Government of India has come out with a new draft policy on 23 February 2019. The policy document is 47 pages long. I had expected some drab legal document, but reads like a nonfiction bestselling book. No legalese and no jargon. You can see the voice of concern and care in the pages for Indian industries and Indian interests. I believe, everyone in Digital Domain should read the policy in entirety and in original form to understand the impact and seriousness of this industry.
When the first e-Commerce policy clarification came out last December 2018, it had left me fuming. The government had very clearly under the garb of defining a platform added additional restrictions for foreign companies.
I had waited for the government to issue further relaxations, and when none seemed forthcoming and 1st February approached, I wrote the solutions to the ecommerce policy problem.
The idea was that foreign companies which had been allowed in India to do business for last 4 years could still maintain doing business with a little change in structure. I proposed divesting stakes in Cloudtail like entities and use technology to do the other pieces. Cloudtail was divested off to 24% some 10 days after the article.
Government has brought out additional rules
A couple of development in the ecommerce sector that happened yesterday needed a new outlook. These don’t demand as deep organizational changes, but they are more of the same. These additional rules are just a veiled attempt to increase the cost of doing business for ecommerce platforms. It in as many words, takes away the benefit of scale that ecommerce has, and more or less brings about the parity with offline retail. Make ecommerce less competitive and may be offline retail won’t suffer as much.
But I am super happy with these additions as these additions are very customer centric and responsible rules. They also apply to everyone running an ecommerce platform and not just the foreign ones, as had been done in the previous clarification.
What are the salient points in the draft rules
The new policy says a lot of things, but the largest change in viewpoint can be described as below
- Talks of “Data capital” at par with other kinds of capital. Also have other concepts like “Industrial revolution 4.0”.
- Talks of network effect and how the first mover can make it so that the second entrant doesn’t get a chance. It wants to correct this.
- Indian consumer data even with the consent of consumers can’t be sent abroad or shared with 3rd parties.
- All products channeling from outside India to India need to be through customs route and not courier route as used earlier.
- Adds the responsibility of trademark and copyright protection on the platform itself.
- Sellers to give declaration on the authenticity and genuineness of the products
- Platforms to seek authorization from trademark owners before listing high value products
- Anti-Piracy measures and prohibition of sale of restricted items to be put on platforms.
- There is push on India to sign the WTO where there is moratorium on adding customs duty on electronic products like books and apps. Not good for India, and India hasn’t signed it yet.
- All individual data is owned by individual and can only be used by express consent which means he/she understands explicitly how the data is going to be used. (Very important)
- Because of the significant first mover advantage, once a certain scale is reached, it becomes virtually impossible for a ‘second mover’ to, on its own, make an entry in the market. But movements across the world in Maoris of New Zealand, Canada, Amsterdam and Barcelona are working on how to take the data away from corporations and use it for common good with privacy checks.
- Local data: Makes sure that Indian companies are not just working on outsourced data. A server farm etc in the country creates jobs. Focus on data analytics and cloud computing as technologies creating jobs by them being restricted in India.
- Creating integrated systems to join Customs, RBI and India post to track international shipments effectively
- 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
- All ecommerce sites available to Indian customers and showing pricing in INR need to have MRP on product packaging, physical product and invoice.
- consumer payments to Non-GST compliant/registered websites banned
- All seller details, physical address, phone number, email address, legal entity to be listed on the website
- In case of counterfeit products, the marketplace to return money to customer and it has to inform the owner of trademark (if registered with website) inside of 12 hours
- Anti-Piracy measures: Intermediaries shall put in place measures to prevent online dissemination of pirated content. Upon being notified by the owner of copyright protected content/ work that a website or e-commerce platform is making available such website or platform should expeditiously remove or disable access to the alleged content
- A body of industry stakeholders will be created that shall identify ‘rogue websites’ which will be blocked.
- Reviews and ratings: All ratings and reviews for verified purchases must be published as registered and market places are supposed to device measures to prevent fraudulent reviews.
- Customer service numbers and email address necessary to be displayed for all ecommerce websites
- System for acknowledgement and timeline for disposal of customer complaints have to be in place and first resolution should be within one week
- High prices charged by monopoly of few social and search platforms to provide access to customers has been discussed as one of the major problems.
- Social media and other technology companies are taking over potential competitors early on as a strategy to extend their monopoly has been discussed.
- Point of Large companies with diversified interests have persisted in selling at loss and making up elsewhere as a sustainable strategy has been discussed.
- Government reserves its right to seek disclosure of the code or algorithm where it foresees that there will be a greater reliance on AI in decision making in the future.
- Digital companies with access to Indian data must nominate a representative responsible for their affairs in India.
- Further points on Logistics processes, Structures, Sustainable environment friendly strategies are discussed.
Hidden in the policy framework is the need for all international ecommerce agencies to have registered presence in India and then in other points it says that they can’t use an Indian banking or payment gateway system if they are not GST registered.
