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A Progressive Step Towards Regulating The eCommerce Sector – In response to Professor Arul’s 101 Article on Decimating Digital Competition

BananaIP Counsels > Intellectual Property  > A Progressive Step Towards Regulating The eCommerce Sector – In response to Professor Arul’s 101 Article on Decimating Digital Competition

A Progressive Step Towards Regulating The eCommerce Sector – In response to Professor Arul’s 101 Article on Decimating Digital Competition

NATIONAL E-COMMERCE POLICY DRAFT

I write in response to Professor Arul George Scaria’s article in Bloomberg where he argues that the Draft National eCommerce Policy (“eCommerce Policy”) will decimate digital competition. Arul bases his arguments on issues in the policy with respect to data ownership/sharing and intellectual property protection, and states in strong words that the policy is discriminatory, anticompetitive, protectionist, and violative of individual rights. While I agree with Arul’s comments relating to anti-piracy measures and open access, I find several of his arguments unsustainable in the context of the policy’s objectives and eCommerce business in India.

Data Ownership and Sharing

Contrary to Arul’s explication and concerns about data ownership and control, the policy does not seek to transfer rights over individual’s data to the state. It in fact specifically states that the individual is the owner of the data and her data can be used only after prior consent. While protecting data rights of individuals, the policy envisages a model where the state regulates cross border transfer of data collected legally from individuals. As per the policy, the state will hold the data in trust only to the extent of preventing unauthorized transfer and use of data beyond boundaries in the interest of ensuring that Indian data at both individual and community levels promotes economic and social progress in, and for India.

In his article, Arul takes serious objection to the analogy of data with coal and oil as data’s character is non-rivalrous, which differentiates it from exhaustible natural resources. Though Arul makes a very valid point, he misses the intent behind the comparison. The analogy with the coal mine is aimed at emphasizing the importance of data by equating it with the value associated with natural resources rather than treating it like a natural resource. Data is of course non-rivalrous, and cannot be treated like coal or oil when it comes to its allocation and regulation. The policy does not propose the said treatment and reading such an intent into the policy would amount to extrapolation. As I understand, what the policy proposes is to consider data as a valuable national asset/resource like traditional knowledge, which can be used to promote the country’s economic progress while safeguarding individual rights and interests.

As opposed to Arul’s opinion, the policy does not propose to take away rights of individuals to protect, control and permit the use of data. The importance of data rights of individuals, safeguarding privacy and requiring consent for using data are all emphasized in the policy at various points. The policy in fact mentions the Data Protection Bill and states that the focus of the strategies proposed in the eCommerce Policy is to regulate what is not covered in the law. Arul’s fears about taking away data rights and freedom of consent from consumers are unfounded because the policy does not propose to do away with consent and the data protection law will most certainly have rules and guidelines with respect to consent.

Data protection may be viewed at individual as well as national levels. At the individual level, a person has the right to manage and determine whether and how her data may be used. At the national level, the data that is legally collected following consent of several hundreds, or millions of individuals becomes an asset for the nation as a whole, the transactions with respect to which the policy seeks to regulate. It proposes strategies to restrict cross border transfer of data and sharing of transferred data with some exceptions. When data is viewed as India’s asset/resource, regulation of cross-border transfers by the Government will have no democratic or other implications. If the data is anonymized, the impact on individual data rights will in fact be very minimal or non-existent.

If data is treated as a collective resource, it will be difficult to manage and regulate use and transfer of data without data localization. The same holds true with respect to the requirement of local registration and FDI restrictions. Arul fears that data localization and the requirement of local registration will discourage investment in India, but some scholars believe that it will have the opposite effect. They believe that the measures will create a level playing field, promote home grown eCommerce businesses, enable skill development, create jobs, and promote economic progress. Also, several countries such as China, Australia, Canada, and Countries in the European Union have data localization requirements of one kind or another.

Intellectual Property Protection

Measures in the eCommerce Policy with respect to marketplaces are meant to resolve the problems of controlling IP violations on marketplaces, which are using the safe harbours and exceptions provided to them for their business benefit with very less or no regard for rights of IP owners. All one needs to do to understand this phenomenon is to undertake the task of taking down infringing products on the leading marketplaces in India. It will not take too long for the person to learn that marketplaces have developed a series of evasive tactics to deny and/or unduly delay take down requests and wear out IP owners.

In his article, Arul talks about the doctrine of exhaustion in the context of objecting to strategies for take down of products by IP owners and permission from IP owners to sell products on marketplaces. The eCommerce Policy proposes measures to be taken by marketplaces in order to prevent IP infringement and counterfeiting based on registration in database and/or complaints of IP owners. On exhaustion of IP rights, a seller is free to sell the products on a marketplace and the eCommerce Policy places the burden on the seller to establish that rights have been exhausted by producing evidence. The eCommerce Policy proposes a transparent process where the burden is moved from the IP owner to the seller to establish that the products do not infringe IP, which can be easily proved by submitting sales invoices to the marketplace. As of now, the marketplaces place the burden on IP owners and they arbitrarily decide if rights are exhausted or not. Marketplaces also use exhaustion as a ploy to retain counterfeit products on their platforms as such an approach furthers their business interests while giving them the safe harbour cover as intermediaries. Self-regulation by marketplaces has never worked, and realizing the same the eCommerce Policy places a higher burden on marketplaces with respect to consumer protection, IP protection and product liability among others, which is justified and necessary in today’s context.

Conclusion

With due respect to Arul and his opinions, I don’t think the proposed eCommerce Policy as a whole is detrimental to economic interests, anti-competitive and discriminatory. In my opinion, the policy proposes strategies that can create a level playing field and promote growth/competition in the eCommerce sector. However, some of the strategies such as anti-piracy measures have to be done away with, and certain aspects of data and IP protection must be thought through and amended before the policy is finalized. Comments from stakeholders and deliberations following those comments will hopefully produce a balanced eCommerce policy for India.

You may view BananaIP’s comments with respect to the National eCommerce Policy Draft here.

Disclaimer: The views expressed in the article are the personal views of the author and not those of BananaIP.

References

Draft E-Commerce Policy: A 101 Guide To Decimating Digital Competition, available at https://www.bloombergquint.com/author/586910/arul-george-scaria, visited on 22nd March, 2019.

Draft National e-Commerce Policy – DIPP, available at

https://dipp.gov.in/sites/default/files/DraftNational_e-commerce_Policy_23February2019.pdf, visited on 22nd March, 2019.

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