Why entrepreneurs are wary of the new draft e-commerce policy

The article by Rahul Sachitanand was published in Economic Times on March 3, 2019. Elonnai Hickok was quoted.

If the policy, drafted by the Department for Promotion of Industry and Internal Trade (DPIIT) and seeking stakeholder comments, gets a go-ahead as it is, Gourmetdelight, her bootstrapped online vendor of organic goods, will have to certify and add reviews of all the products her marketplace sells.

She says her platform has nearly 1,500 stock keeping units - from black garlic to trikaya baby spinach - and certifying all of these would mean a further strain on her budget and small workforce. Then there are other questions she is seeking answers to: what to do with the growing volume of user data (the policy suggests the government has overarching rights over it); what is the scope of the policy; what is the definition of ecommerce and will the policy, by appearing protectionist, keep away foreign capital, so far the life blood of the sector?

In five years, according to Venture Intelligence, investors have poured over $18 billion across 667 deals in India's ecommerce market. This money, mostly from overseas, has allowed ecommerce startups to grow fast and also offer investors a handsome exit - like in the case of Walmart buying Flipkart.

Some of this momentum may be lost, fear entrepreneurs, since the policy appears to take a protectionist approach - by empowering domestic entrepreneurs, pushing Make in India and proposing to own user data and deterring global investors from betting on the potential of India's ecommerce market.

Legal experts and executives in ecommerce companies feel the draft policy is half-baked. While it makes some progress on protecting home-grown small businesses, the proposals about data ownership and stricter quality norms may make it hard for such businesses to grow.

Ambareesh Murthy, CEO of furniture retailer Pepperfry, says this is a draft that is evolving and the intent may change over time. He is wary of the proposal to give government ownership of, and therefore control over, user data. While the government argues that data is a national resource, executives feel individuals should hold ultimate control over their personal information.

While foreign company-owned Amazon and Flipkart have built their business here, newer entrants such as Chinese upstarts will find an India foray costlier, since the policy calls for setting up of an office here to legally operate. Critics also argue that while the policy starts with the right intentions, it loses focus on the way. They say the recommendations made across more than 14,000 words are too broad, encompassing more than the e-commerce industry itself.

Putting together such an all-encompassing statement isn't right, say policy experts, since it involves not just DPIIT but also other government bodies and regulators, including the Competition Commission of India.

Elonnai Hickok of Centre for Internet and Society, a think tank, says regulators do not fully appreciate the nuances of the growing mountain of data and properly safeguarding it within the country.

"The draft policy has not comprehensively addressed what is the appropriate framework for ensuring data as a national resource," she says. "It appears to take a one-size-fits-all approach - bringing in privacy, intermediary liability, piracy, authenticity of information, etc. without considering potential exceptions and implications of such measures, including rights of individuals." Anirudh Rastogi, founder of Ikigai Law, a firm tackling tech legislation, contends that too much onus has been placed on entrepreneurs and their ventures to meet regulatory norms. "The draft proposes a host of consumer protection and anticounterfeiting measures, which is a good thing on principle," he says. "But this also means a lot of requirements for platforms and other intermediaries which dilute their intermediary status."

Not everyone agrees. For some homegrown entrepreneurs, measures that look protectionist offer a level playing field to compete with well-funded foreign company-owned behemoths.

"The govt is trying to level the playing field and take away some of the power held by well-funded giants over the Indian market," says Ashish Gurnani, cofounder of Postfold, an online bespoke apparel brand. "We can now hope to compete more on variety, curation and quality, rather than discounts alone." When contacted, a DPIIT official involved in the process of drafting the policy, said: "At present, we don't have control over our data. Companies which control our data can say no to sharing it if we want that data. Servers are outside. We're incapacitated as there is no physical or legal control. We want to create jobs through the policy."