Amazon, Flipkart among firms facing trouble amid draft data localisation law, new e-commerce rules

By: |
February 14, 2019 10:33 AM

This has disrupted product listings on Amazon's India website and compelled it to change its business structures.

Draft law on data localisation and the new e-commerce rules have garnered severe attention in the recent policy debates.

Expressing his concerns on the same, Thomas Vajda, a visiting US diplomat, pointed out that they do not take into account the needs of all stakeholders such as American and other foreign companies. “It is in India’s interest when it undertakes these new policies to reach out to all stakeholders and think very carefully about the impact on the overall business environment,” he said.

The new changes are also being refuted by various global firms operating in India who regard it as against the spirit of globalisation and technology revolution. Moreover, many startups and companies dealing with personal data would have to bear an additional cost to comply with these norms.

Against this background, a careful analysis of these issues becomes a must.

Data Localisation

The idea of ‘data localisation’ was mooted by the Ministry of Electronics & Information Technology (MeitY) in the draft on Information Technology Intermediaries Guidelines (Amendment) Rules, 2018, based on the recommendation of a B N Srikrishna committee. Under it, all personal data of Indians should have at least one copy in India and a subset of that data, labelled as critical personal data, must be stored and processed only in India. The move would force various big companies such as Mastercard and Visa to move their data to India.

While some domestic players such as Mukesh Ambani, the chairman of Reliance Industries, have supported the idea citing privacy and security concerns, few experts have also opposed it. For instance, in a working paper of NIPF, Rishab Bailey and Smriti Parsheera, concluded that the costs of introducing broad and sweeping data localisation norms are likely to outweigh its benefits, from a rights-based perspective as well as an economic one.

New E-commerce Policy

The new rules for the e-commerce sector announced by the government in December, has banned companies such as Amazon and Flipkart from striking exclusive deals with sellers, restricted their ability to offer discounts and barred them from selling products via vendors in which they have an equity interest.

This has disrupted product listings on Amazon’s India website and compelled it to change its business structures. Flipkart had also expressed its discontent with the revised FDI e-commerce rules, said an earlier report by PTI.

With the general election around the corner, the new changes are being regarded as an attempt by Modi government to placate small traders, who had for earlier complained about the business practices of large e-commerce companies.

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