Synopsis Of The Draft E-Commerce Policy

The Draft E-Commerce Policy (“Policy”) was released by the Department of Industrial
Planning and Promotion on February 23, 2019 for comments and suggestions. The Policy
addresses 6 broad issues: (i) data; (ii) infrastructure development; (iii) e-commerce
marketplaces; (iv) regulatory issues; (v) stimulating the digital economy and (vi) export
promotion through e-commerce.

The Policy identifies critical aspects in each issues and then goes on to suggest strategies under
the same.

1. Data

The Policy identifies data as a critical aspect of the digital economy and a foundational
asset to any enterprise in the digital ecosystem. Further, the Policy lays down that the data
of a country is a national resource, as a result of which its cross-border flow must be
regulated. The Policy specifies that India’s data must be used for the economic benefit of
Indian enterprises. The strategies suggested for this are the following –

• Creating a legal and technological framework for imposing restrictions on cross-border
  data flow from IOT devices installed in public places and data generated by users in
  India by various sources such as e-commerce platforms, search engines, etc. The
  framework will also provide basis under which the data collected from public devices
  can be shared with domestic entities for research and development in public policy.
• Imposing restrictions on sensitive personal data of Indians stored abroad such as not
  making it available to third parties, foreign business entities and foreign governments.
• Guidelines for sharing of community data for larger public purposes.

2. Infrastructure Development

Strategies for infrastructure development include –

• Taking forward the core components of Digital India which are (i) the development of
  secure and stable digital infrastructure; (ii) delivering government services digitally;
  and (iii) universal digital literacy.
• Developing capacity for data storage in India.
• According infrastructure status to data centers, server farms, towers, etc.

 3. E-Commerce Marketplaces

The strategies have been given under the following heads –

1. FDI
   The FDI policy in e-commerce clearly demarcates a marketplace model and an inventory
   based model. The policy encourages foreign investments only in the marketplace model.
   The FDI policy also takes into account the interests of small and medium enterprises to
   create a level playing field. This includes adopting fair and non-discriminatory
   treatment of all the stakeholders including MSMEs and start-ups operating on a
   marketplace.
2. Other strategies
   • Product shipments from other countries to India must be channelized through the
     customs route.
   • An integrated system that connects Customs, RBI and India Post to be developed to
     better track imports.
   • All ecommerce sites/apps available for download in India must have a registered
     business entity in India as the importer on record or as the entity through which all
     sales in India are transacted.
   • Any non-compliant e-commerce app/website will not be given access to operate in
     India.
   • All e-Commerce sites/apps available to Indian consumers (displaying prices in INR)
     must have MRPs on all packaged products, physical products and invoices.
   • Consumer/Business Payments from Indian banks and payment gateways to
     unauthorized and unregistered (GST non-compliant) sites/apps shall be barred.
3. Anti-counterfeiting measures
   • Seller details should be made available on marketplace website for all products.
   • Sellers must provide an undertaking to the platform about genuineness of products.
   • Trade mark owners shall be given the option to register themselves with e-commerce
     platforms. Whenever a trade-marked product is uploaded for sale on the platform,
     the platform shall notify the respective TM owner.
   • In case a complaint is received about a product being fake/counterfeit, the same shall
     be conveyed within 12 hours to the owner of the TM. If the owner of a TM informs
     the platform about the product being sold on its platform to be counterfeit, it shall
     notify the seller and if the seller is unable to provide evidence that the product is genuine, it shall take down its listing and notify the TM owner of the same, as per the
     provisions of law.
   • The platform shall enter into an agreement with each of the sellers on its platform,
     under which it shall obtain guarantee of authenticity and genuineness of the products
     sold by the seller.
   • It shall also seek a guarantee from the sellers that the product has not been impaired
     in any manner and that all warranties and guarantees of the brand owner are
     applicable and shall be honoured accordingly.
   • Since counterfeiting is a major concern, in case a customer makes a complaint to that
     effect, marketplaces would have liability to return the amount paid by the customer.
     In addition, the marketplaces shall cease to host the counterfeited product on their
     platform, thereby taking down every information related to the product.
4. Anti-piracy measures
   • Intermediaries shall put in place measures to prevent online dissemination of pirated
     content. Intermediaries shall identify ‘trusted entities’, whose complaints are
     resolved on priority.
   • Websites or platforms should expeditiously remove or disable access to the pirated
     content.
   • A body of industry stakeholders will be created that shall identify ‘rogue websites’.
     Rogue website would refer to those that host predominantly pirated content. After
     verification, these rogue websites shall be included in the “Infringing Websites list’.
   • Advertisers or advertising agencies shall not host any advertisements on the websites
     identified in the IWL.
5. Prevention of sale of prohibited items
   • Websites or applications where purchase-sale of products take place, must display
     list of products which are prohibited.
   • Sellers must provide an undertaking to the platform/site/application that they are
     not engaged in transacting in such products.
   • In case it is found that products being sold are prohibited, or a complaint to that effect
     is received, the platform shall immediately remove the listing or other reference to
     the product. The time limit for this shall not exceed 24 hours. Such sellers shall also
     be blacklisted from the platform and the relevant authorities notified.

