e-commerce, while the fourth on taxation is an obvious imperative and shows good intent.

On much else, the draft document is a hotchpotch. Take, for example, the intent to share anonymised community data collected by Internet of Things devices installed in public spaces like “traffic signals or automated entry gates.” What that has to do with e-commerce would be interesting to discover.

It rightly recognises monopolistic power as a potent threat, with later entrants likely to find it nearly impossible to compete, given the nature of the e-commerce platforms. That’s where it also gets muddled. Strangely, the draft considers “high rates” of online advertising by social media and search engines as barriers. While monopolistic power is obvious in many areas — e-commerce itself, or payments processing where the network effect is at its strongest — it would be hard to make the case that online advertising is costlier than, say, other forms of advertising.  Similarly, it revives an old argument by saying the government should have the right to “source code and algorithms,” or transfer of technology.

The draft document’s views on “data nationalism” are loud and clear. It is held as in a “societal commons”, and comparable to the nation’s rights over its mines or airwaves. “India and its citizens have a sovereign right to their data,” it asserts.

What is not clear is how the country can harness that data either to further e-commerce or for any other purpose. Or whether it might be better addressed in a different context. Still, the document is only a draft and much could still emerge before a final policy is crafted.

Bala Murali Krishna works for a New York-based startup. Views are personal

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Algolia Reports

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