Regulating E-Commerce: Top Three Proposals Of Parliamentary Standing Committee
India's regulatory regime for e-commerce suffers from arbitrage, overlaps and gaps, says the standing committee on commerce.
Arbitrage, overlaps and gaps–India’s fragmented and ineffective regulation of e-commerce has led to these outcomes, according to the 30-member parliamentary standing committee, which suggested several regulatory fixes for the industry.
For a start, the government needs to collate data on e-commerce activity in India, it said.
The committee is perturbed to observe that critical data regarding e-commerce, such as share of e-commerce market in GDP and direct and indirect employment generated by e-commerce sector, has not been collated and maintained...Parliamentary Standing Committee Report
It has further proposed that registration of e-commerce companies with the Department for Promotion of Industry and Internal Trade needs to be made mandatory for streamlining the regulation of e-commerce. It will also assist in gauging the progress of the sector.
To that end, the committee has made the following important recommendations:
Dominance In Digital Markets
From a competition law perspective, market share is a good indicator of dominance in a sector, and one that the regulator has time and again relied upon.
This matrix might not work for the e-commerce sector where access to data and network-effects are important considerations while determining dominance, said the committee.
The Competition Commission of India must notify quantitative and qualitative parameters to ascertain dominance in the e-commerce market, it said.
Several suggestions have also been made for deals since asset and turnover-based thresholds will not work for e-commerce mergers and acquisitions, said the committee.
The Competition Law Review Committee in 2019 made a similar suggestion as a result of several deals, such as Facebook-WhatsApp, Flipkart-Myntra, Ola-TaxiforSure, Snapdeal-Freecharge, which didn’t meet the turnover or asset thresholds and so, didn’t require any CCI approval.
Currently, if the value of the assets of the target is less than Rs 350 crore or its turnover is less than Rs 1,000 crore, no CCI approval is required.
Additional criteria to widen the ambit of merger scrutiny, as contemplated in the Competition Law Amendment Bill, is the need of the hour. It would help prohibit e-marketplace giants from engaging in anti-competitive transactions that may irremediably tip the Indian e-commerce market.
So, the parliamentary committee has asked the CCI to provide guidance on the different dominance standard for digital markets.
Deals In The Digital Market Must Be Scrutinised For Competition Effects, Says Expert Committee
The existing regulatory regime against e-commerce platforms also lacks enforcement, the committee noted. Presence of an overarching regulatory body that glues together different ministries and authorities that currently regulate e-commerce will strengthen the regulatory regime.
A Digital Market Division within the CCI should be created as an expert division specifically tasked with regulation of the digital markets with participation from all the existing regulators, the committee said.
The final suggestion is to identify entities that act as gatekeeper platforms and set a threshold for qualifying as gatekeeper. An obligation must be placed on platforms to suo moto notify the regulator once it reaches the prescribed gatekeeper threshold.
The competition law must be amended to prescribe additional quantitative and qualitative criteria, such as number of registered/active consumers and sellers on the platform, number of transactions taking place, resources, bargaining position vis-à-vis its business users and consumers, and volume of revenue generated to identify entities that act as a gatekeeper platform.
Tackling Financial Frauds
Ensuring the security of financial transactions through Unified Payments Interface is vital given that a majority of e-commerce payment is undertaken through this platform, the committee said.
It highlighted that payment service providers such as GooglePay, Paytm, PhonePe, etc., generate revenue from transactions through their platform and command a major share in e-commerce transactions. But, they are not responsible for cases of frauds that occur through their UPI.
So, it has suggested that security measures or Standard Operating Procedures that are applicable to banks should be made mandatory to UPI-based PSPs to avoid financial frauds on their payment platforms.
...the payment platforms should be held accountable for financial frauds perpetuated on their platforms in case of non-compliance to mandatory security measures.Parliamentary Standing Committee Report
Dealing With Fakes
India suffers a loss of over Rs 1 lakh crore a year owing to the sale and purchase of counterfeit goods, the committee said. While India has a well-defined legal and regulatory framework for protection of intellectual property rights, laws for the virtual world need to be updated.
The committee is deeply concerned by the prevalence of counterfeit products. The unhindered presence of such products negatively impacts the revenue of genuine manufacturers and the absence of protection to the trademark and copyright products may also act as a deterrent to innovation.Parliamentary Standing Committee Report
Due diligence measures must be imposed on the sellers and platforms to ensure that products via them are authentic and do not infringe upon Intellectual Property Rights.
Sellers of counterfeit products should be made to pay the loss suffered by genuine rights holder and must be barred from the e-commerce space.
And finally, platforms should be made responsible for delivery-related, counterfeit products/services issues, the parliamentary committee said.