E-Commerce: Fair Play Code Proposed

In March 2019, Department for Promotion of Industry and Internal Trade (DPIIT) had invited comments from stakeholders and the public on a draft e-commerce policy (2019 Draft Policy). Among other items, the 2019 Draft Policy proposed that measures should be taken to regulate cross-border data flow, establish a level playing field for domestic and foreign e-commerce players, boost sale of domestic products through e-commerce, and generally regulate e-commerce in India.

Several aspects of the 2019 Draft Policy were opposed by industry participants, including on the obligation on data localisation and the proposal to institute an independent e-commerce regulator. The 2019 Draft Policy did not gain much traction.

In the first week of July 2020, Indian media reported that DPIIT has been working on a revised draft e-commerce policy and that the revised draft policy will be placed in public domain inviting public comments. Since then, the government has enacted the Consumer Protection (E-Commerce) Rules, 2020 (E-Commerce Rules), which addressed few of the policy initiatives under the 2019 Draft Policy (see here for our Ergo on E-Commerce Rules).

Fast forward to March 2021, while the DPIIT is yet to formally release the final draft of the revised e-commerce policy, we have received an undated draft of the proposed e-commerce policy which media reports indicate was discussed in an inter-ministerial meeting on 13 March 2021 (2021 Draft Policy). It is unclear if DPIIT will formally release the 2021 Draft Policy for public or industry consultation. A draft policy generally reveals the Government’s thoughts on the subject matter and helps the industry set expectations.

The 2021 Draft Policy covers all models of e-commerce i.e., inventory, marketplace and hybrid model across all forms of entities, natural and legal with foreign and domestic investments. It broadly covers: (a) handling of data; (b) free and informed choice; (c) fair competition; (d) prevention of counterfeit and piracy; and (e) monitoring.

Definition of ‘e-commerce’ and ‘e-commerce operators’

Conduct of e-commerce

Handling of data

The regulations on data protection are awaited. The 2021 Draft Policy incorporates aspects from the report submitted by the committee of experts on non-personal data governance framework which was constituted by the Ministry of Electronics & Information Technology. For instance, the 2021 Draft Policy proposes to allow data sharing with the government to aid in national security, economic security, and law enforcement and with other industry participants to aid in innovation and fair competition.

Competition

The 2021 Draft Policy emphasises that the Government will attempt to curb any monopolistic tendencies and seeks of the e-commerce operators to bring out clear and transparent policies on discount offerings and participation by vendors in various schemes.

Prevention of counterfeit and piracy

Other aspects

Conclusion

The overarching principle of the 2021 Draft Policy seems to be fair play, and it brings forth ideas that address existing imbalances in the e-commerce space. We are likely to see the Government taking measures to achieve a level playing field with more diversity amongst the market participants.

The proposal for a sector regulator for e-commerce is an interesting one and has been mooted several times earlier. The Indian constitution read with the Government of India (Allocation of Business) Rules, 1961 could however limit the scope of the sector regulator to only have limited nodal functions to coordinate with other Government departments on e-commerce related matters and arrive at decisions. The implementation of a sector regulator may however help address broader compliance concerns in the industry provided that the Government enables an effective framework that safeguards the interests of the consumers without unreasonably straining the market players. The ongoing investigation by the Competition Commission of India (CCI) into practices of certain e‑commerce players and the judicial review of CCI’s powers in this regard could also shape the e‑commerce sector regulator’s purview.

Some aspects mentioned in the 2021 Draft Policy have been addressed under the E-Commerce Rules which were enforced last year and have been reiterated with the intent to likely build Government processes and streamline implementation. Some other proposals are likely to see light under the data protection framework that is under discussions. Lastly, the 2021 Draft Policy does not strangely refer to any proposals to ease the working conditions of ‘gig workers’ which received media attention lately. But, with the labour codes proposed to be legislated soon, this issue is likely to be addressed at a different forum.

-         Ganesh Prasad (Partner), Arun Scaria (Partner), B N Vivek (Senior Associate) and Rudra Pratap Tripathi (Associate)

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