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Draft E-commerce policy mandates equal treatment of sellers, tries to address monopolistic behaviour

E-commerce companies in the country must to ensure that all sellers and vendors registered on their platform are given equal treatment, and they cannot use algorithms that prioritise select players, proposes the Draft E-Commerce Policy 2021. The policy, a copy of which has been reviewed by MediaNama, also prescribes principles on how to use customer data and safeguards around it. Importantly, it prohibits e-commerce companies from using information collected to obtain a market advantage against sellers on their platforms. The policy was first reported by Reuters.

The draft policy comes at a time when Amazon, one of the biggest e-commerce companies in the country, is under scrutiny for allegedly giving preferential treatment to some sellers, at the expense of others. According to a Reuters report from last month, just 35 sellers accounted for two-thirds of Amazon’s sales in India. This is the third iteration of the policy, the first version being released in March 2019, and the second one in July 2020.

The draft policy covers all modes of e-commerce — inventory (when the entity sells its own products and services being sold on the platform), marketplace (when an entity only facilitates sale of goods and services through the platform)  and hybrid models. It will apply to entities with both foreign and domestic investments.

The policy notes that there is a tendency in e-commerce activity for “one or two strong companies” to emerge as leaders which gain control over the repository of data. “In this world, digital capital has come to be reckoned as one that matters no less than intellectual capital (Intellectual Property) or industrial capital (funds).”

We have reached out to the Department of Promotion of Industry and Internal Trade (DPIIT) in the Commerce Ministry for comment on the draft policy, on when the draft policy will be made public for widespread consultation. We will update this post if we receive a response.

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  • Government will ensure there are no monopolies: The government, in the interest of the Indian consumer and the local startup ecosystem, will ensure that there are service providers available. It will ensure that network effects don’t lead to the creation of digital monopolies “misusing their dominant market position”.
  • Platform should be agnostic to sellers: The draft policy says that marketplace and hybrid e-commerce operators need to ensure that all sellers on their platforms manage their relationship with sellers “in an agnostic manner without being partial to any its sellers”.
  • Cannot use information to obtain market advantage against sellers: Marketplace and hybrid e-commerce operators cannot use the information collected through their platforms to obtain market advantage against sellers on the same platforms.
  • Equal treatment of all sellers/vendors: E-commerce operators need to ensure that sellers and vendors on their platforms are treated equally, and that they do not prioritise select ones. “E-commerce operators must ensure to bring out clear and transparent policies on discounts, including inter alia the basis of discount rates funded by platforms for different products/suppliers and implications of participation/non-participation in discount schemes, so as to ensure fair and equal treatment.”
  • No bias in algorithms: E-commerce operators need to ensure that their algorithms are not biased and that they don’t discriminate based on “digitally induced biases”.
  • Country of origin, value addition details to be displayed: The policy notes that consumers have a right to be made aware of relevant details about the goods and services such as “country of origin, value addition in India” at the pre-purchase stage.
  • Registration of operators mandatory: The government shall mandate e-commerce operators to register with an authority identified by it. The data collected from the e-commerce platforms will aid the government “in making necessary decisions.”
  • Data an asset, sharing for industrial development encouraged: The acknowledged the importance of data as an asset, and the need to use data from India for Indian entities first, the policy notes. It notes that the government is developing regulations for personal and non personal data. “Sharing of data for industrial development shall be encouraged and regulations for data will provide for sharing mechanism.”
    • The government will lay down principles on data usage for developing any industry, e-commerce, consumer protection, national security, law enforcement and taxation with adequate safeguards to prevent misuse.
    • Safeguards may include the regulation of cross-border flow of data pertaining to Indians. “Violation of safeguards shall be viewed seriously and attract heavy penalties.”
  • Ensure products are not counterfeit, sellers traceable: E-commerce platforms need to create safeguards to ensure that the products offered by sellers are genuine and that sellers are traceably.
    • “For products fulfilled end-to-end by the e-commerce entity, the liability for counterfeit product shall be jointly and severally of the e-commerce entity and the seller,” the policy says.
  • Create mechanism to deal with counterfeit issues: E-commerce platforms need to have a mechanism wherein counterfeit issues raised by consumers and trademark issues raised by owners can be dealt with “expeditiously”.
    • In case a seller fails to establish the genuineness of their products within a “reasonable time frame”, the platform would have to delist them.
  • Intermediaries to prevent online dissemination: Intermediaries will have to put in place measured to prevent online dissemination of pirated content. In case the platform is selling or distributed copyright-protected content without permission, they have to remove or disable access to it on being notified by the owner.
  • Industry body to identify “rogue e-commerce entities”: A body of industry stakeholders will be created, which will identify “rogue e-commerce entities” that predominantly host pirated content. These entities will be added to a list of “Infringing e-Commerce Entities (IEE)”.
    • ISPs will be required to disable or remove access within set timelines.
    • Search engines and app stores will have to remove websites identified as IEE
    • Advertisers and advertising agencies will not be allowed to host ads on websites identified as IEE
    • Payment gateways cannot support transactions on IEE
  • Activity to be monitored periodically: Information such as details of sale, import and custom duties, grievance redressal, compliance to existing or new regulations, rogue sellers, counterfeit items etc. will be collected by “concerned agencies in a periodic manner”.
  • Conformity assessment procedures: The government will put in place “conformity assessment procedures” to verify that goods and services sold on platforms meet required standards and technical regulations prescribed in sectoral regulations.
  • Bringing Indian businesses online: The government will streamline regulatory processes to ease compliance burdens, in an effort to bring more sellers online. State government will encourages to make transform their state emporiums into “e-emporiums” to increase the reach of rural craftsmen and weavers, the policy notes.
  • Strengthen India Post for exports: The country’s postal service will develop a low-cost and trackable solution for e-commerce exporters. Existing foreign post offices will be strengthened and new ones will be established to act as delivery hubs.

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