Parliamentary Committee’s Report on E-Commerce: A Pre-cursor to E-Commerce Policy?

 The media has been flooded with news of the e-commerce policy doing the rounds in the last few months and it has only intensified in the recent weeks. There is immense increasing interest on how the policy will shape up given, as there has been no formal guidance on the inclusions or conditions of the policy leaving one to make assumptions based on the previous iterations.

With the significant growth witnessed by the e-commerce sector, there have been numerous debates on the requirement of specific law and policy on e-commerce versus allowing the sector to grow and under the ambit of the existing laws. In the last couple of years, the e-commerce sector in India has been one of focus areas of regulatory planning, to the point where the regulation of the sector has been the subject matter for two parliamentary committees, which has drawn attention to the e-commerce policy.

Firstly, the Parliamentary Standing Committee on Commerce under the chairmanship of Shri V. Vijaysai Reddy, was constituted by the Parliament of India to examine regulation of the e-commerce sector in India. The recommendations were present before both the houses of the Parliament on July 21, 2022, in the form of the 172^nd Report on ‘Promotion and Regulation of E-commerce in India’ (“Recommendations Report”).

This Recommendations Report was followed by a report issued by the Parliamentary Standing Committee on Commerce under the chairmanship of Dr. Abhishek Manu Singhvi (“Committee”) that delved into the actions taken pursuant to the Recommendations Report. On March 24, 2023, this Committee published the 176^th Report titled ‘Action taken by Government on the Recommendations / Observations of the Committee contained in its 172^nd Report on Promotion and Regulation of E-commerce in India’ (“Actions Report”). The Actions Report dealt with actions that were implemented in pursuance of the recommendations on regulation of e-commerce space in India provided in the Recommendations Report. The Actions Report is based on notes of the Department for Promotion of Industry and Internal Trade (“DPIIT”). These reports provide the view-point of the Parliamentary Committee and serve as an key and valuable guiding source, providing a peek into the future of the regulation of e-commerce, including through the e-commerce policy.

Some of the key parts of the Actions Report are discussed in the following paragraphs.

Formulation of the National E-commerce Policy

The Actions Report provides that the absence of a dedicated ‘e-commerce policy’ has resulted in ineffective regulation of the e-commerce space. A comprehensive policy is of primary importance for any sector’s strategic growth; however, the Actions Report also lays emphasis on the fact that policies and regulations must be developed with an understanding of the segments and challenges of the sector.

The Actions Report mentions certain caution that the DPIIT must consider in the creation and finalisation of the policy, such as the fact that policy should not implement one-size-fits-all mechanism for the varied models of e-commerce. The DPIIT has been advised to drive the industry in direction of implementation of standards for the progressing e-commerce ecosystem, for instance through mechanisms for e-commerce players to enable self-regulation. As per the Actions Report, the proposed draft of the policy is expected to lay down comprehensive framework regarding self-preferencing, platform neutrality, deep discounting, exclusive agreements, special initiatives, special status to certain parties. Further, the Actions Report states that the policy is proposed to be agnostic to the source of capital funding, with foreign funded and domestically funded e-commerce entities to be treated alike. The Committee, in the Actions Report, also emphasises on the inclusion of an enabling framework to benefit from e-commerce and stimulate more sellers to export their products through e-commerce route.

Media Reports on Policy inclusions: Apart from the Action Report, there have been news reports that suggest that the policy is expected to reiterate regulatory concerns around inventory-based model of e-commerce; however, a marketplace may be differentiated from warehousing-based models or web-store models. While recognising technological initiatives, the policy is also expected to promulgate fairness in algorithms for ranking of goods and services. The news reports also suggest that the policy may come down on preferred sellers as well as private labels belonging to e-commerce platforms.

Regulation of Digital Markets under Competition Law

Various recommendations were made to deal with anti-competitive practices, which are regulated by the Competition Commission of India (“CCI”). Some of these include laying down different standards for determining dominant position in digital markets; moving beyond assets or turnover thresholds to capture combinations in new age economy, e-commerce, digital markets and multi-sided platforms; lack of a regulatory framework to enable periodic interaction and information exchange among regulatory bodies and ministries that govern e-commerce activities; and identifying additional quantitative criteria for gatekeeper entities. The Actions Report clarified that these were suitably addressed under a draft bill to amendment the Competition Act, 2002, issued by the Competition Law Review Committee.

