Draft ecommerce policy lays down restrictions on cross border data storage

The government on Saturday released the draft ecommerce policy, proposing to set up a legal and technological framework for issues as varied as cross-border data flow, anti-counterfeiting measures, digital economy, taxation and other regulatory issues. The 42 page draft also laid down conditions for companies on collection and processing of sensitive data locally, and storing it abroad.

Nikhil Narendran, Partner at Trilegal, said that broadly, the three highlights of the draft policy are: regulation on cross border data flow for ecommerce companies; ecommerce sites/apps available for download in India must have a registered business entity in India; and regulation on advertising charges of ecommerce companies.

Also read: With Walmart-Flipkart deal Indian ecommerce sector to witness increase in cross-border data transfer

Talking about apps of global companies, the draft policy stated, “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. This is important for ensuring compliance with extant laws and regulations for preventing deceptive and fraudulent practices, protection of privacy, safety and security.”

On creating a level playing field for Indian startups and smaller firms, the draft policy indicated that MNCs in the ecommerce sector have been able to leverage their access to data. It said, “The greater the access to data, the greater the potential for AI to come up with solutions based on it and the greater the likelihood of a company’s success... 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 startups and small businesses to breach.”

Also read: Government tightens norms for ecommerce companies on sale of products

The draft policy adds that the network effect must also be kept in mind while analysing mergers and acquisitions. “Data effect and the network effect are the reasons why selling at a loss has emerged as ‘sustainable’ for enterprises. Leveling of the playing field, must therefore be seen from a data-lens. These are aspects which the anti-trust regime must take into account, to meet the challenges of regulation in the arena of ecommerce.”

The draft also states that advertising charges in ecommerce must be regulated, especially for small enterprises and startups. It also suggests making it mandatory for ecommerce sites to have seller details on the marketplace website for all products. “This shall include the full name of the seller (the name of the legal entity), address and contact details including email and phone number. Sellers must provide an undertaking to the platform about genuineness of products they are selling and the same must be made accessible to consumers.”

Also read: Walmart to wait and watch before pumping in more funds into Flipkart

What ecommerce companies says

Rajneesh Kumar, Chief Corporate Affairs Officer, Flipkart, said, “We appreciate the government seeking consultation on the draft ecommerce policy. We look forward to working with the government and other stakeholders in developing this nascent sector, making India a competitive economy and driving greater benefits to consumers, farmers, small suppliers, infrastructure development and innovation."

In its statemet, rival Amazon India, said, “We look forward to an enabling policy to serve over 4.5 lakh sellers and a policy that will allow us to scale up our logistics network, create new jobs and infrastructure, digitise payments and delight our customers.” A spokesperson from Snapdeal said, “The draft policy's categorical rejection of inventory based ecommerce model must be followed by effective implementation of FDI norms to ensure marketplaces do not own or control inventory, directly or indirectly. The recognition of data as a strategic national asset is well-timed and will lead to the development of required regulation in this regard.”