 4. Regulatory Issues

Governments are finding existing regulations and structures inadequate to deal with issues
thrown up by the digital economy. Businesses find that once scale beyond a certain point is
reached, it makes entry into that area by a ‘second comer’ next to impossible. Barriers to entry
are especially difficult for start-ups and small businesses to breach. In light of this, strategies
are suggested in the following areas –

1. Inter-disciplinary nature of e-commerce
   • Given the inter-disciplinary nature of e-commerce, the tackling of specific issues that
     emerge may be the subject matter of different statutes- the Information Technology Act
     and Rules, the Competition Act, the Consumer Protection Act etc. The Standing Group of
     Secretaries on ecommerce (SGoS) shall give recommendations to address policy challenges.
   • It is important to acknowledge that ecommerce (when it takes place within the country)
     falls under the category of inter-state trade and commerce. Thus, has been allocated to the
     Centre under Schedule VII of the Constitution. It is hence the responsibility of the Centre
     to ensure its growth. And make rules therefor.
2. Data
   • It is essential that regulators examine transactions with reference to the access to data that they entail. Access to data can give rise to market distortions.
   • High advertising charges become a barrier to entry. Advertising charges in e-commerce
     must be regulated, especially for small enterprises and start-ups.
   • The network effect must also be kept in mind while analyzing mergers and acquisitions.
     World over, the experience has been that e-commerce players like social media platforms
     have taken over potential competitors early. This prevents the emergence of the threats to
     market position later on.
   • Data effect and the network effect are the reasons why selling at a loss has emerged as
     ‘sustainable’ for enterprises. These are aspects which the anti-trust regime must take into
     account, to meet the challenges of regulation in the arena of e-commerce.
   • Imperative that regulators and law makers must create dedicated ‘technology wings’
     within their organizational set- ups.
3. Law and Order
   • Privacy is an important aspect and all possible efforts must be made to ensure it.
   • Participants of the digital economy that have access to the data of Indians must nominate a local representative to be responsible for the affairs of the company in India.
4. Small enterprises and start-ups
   In the presence of network effects which create barriers to entry, small firms and start-ups attempting to enter the digital sector can be given ‘infant-industry’ status.
5. Taxation issues
   • It is important to move to the concept of ‘significant economic presence’ as the basis for determining ‘permanent establishment’ for the purpose of allocating profits of
     multinational enterprises between ‘resident’ and ‘source’ countries and expanding the
     scope of ‘income deemed to accrue or arise in India’ under Section 9(1)(i) of the Income Tax
     Act, 1961.
   • The current practice of not imposing custom duties on electronic transmissions must be
     reviewed in the light of the changing digital economy and the increased role that additive
     manufacturing is expected to take.
6. Consumer Protection
   • A system for electronic redressal of grievances including making available compensation
     to the aggrieved consumer electronically will be developed.
   • Unsolicited commercial messages (on various platforms including but not limited to SMSs,
     emails etc.) and calls will be regulated. A legal framework for this will be developed.
7. Content liability
   Due to the fact that traders, merchants, individual users, organizations, associations are all
   dependent on online platforms, the authenticity of content posted on their websites cannot
   be compromised. In this regard, it is important to emphasize on responsibility and liability
   of these platforms and social media to ensure genuineness of any information posted on
   their websites.

5. Stimulating the domestic digital economy

• Domestic industrial standards need to be formulated and facilitated for smart devices and
  IoT devices to meet the goals of the country including, inter alia, consumer protection,
  secured transactions, enhanced interoperability and ease-of-user interface.
• Delivering government services digitally.
• Online Customs clearance will be facilitated by adopting Customs Electronic Data
  Interchange (EDI) platform, integrating all the Departments concerned such as Department
  of Posts, DGFT and RBI, and other stakeholders, eliminating manual processes under ease
  of doing business.
• E-Commerce will also be included in the National Integrated Logistics Plan being prepared
  by the Department of Commerce, which would focus on faster delivery with emphasis on
  lower costs.

6. Export promotion through e-commerce

• Outreach of Indian entities can be further enhanced by promoting export of their products
  through ecommerce. In this regard, the proposed National Integrated Logistics Policy must
  take into account the special needs of the sector E-commerce must be dealt with separately
  under the Logistics Policy.
• The extant Courier Imports and Exports (Clearance) Regulations, 1998 indicates that on
  the export side, these regulations shall not apply when the value of consignment is above
  Rs. 25,000 and involves foreign exchange transaction. Therefore, consignments valued
  above Rs. 25,000 are exported through cargo mode. This increases the transaction costs
  and the delivery time for consignments valued above Rs. 25,000 through cargo mode. In
  this regard, the existing limit of INR 25,000 shall be increased to make Indian e-commerce
  exports attractive even for high-value shipments through courier mode.
• Transaction costs for MSMEs and start-ups would contribute to the selling price of their
  products. High selling price has a detrimental effect on the attractiveness of products in a
  market. Therefore, the provisions for collecting fee on applications submitted to claim
  export benefits should be done away with to reduce the transaction costs for MSMEs and
  start-ups.