It’s a known fact that a lot of products were landing in India directly to customers without paying either customs or GST. This small change itself will not only bring an Indian national in the picture, but also increase GST and customs collection.
In short, if you plan to make money from Indian markets, you have to let the government dip its beak. Also, once you have a registered entity, the economy comes out from shadow into the light.
It also protects the local ecommerce players like Amazon, Flipkart or Snapdeal from these companies which were getting a small fragment of Indian business without additional costs. Now if you want a pie of the Indian market, come out of the shadows and compete in the open.
Giving fake discounts had become a big challenge. A seller will list a product X at 1000 INR on Amazon and then give 70% off and sell it for 300 rupees. On more price sensitive platform like Shopclues, it will list the same product at 400 and give 25% discount and sell it at 300 rupees.
Because the MRP of the product was neither printed on the product or on the invoice, but just the selling price, it was easy to fool customers.
It also prohibited customers from making an informed decision among platforms as a high priced product (before discount) would be perceived as a higher quality product. Where a brand has a static MRP, these fly by night operators would import products from china at throwaway prices and set a fake MRP equal to the target brand and then give a huge discount.
Now that won’t be possible. So both customers and established brands providing jobs in the market win. Fly By night operators, sitting at home running seller businesses lose.
Overall the focus is on the transparency, which is a welcome change.
Fake reviews have to be checked and verified purchase reviews need to be stated so. I wrote yesterday about the first FTC (US) case brought against a seller on Amazon.com in US where it was using fake reviews to sell a health supplement. So the Health supplements reviews were filled with fake endorsements and reviews of how the product had helped in weight loss. This company was duping customers by building a fake consensus.
This policy point attacks such issues from coming up in India and asks the platform to take steps to check such misuse of reviews.
Impact: Fake Products
Trademark registered brands are given a bigger push. All platforms have to create a system of registering such trademark users which can be used to protect their IP on the platform. In case of high value products, now the platform has to ascertain with the trademark owner if the product is genuine. How that will happen is tricky, but it increases trust on online platforms and also increases the size of transactions.
Luxury as a segment has not grown in India as much as it can. It has been plagued by fake and second hand products being sold at high price points. This policy item can make sure that items worth lakhs can as easily be sold online as a sub-1000 INR product.
It accelerates the big push on keeping the data in India akin to GDPR in Europe. The government ascertains that if data is kept in India, it will require companies in India to analyse it and build a cloud infra push to store it. Overall the jobs grow and the learning gets distributed quicker.
One side note i also feel is that if the data is being used unscrupulously, with Indians handling their data also creates chances of whistleblowers coming out and disclosing such practices. Over all the legal system becomes robust and again consumer interest is protected.
Impact: Small Companies
Overall the small companies benefit. The policy in multiple places has shown concern in the way the big tech companies have been working against societal good by taking over smaller competitors or using monopolistic control to charge high prices. High access price to customer is detrimental to small businesses which keeps them away from ecommerce.
So if the policy talks about these issues, there is a good chance that laws will reflect methods to break such monopolies.
There is one more aspect, where the government wants to reserve the right to code disclosure. Since now this has been named, every big company out there has to think if it wants to get to a situation where this might be called upon. So the pressure on larger companies to be surer of what they are doing and taking unnecessary risk grows.
The excuse of AI making decisions also goes away, as now the government can just ask for the company to disclose code and show how the decision was taken. Think of this in context of a self-driving car and others.
Impact: trademarks and copyrights
One of the points I loved is that the platform is being held responsible for resolving trademark and copyright issues. The idea of copyright protection is important when it comes to media like books and music and movies (think YouTube).
The policy is loosely worded and open to interpretation. Right now it just talks of platform’s responsibility and identifying trademark and copyright owners, but it’s an important chip off the “Safe harbor”.
I had written about the need to remove safe harbor protection that a lot of these companies get, which makes it difficult for people to get offensive or copyright infringement content taken down.
Conclusion: Way forward
What I really want to see if digital media platforms also come in the scope of ecommerce. Right now if I download an app and pay a company subscription fee, does that get covered in this? Is that ecommerce?
If the definition expands to YouTube and twitter and app stores, imagine that will be the death of anonymity which is resulting in a lot of bad stuff in the society.
I feel taking down anonymity from content producers, just as it has been stripped from the sellers should be the next step. This can happen, may be in the next version.
Random video or fake news content floats to entire world because it is free. But if I am watching ads to keep the content free, does that mean i am paying in a way. So these definitions also need to be incorporated in some ways.
Overall, I am seriously happy with the document. Given that Ministry of Electronics and Information technology (Meity) doesn’t go beyond two clicks and starts showing server hang-up pages, these pages are indeed a promising start.
Let’s see how it goes forward.
The lists of points were too large to go in any more detail, and I am sure I have left out a number of points. I would love to hear what you have to say about it in the comments.
And last, but not the least. Read the document yourself and form your own opinion. This is the start of digital in India, and an informed YOU is the only thing that can protect the country and its citizen’s interest.