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India Needs a Proportionate and Inter-operable Digital Strategy to Regulate Digital Ecosystem

India Needs a Proportionate and Inter-operable Digital Strategy to Regulate Digital Ecosystem

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By Dr. Gulshan Rai 

Senior Advisor, Dua Consulting, an independent public affairs and business consulting practice group of Dua Associates   


Regulation of “Digital Market” and “Digital Platforms” is an imperative and the need of the hour.  The “Information Technology Rules” for regulating social media, draft Consumer Protection (e-commerce) Rules, 2020 and an Advisory Council for promotion of Open Network for Digital Commerce and measures to curb “Digital Monopolies” announced by the Government have the potential to shape the “digital market” in the country and may set a trend for regulation of “digital markets” in the future. 


The frameworks indicate the broad-based approach of the Government for regulation of “Digital Platform and Services” including e-commerce. These initiatives unambiguously reflect the intention of the Government to maintain the core principles of obligations and accountability of tech companies and e-commerce providers toward the fundamental rights of the consumer in the internet environment. As we progress in the digital economy, this broad-based approach would have a techno-legal impact on commerce be it on the net or offline, as well as on the overall ecosystem in the country. Several countries like Europe, USA, Japan and China have enacted structural legislations to regulate “Digital Market” and “Digital Platform”. 

The rise of “Digital Platforms” has transformed and brought innovative new business opportunities across sectors of the economy and catalysed social development. Moreover, emerging technologies like Artificial Intelligence and Big Data are contributing significantly to making such “Platforms” promising engines of economic growth. In fact it is forecast to play important role in India achieving the targeted US$ 5 trillion economy by 2025.  

Countrywide, there are few thousand “Digital Platforms”, operated by SMEs and few large ones run by big companies. The large players usually set the commercial conditions in a monopolistic manner and act as a gateway for businesses to reach their customers (all Big Tech Companies, Google, Facebook, Twitter, Amazon, Jio fall under this category). While this may not be a desirable outcome, the broad-based approach of the Government to regulate the “Digital Market” however will complicate matters for “Digital Services” in the country. To illustrate, take example of definitions relating to “e-commerce entity”, “marketplace e-commerce entity” and scope & applications as provided in the proposed e-Commerce Rules 2021 – these definitions are broad, covering all possible economic sectors and entities like banks, capital markets, academia, health, IT services and even those auctioning commodities like tea and telecom spectrum. All such entities and their activities would get classified under e-commerce, and it will be incumbent on them to follow Regulations of Consumer Protection Act. 

Is this the intention of the Government? Such broad definitions will create confusion, restrict economic growth and do more harm rather than promote the transparency, access and delivery of goods and services through “Digital Platforms”, as intended.  The proposed e-commerce rules will treat every single entity e.g. Amazon, Jio Mart, Flipkart, Zomato, Stationary, Shoes, Flower, Cinema tickets, and Confectionary shops on the same footing. It is a significant policy decision with far-reaching implications and therefore should be enacted after due consideration. 

Government market place (GEM) hosts more than a million sellers. More than 2 million SMEs businesses, artisans, weavers and craftsman work with each of the big e-commerce companies. The requirement relating to appointment of Compliance, Grievance and Nodal officers to respond to grievances and issues of consumers within a fixed period, will create huge hindrances particularly for such SMEs and individuals entrepreneurs, as the delay invites penalties. Contrary to the objectives, the approach of the Government will ensure that only companies operating large “Digital Platform” can comply with such regulations. The approach will inadvertently create the monopoly and result in unfair trade practices for which citizens will have to ultimately pay.

Separate laws and regulators in the country address unfair trade and antitrust practices. There is nothing to be gained by providing for such loose provisions in Consumer Protection Rules particularly when the underlying legislation (the Consumer Act in this case) is weak and deficient in such aspects of law. The consumer courts have large pending cases pertaining to large companies, delaying the relief to the consumers by preferring appeals in higher courts. 

If all stakeholders of businesses, trading through digital or non-digital means are to retain their right to economic freedom and entrepreneurial activity based on fair non-discriminatory principles, then it would be necessary to have the same or harmonisation of legal frameworks for the two modes of businesses. This would reduce confusion, enhance legal certainty of businesses and engender business confidence.  The dualism between digital and non-digital conduct is artificial, though digital transactions have some distinct features. To prescribe a whole new set of regulations for the digital sector maybe unwarranted and could lead to unforeseen legal complications. The country must avoid two different legal regimes for digital / non-digital services. 

Therefore, prior to setting up a framework to regulate “Digital Market”, it will be prudent for the Government to bring out a “Digital Strategy” on the “Approach to Regulate the Digital Market/ Platforms/ Services”. The policy must be aligned with the existing policies which promote and regulate the internal and cross border trade. It must be based on legal principles enshrined in the Constitution of India and be proportionate and Inter operable reflecting regulatory fitness both with domestic and cross border trade. The regulatory fragmentation is to be avoided and maintaining the parity in digital and non-digital business must be the core principle. The “Digital Strategy” should lead to amendments in respective laws / rules to provide for a level playing field for conduct of business be it in digital or offline mode, while protecting of the interest of consumers. A forward looking “Strategy”, taking cognizance of digital innovations will not only drive the ecosystem, but will benefit every section of society in line with the vision of the Honourable Prime Minister.