Regulation of E-commerce - EU and India

Date : November 05, 2019

Introduction

Since global retail started focusing on buying and selling of goods and services over a network, primarily the internet, the term e-commerce grew to define the same. The evolution began since the growth of eBay in the 1990s. E-commerce essentially means electronic commerce- a term self-explanatory enough but also calls out for reflecting on the incidental privacy violations and antitrust issues that grew with it.

For goods and services to be accessed on this platform, data is transferred virtually, processed and stored by enterprises. Many countries have now passed regulations to restrict such data transfer owing to concerns regarding data privacy, national security and regulation of domestic markets. Utmost importance therein being given to personal and sensitive data of individuals. The main focus for laws has been to maintain a balance between protecting said data and stabilising healthy competition in market, and efficiently using it for economic development by facilitating cross-border data flow.

European Competition Commission Inquiry on E-commerce Sector

The European Competition Commission in 2017 first launched an inquiry into the ecommerce sector based on its Digital Single Market strategy. The focus was primarily on recognising e-commerce practices that hinder competition in the market. The main findings were based on Consumer Goods, Digital Markets and ensuring no discrimination between consumers from and within EU countries.

One of the major steps was to prevent geo-blocking, which essentially means consumers can shop from cross border EU states which was earlier prohibited. The Commission further laid emphasis on scrutinising and enabling Selective Distributive arrangements only partially. Further, the interference of suppliers with final and fixed price was effectively seen as anticompetitive behaviour. However, price transparency was recognised as the basis of marketing strategies further protecting and fostering consumer interests.

A hint of restricting/banning price comparison tools that tracked a competitor’s price which in turn added to anti-competitive behaviour to increase traffic. Further, stringent licensing practices were proposed to make it difficult for new online businesses to emerge.

The effect of this included sending compliance rules to various online retailers.

A recent investigation into practices by Guess, a fashion brand that restricted its authorised retailers to set their respective retail prices drove the EU to impose a fine on the same. In the judgement the EU also mentioned that Guess prevented the retailers from being visible in online sales which hindered competition.

Draft Policy on E-commerce, 2019 (India)

The Department for Promotion of Industry and Internal Trade in March 2019 drafted a Policy on E-commerce that focused on 6 issues - (1) Data; (2) Infrastructure Development; (3) E-Commerce Marketplaces; (4) Regulatory Issues; (5) Stimulating Domestic Digital Economy; and (6) Export Promotion through E-Commerce. The analysis of these issues was based off identifying data as the crux for providing competitive edge and to provide consumer protection in light of the same.

The policy identifies data as an asset thus calling for digital capital just as important as industrial capital or intellectual capital. Further, the policy lays down that data belongs to the individual and must be used with his/her consent. Data, it states is a national asset that further maximises growth for all sections of the society.

Apart from dealing with data privacy one of the key issue is to identify a legal framework to impose restriction on the cross border data transfer. Further, guidelines for businesses that deal with data on a daily basis must be formed and adhered to. Business to Business transactions and large MNC internal data were to be exempted from cross border restrictions.

This policy, with regard to data however fails to provide a strategy as to striking a balance between promoting cross border transfer for economic and market development and data protection. Further, data ownership as much as is focused on individuals on the contrary is also termed as community data and also a national resource that the government holds.  The categorisation of the same should have been made in consonance with the Data Protection Bill, 2018.The policy should clearly provide that it refers to community data collected through IoT devices installed by government or government agencies. Further, the same is not in consonance with the Puttuswamy judgement. Thus the target of data protection lacks clarity.

The policy further states that the network effect of this data transfer have led to monopoly in terms causing anti-competitive effects. A Data Protection Authority will be established to ensure protection of public interest. The policy includes e-commerce to be for goods (retail) and services (e-network).The policy further promotes the print of MRP prices on the products that are sold on the network and also on the invoices.

The restriction on cross border transfer further might create negative effect on businesses that work offshore which in effect might make their entry difficult in India. By restricting the same, since India is a developing country, especially with regard to trade, such intense restrictions would not promote healthy entry into the Indian market.

The policy also further lays down measures to restrict piracy and exchange of counterfeit goods on the online platform. This is done in an exhaustive manner and adherence to the same would be beneficial to the society.

In the light of these recommendations and comments, it is observed that the draft policy must lay down more focus on the matters pertaining to ensuring healthy competition in market and flow of data with regard to the same. Various considerations from the European Competition Commission can also be adopted to facilitate the same.

Conclusion

Shedding a positive light to the growth of e-commerce regulations the mentioned initiatives by the European Union and Indian Ministry provide an impetus to further, more comprehensive regulations. The case of Guess is a roaring example of how the Inquiry by the European Competition Commission is effective in regulating e-commerce and also in turn providing for a balance to foster growth of other entities as well. The Draft Policy in India, on the other hand provides for a detailed analysis of types of data that exists in the market and to regulate, protect the same. However, the same should have concentrated extensively on the regulation of market competition through e-commerce. The need of the hour thus calls for methods to regulate digital economy and deal with Competition issues.

Author: Priyanshi Dixit, 4th year BA LLB (Hons.), School of Law, CHRIST, intern at IP and Legal Filings  and can be reached at support@ipandlegalfilings.com.

References:

[1] Case AT.40428 — Guess.

[2] Draft National e-Commerce Policy - India’s Data for India’s Development, 2019.

[3] Final report on the E-commerce Sector Inquiry {SWD(2017) 154 final}

[4] Comments on the draft nation E-commerce policy (online available at http://www.mondaq.com/india/x/801170/international+trade+investment/Comments+On+The+Draft+National+ECommerce+Policy)