Search for the best deal: What India's draft e-commerce policy says

Apart from China, India is one of the few countries that has specific regulations targeted at online sellers

Regulating e-commerce in isolation is tricky as boundaries are hard to draw for any one segment of the retail business. At least three examples involving merger and acquisition deals by leading brands criss-crossing on­l­ine and offline would explain why. 

Last week, the salt-to-software Tata group made a filing with the Competition Commission of India (CCI) for acquiring a majority stake in online grocery brand BigBasket. Reliance Industries bought BigBazaar for an online-offline play but the deal is caught in a court case moved by e-commerce major Amazon. In 2018, the largest retail company of the world, Walmart, entered a $16-billion deal to buy homegrown e-commerce poster boy Flipkart. It’s tough to figure out where physical retail ends and online begins, and vice versa.      

It is no surprise, therefore, that a specific e-commerce policy to guide and regulate online shopping is rare anywhere in the world. China, with its e-commerce law, is an exception among the major economies, an analyst tracking Asian businesses pointed out.

Indeed, India too has been struggling for years to put in place a national e-commerce policy that might bring regulatory stability to the sector. On Saturday, a draft policy surfaced after an inter-ministerial meeting. The draft, which is more like a vision statement proposing a new holistic law in place of multiple Acts to deal with online businesses, will undergo several changes before becoming a policy sometime in the future.

In the draft stage, the definition of e-commerce is loose. It’s not clear if categories such as online travel, food delivery, cab aggregators and classifieds will be counted as e-commerce. “An e-commerce operator shall mean any entity that is engaged in the operational activities of selling goods or providing service through internet and other information network, including e-commerce platforms, operators on platforms and e-commerce operators selling goods or providing their service via their self-built website or other web service,” according to the draft seen by Business Standard. 

It complicates things further by stating that an e-commerce operator can operate in any of the three modes of e-commerce. Industry watchers believe that the government is referring to e-tailing or online retail, rather than an all-encompassing e-commerce policy, and that the name is an anomaly.    

So far, e-commerce has been regulated with guidelines in the form of “press notes” issued from time to time (see box).

According to Sreedhar Prasad, an independent internet advisor, it’s time to think micro. ‘’We need to focus on what needs to be regulated and what’s the benefit of that regulation,’’ he said. The idea is to be progressive and clear in regulatory policies, he pointed out. Clarity in policy is even more relevant now as the IPO story is unfolding. Several e-commerce and online start-ups are said to be preparing for IPO — the list is long, including Flipkart, Zomato, Nykaa, PolicyBazaar and Delhivery.

Elaborating on other geographies, a senior executive at an international firm, said there’s no differentiated retail and e-commerce regulatory environment anywhere else other than China. The Chinese e-commerce law is focused on consumer and supplier protection. But, in addition, the State Admin­istration for Market Regulation (SAMR) issued guidelines last month to formalise an anti-monopoly draft law in China to crack down on e-commerce players like Alibaba group’s Taobao, payment firms like Ant Group’s Alipay and Tencent’s WeChat Pay. Among other things, these rules bar companies from forcing merchants to choose among the leading internet players.  

In the US, online regulations, which have mostly brought tech majors like Google, Facebook and Amazon under scrutiny, deal with content, privacy, data localisation and competition. These are at the state level and not centralised. In the EU, the central issues revolve around data protection, cross-border regulation and taxation.

Comparing India’s online and e-commerce regulatory environment with other geographies, another com­pany executive cites the China example. In India, lack of policy transparency and the absence of sta­bility as well as predictability is a major hurdle, he said. “In China, tho­ugh businesses are over regulated, you know what to expect,’’ he added.

However, global majors have recently faced upsets in other Asian markets as well. In November last year, Walmart, for instance, had to sell 85 per cent stake in its Japanese supermarket subsidiary Seiyu after almost two decades of poor performance. Investment firm KKR picked up 65 per cent, while Japan­ese online retailer Rakuten another 20 per cent to give Seiyu a digital edge. Analysts believe a cultural mismatch may have been at the core of Walmart’s failure in a country where Tesco and Carrefour have also failed. Yet the other American major Amazon is giving Rakuten some stiff competition in e-commerce.  

Among other Asian countries, regulatory issues, including those linked to foreign direct investment (FDI), are less for global players. In Vietnam, for example, cyber security, data localisation and encryption are among the regulations that foreign businesses are expected to comply with.  

On the way forward for policies related to online businesses such as e-commerce, Harish HV, managing partner at ECube Investment Advisors, explained that regulators should understand the system better. Advising against any policy differentiation between foreign and domestic, big and small, he said the regulatory environment should only guard against monopolistic behaviour. “Otherwise, we should let the market figure out,” he added.

Analysts say when it comes to regulatory compliance, it should not be a free-for-all in India’s roughly $25-billion e-tailing market. Though still a minuscule proportion of the retail pie, the fear of e-commerce killing kiranas has a bearing on policy-making. While the government has the responsibility to protect the mom-and-pop stores, the regulatory environment must support entrepreneurship, as Prasad put it.

After all, the canvas is promising for online businesses to grow in India, with around 600 million internet users and some 50 unicorns, with 12 coming up just in the last two months.