Also, in another noteworthy suggestion, the CCI commenced the process to set-up an in-house specialized inter-disciplinary centre of expertise for digital markets, namely Digital Markets and Data Unit (“DMDU”). The Recommendations Report provided that the DMDU should be an overarching regulatory body for the digital economy. In this context, the Actions Report provides that the DMDU was expected to co-ordinate the actions amongst the CCI, DPIIT, Ministry of Electronics and Information Technology (“MEITY”), Ministry of Consumer Affairs, Food & Public Distribution (“Consumer Ministry”) etc., to function as an intermediary for periodic interaction and information exchange among various regulators. The DMDU would also connect with experts, and engage with industry, academia, international agencies and other regulators and departments. However, the Actions Report reiterated that DMDU would need legislative backing under the Competition Act, 2002, for regulation of digital markets with participation from all concerned regulators.

Amendment to the Consumer Protection E-commerce Rules

The Consumer Ministry issued the draft of an amendment to the Consumer Protection E-commerce Rules, 2020 (“Consumer Rules”) for stakeholder comments and public discussions in June 2021. The amendment sought to include concepts and regulatory provisions pertaining to flash sales, fallback liability for e-commerce marketplace entities, cross selling, mis-selling, misleading advertisements, mandatory registration with the DPIIT, within the Consumer Rules. The Actions Report specifically mentions that the mandatory registration requirement with the DPIIT may not be in the interest of ease of doing business. The Government and the Committee reiterated that the proposed amendment to the Consumer Rules will be focused on protection of consumer interests, including by ensuring unfair practices do not impact consumer choices and information. The industry awaits to know the consequence of the amendment to the Consumer Rules, pursuant to the process initiated in 2021.

National Policy on Cyber Crimes

With the growing utilisation of digital channels and cyber space, Cyber-crimes and frauds have also exponentially grown. In this context, the Committee termed the regulatory approach for dealing with such cyber incidents as fragmented and observed that spreading awareness will not be sufficient to reduce cyber-crimes, in-keeping with the critical nature of the cyber infrastructure with increasing dependence on digital technology. The Actions Report observed that cyber-crimes and measures to address such as skilling and training in digital crimes investigation, creation of dedicated Cyber-crime division, cyber security standards, grievance redressal mechanism, capacity building for stakeholders, require concentrated effort, may be in the form of a comprehensive National Cyber-crime Policy. The Committee has urged that the legislative consultation process should be initiated for formulation of the National Cyber-crime Policy framework.

It would be interesting to observe how this policy framework develops and its interplay with the recent directions issued by the MEITY in relation to cybersecurity laying down an extensive set of requirements for digital entities to report Cyber-crimes and maintain records.

Other matters – Actions Report

The Committee urged the DPIIT to create a robust enforcement mechanism for intellectual property related matters to reduce the instances of counterfeit products. The lack of regulation for online sale of medicines was also dealt with by the Committee, when it observed that a delay is not conducive to the fast paced digital market. The Actions Report reiterated that the Draft E-Pharmacy Rules proposed by the Ministry of Health and Family Welfare to regulate e-pharmacy and e-health platforms, must be implemented at the earliest.

The Actions Report provided that frequent changes to the foreign direct investment policy may hamper the stability and certainty for the business and the potential investors. In this background, the Committee observed that a holistic framework to address practices of self-preferencing, lack of platform neutrality, deep discounting, exclusive agreements, and preferential treatment to selected sellers, must be implemented applies regardless of the marketplace being funded by foreign or domestic entities. This has been recognised as the need of the hour.

It is interesting to note that the Actions Report is not only for additional regulation measures, but the Committee also emphasised on the need to promote ease of business through regulatory actions, such as relaxation of mandatory registration for online sellers, exemption from compulsory registration for physical place of business in states of sellers’ operations, extension of incentive schemes to online sellers, and liberalisation of e-commerce exports, etc. These are expected to remove certain hurdles currently faced by the e-commerce players, providing impetus to the growth.

What Happens Next for the E-Commerce Industry?

The Committee has spelled-out suggestions and recommendations for digital markets and e-commerce under the Actions Report, taking the baton on from the Recommendations Report. This lays down a clear path for the expected regulatory overhaul, be it in the form of the impending National E-Commerce Policy or the efficiently functional DMDU or the framework to curb cyber-crimes. However, it remains to be seen how soon the change in the regulatory landscape is effectuated.

Further, the issuance of two reports in a span of about ten months is evidence of steps in the direction of conceptualisation of the ‘National E-Commerce Policy’, which remains unimplemented despite the couple of attempts made through versions of 2019 and 2020. Arguably one of the most vital suggestions of the Recommendations Report, which was re-affirmed under the Actions Report, that is the issuance of the National E-Commerce Policy is imminent. It is likely to become reality soon, with reports suggesting that the policy framework is in the stages of inter-ministerial consultations and final stages.

The path towards e-commerce 2.0 for India appears to be almost near!