A draft report on regulating e-commerce in the country flags Chinese e-commerce for their apparent security risk to the sector that is expected to grow to $200 billion by 2026 and the need to regulate them.
The report prepared by the Department for Promotion of Industry and Internal Trade (DPIIT) lays stress on local storage for protection of consumer data and proposes to grant the industry a three-year window for enforcing that shift.
However, the report rules out the need for an authority like the Telecom Regulatory Authority of India (Trai) to regulate the industry, which was valued at $38.5 billion in 2017 (This estimate excludes travel and tourism business and business-to-business (B2B) commerce). Instead, the draft released for discussion among all stakeholders, recognizes a standing group of government secretaries as the primary industry regulatory body, unlike a body of technocrats like Trai.
However, the report accepts the need for dedicated technology wings that would work with the regulators in view of the extreme specializations like artificial intelligence (AI), big data and deep learning that the e-commerce industry employs. ''This would help them understand and analyze transactions in a proper light," the draft says.
The draft policy wants the government to be able to access source code and algorithms of AI-based systems."There is a need to strike a balance between commercial interests and consumer protection issues, as well as issues of larger public concern, like preventing racial profiling and maintaining constitutionally mandated rights, such as the right to equality," the document says.
Sources say the 41-page policy document is soft on companies like Amazon and Walmart, which owns Flipkart, perhaps considering the recent harsh policy changes that have hit them adversely. "Data of companies like Amazon and Walmart are stored in India and they will not require many changes," an industry source said. "Most of the what the draft talks about are under different stages of implementation," he said, according to a media report.
With a tagline 'India's data for India's development', the report focuses particularly on the use of targeted marketing using AI to track consumer behaviour. The report seeks to regulate the use of AI bots that gather information on the frequency of website visits to search results to the time a user spends on a webpage. ''By tracking the search and browsing histories, online retail websites are able to target consumers with tailor-made marketing content," according to the draft report.
"Among the most prominent features of the draft e-commerce policy is its emphasis on data protection, including data collected by users in India and restrictions on sharing of such data, even if it is stored outside the country, even if a customer consents to such data storage," Atul Pandey, partner at Khaitan & Co, told the Business Standard website.
"It remains to be seen as to how the stringent EU General Data Protection Regulation interplays with such strict conditions on data sharing provided in the draft e-commerce policy."
The draft also proposes to regulate advertising charges on e-commerce websites. It specifically mentions small enterprises and start-ups for protection from the high tariff.