Don’t stifle e-comm with excessive regulation

The policy intent to create a facilitative ecosystem for nurturing e-commerce appears to have been bogged down with a disproportionate focus on creating an overarching regulatory framework. Raw ideas such as encouraging start-ups by providing them access to data and promoting domestic fintech industry by carving out special role for a single brand of product seem to have shifted focus from the core objectives. The move to advocate data localisation raw is another such example.

What needs to be protected?

E-commerce is being largely driven by retail, financial services, travel, recruitment and digital content and can reach $120-billion market size by 2022. The segment has grown from $10 billion to $40 billion over the last five years. Indian e-commerce and payment players have cut their teeth in this cut throat competitive world. The Indian consumer for the first time has the feeling of being the king. This growth has brought the mom-and-pop shops, taxi drivers, small hotels and restaurants, plumbers and electricians onto a market place where they are only limited by their vision and service or goods portfolio. They are finally a real part of digital India. This needs to be nurtured.

Indian policy makers need to ensure that this growth is sustainable and it does not lead to abuse of market power by firms in dominant position and the consumers are adequately protected.

The policy challenge

Unlike an offline world — consumers in e-commerce may not have the same ability to check the products or services they purchase. They may be more susceptible to frauds and face greater handicap in obtaining redress. In some areas, e-commerce is throwing up business models which are completely new, the taxi and hotel aggregator model being good examples. These have made the traditional regulatory models of tariff regulations outdated — dynamic pricing being purely technology enabled. In fintech, proliferation of non-bank payments have revolutionised the payments industry even as it threatens to relegate banks to being containers where money is stored.

These developments have heightened the competitive concerns and challenges. Business models are becoming obsolete before they mature. This is the age of innovation and co-creation. A ‘protectionist’ approach will only set India back from the strong position it is currently in as a globally preferred location for innovation and co-creation. These developments have also brought out new risks which may or may not be higher than those faced in the traditional brick-and-mortar world. Regulators and the government need a risk-based template to address these without the unintended consequence of jeopardising what is not broken.

The macro challenges facing policy makers around e-commerce in India are around access to internet in remote areas, local language content and expanding online consumption beyond the urban middle class. There are challenges around consumer protection, trust and reconciling traditional regulations with the e-commerce models.

Way forward

India also needs many more SMEs online, so that new channels are available for these companies across borders. The draft e-commerce policy has many positive recommendations for enabling SMEs, but many other recommendations need to be debated and aligned with existing laws.

The government is yet to release the draft e-commerce policy formally for consultation. It might be a good idea to focus on steps which exclusively promote e-commerce like promoting SMEs, data centre and cloud infrastructure and strengthen consumer protection. Government intervention in terms of new laws and regulators and measures which might distort the playing field should be reviewed.

We must enable the competitive forces to play out and intervene only when there is a case of abuse of market power or malpractices. The focus should be to strengthen the capacity of the Competition Commission of India where needed and impose obligations on e-commerce players to provide effective redress to consumers through the consumer protection laws.

In this fast developing market, the start-ups of today will turn into seasoned players tomorrow and the domestic firms of today are the multinationals of the future. Policy should be agnostic to these and instead keep consumers as its focus.

The writer is senior director and head – public policy at Nasscom