India’s draft e-commerce directive promises more government oversight and tougher rules

India’s second attempt at drafting a draft e-commerce policy aims to create a regulatory framework that ensures fair competition, consumer protection and the handling of data in the world’s fastest-growing online commerce market.

The draft directive will be India’s latest effort to tighten scrutiny over e-commerce companies like Amazon Inc, Walmart-owned Flipkart, Alphabet Inc.’s Google and others, and is likely to increase compliance concerns for the tech giants that Foreign investment rules have been tighter since last year.

“In order to deal with the new matters arising from the rapid development of this (e-commerce) sector, adequate legislation is needed to provide a regulatory framework to regulate unique aspects of e-commerce,” he said Draft E-Commerce Policy issued by Industry and Domestic Trade Promotion Department. BloombergQuint reviewed a copy.

The legislation will ensure fair competition, consumer protection and dealing with data issues related to e-commerce.

In addition, as per the guidelines provided by the E-Commerce Legislation, the Government is empowered to review, investigate and take action if it deems that a player’s entry into the Indian market or certain E-Commerce activities contribute to it may result in a security risk.

The proposed new e-commerce law and a sector regulation will also identify information that will be restricted for collection, storage, use, transmission, attribution, processing and analysis, the 15-page draft said.

In addition, the definition of e-commerce has been broadened to include the buying, selling, marketing, distributing, or providing access to goods, including digital products or services; over any electronic network at one price. These include entities such as B2C/B2B e-commerce marketplaces, web-based consumer content platforms, app-based e-commerce, connected device-based services, and a hybrid combination of all of the above.

This comes almost two years after the ministry announced it would be revising the rules after concerns were raised.

Here’s a closer look at the design.

Data

• Certain types of data may need to be mirrored or localized, both in terms of personal and non-personal data management. The government, in consultation with relevant stakeholders, will define the categories of e-commerce that would require mirroring or localization.
• The Government reserves the right to enforce measures to order that information related to activities in India (including data of Indians) is only stored in India.
• For those categories of data that can be stored/mirrored overseas, companies are subject to extensive regular auditing and such audits would only be performed by an Indian entity.
• All law enforcement information requests must be fulfilled and provided in less than 72 hours and entities must ensure that information is stored in India in a manner that is promptly provided to law enforcement. Otherwise, costs and penalties may arise for the affected e-commerce player.
• If a platform collects non-personally identifiable information from consumers, the business must disclose, through appropriate notification, the reasons for its collection, storage and use at the time of collection.
• The draft also called for the promotion of computing facilities such as data centers and server farms within the country.

exports

• The Government of India will encourage and facilitate exports through e-commerce by streamlining e-commerce logistics, reducing administrative requirements and costs, and simplifying procedures related to compliance.
• To this end, special e-commerce export promotion cells will be established and export support policies for MSMEs will be specialized, and logistics infrastructure will be established with India Post.
• Goods imported or exported from India via e-commerce entities should clearly state the details of the country of origin and value added made in India.
• All shipments of products from other countries to India must be routed through the Customs route and an integrated system is to be developed linking Customs Department, RBI and India Post to track imports.

customer protection

• The guidelines also stated that a consumer complaint acknowledgment system must be in place, along with clear deadlines that must be prominently displayed on the website/application.
• Also, e-commerce businesses must offer consumers all available product and service options without favoring any particular product, vendor or group, and a regulatory framework is put in place.

fair competition

• The draft acknowledged that one or two strong companies tend to take the lead and exercise control over a large part of the information store, which can lead to the emergence of monopolistic tendencies and the undermining of competition.
• It said the relevant regulator or ministry would issue the necessary regulations or guidelines to that extent.
• The government can require disclosure of source code and algorithms for e-commerce to ensure there is no bias and no discrimination based on digitally induced prejudice.
• Ecommerce entities/platforms that do not comply with the rules will not be allowed to operate in India.

Dubious e-commerce

• It will also create a panel of industry stakeholders to identify “rogue e-commerce entities” that host mostly pirated content. After the review, such companies would be among the “violating e-commerce businesses (IEE)” and the body can request internet service providers, search engines/app stores to remove or disable access to such websites within the specified time limits.

Other Policies

• All e-commerce platforms/apps available for download in India must have a registered business entity in India as the importer of record or as the entity through which sales in India are processed.
• All foreign e-commerce companies using live video streaming services and creating tokens to pay for service providers must ensure that such transactions are made through regulated channels such as the liberalized remittance system, prepaid wallets or RBI-authorized online Payment gateways are processed.
• Seller details should be made available on the marketplace website for all products, including the seller’s full name, address, and contact information, including email and phone number. The e-commerce business must bear any and all liability arising from the sale of the item in the absence of such information.