E-commerce is one of the fastest growing sectors in India. The country has an internet user’s base of about 470 million as of July 2017, about 40% of the population. As of 2017, the largest e-commerce companies in India are Flipkart, Amazon, ShopClues, Paytm and Snapdeal. As of now, India does not have a national policy to regulate the sector. So the government is planning to bring an e-commerce law to effectively regulate the burgeoning sector. The policy includes the prevision to create an independent regulator for the sector, like the Telecom Regulatory Authority of India (TRAI) which regulates the telecommunication sector. A regulatory agency like TRAI is a government agency responsible for exercising autonomous authority over some area of human activity in a regulatory or supervisory capacity.
The government has been striving to build consensus on an e-commerce policy to mitigate the policy vacuum on key issues related to the sector as well as to effectively respond to a proposal for multilateral discipline in e-commerce at the World Trade Organization (WTO), as various government departments have contradictory views on the matter. “It is a very encouraging move to give some time to the domestic industry to come to terms with the data storage procedures before actually imposing the legislation. However, it is important to carefully examine which companies actually qualify for this,” said Amber Sinha, lawyer and senior programme manager at Centre for Internet and Society (CIS), a Bengaluru-based think tank.
According to an estimate by the finance ministry, the size of the digital economy in India will be $1 trillion by 2022 and it will account for close to 50% of the entire economy by 2030. To encourage a fair competition with the Micro, Small and Micro Enterprises (MSME), the policy draft on e-commerce proposes that all discounts should be phased out in two years. All the e-commerce companies will have to store all the data in India and for this, they will be given two years time. The Justice B N Srikrishna Commission on data protection has also recommended the localization of data storage. Although both documents suggest the government will have access to data stored in India for national security and public policy objectives, subject to rules on privacy and consent.
There has been many merger & acquisitions (M&A) in the e-commerce sector in last few years. To ensure that these M&A are not distorting fair competition, the policy proposes to pitch in Competition Commission of India (CCI). The regulatory authority will also take care of compliance with FDI caps in e-commerce in the country. Currently, 100% FDI is allowed in online stores that follow the marketplace model; no FDI is permitted in firms following the inventory model. Marketplace model means providing an information technology platform by an e-commerce entity on a digital and electronic network to act as a facilitator between buyer and seller. The companies like Flipkart, Snapdeal, Amazon follow this model primarily. Inventory model means an e-commerce activity where the inventory of goods and services is owned by an e-commerce entity and is sold to the consumers directly. Alibaba, the e-commerce giant of China follows this model.
On the consumer front, they will lose out due to the phasing out of the discount plan in two years. But at the same, their complaints are expected to get addressed in a much better manner and within the said time period. The online financial frauds and cheating by some e-commerce companies are expected to come to an end as the new regulator assumes its responsibilities. A comprehensive law and a regulator was very much required because the burgeoning e-commerce market needs to be regulated otherwise the large fish will simply eat the smaller one.