Ajit Balakrishnan: Spotting the eCommerce offender

PEOPLETECH

When the motor car first appeared on British roads the law required that a man with a red flag walk sixty yards ahead of each vehicle to warn horse-drawn carriages of the approach of these new-fangled 'self-propelled machines'.

Something similar exists today in India, not in the law governing cars but in the law governing eCommerce.

The British Highways Act of 1878 made the car driver solely responsible for the safety of horse-drawn traffic ahead of him. The Information Technology Act, 2000, in India similarly makes the eCommerce site operator solely responsible for any action buyers and sellers take on an eCommerce market-place.

Law enforcement authorities in 19th century Britain were adamant in their opposition to modernising the 1878 Act governing motor cars. They insisted that the driver of this 'self-propelled machine' warn horse-drawn traffic of his approach by having a man with a red flag walk ahead of him. Similarly, law enforcement authorities in India are adamant in their opposition to modernise the Act governing eCommerce market-places. They insist that the market-place operator be responsible that all products and services put up for sale by independent merchants.

The consequence of the 1878 British law was that a motor car could only travel at the pace of the man with the red flag walking ahead of it. This undermined the very rationale for a car "" the promise of travelling faster, cheaper and for longer distances than a horse-drawn carriage.

The consequence of the Information Technology Act, 2000, is that it undermines the promise of the eCommerce market-place "" a faster, cheaper way of buying and selling products and services. This saving in time and effort comes about by making the buyer and the seller do all the work of creating catalogues, posting them online, choosing the product, adding it to a shopping cart and swiping his card for payment. The eCommerce market-place operator merely provides the computer disk-space and related application software.

The current opposition to the emergence of eCommerce market-places and the 19th century opposition to the emergence of the motor car are part of a long trend of initial opposition to the emergence of a new technological regime. Part of this opposition arises from the difficulty of understanding how the new technology works. But most of the opposition is because of the unease about shift in the responsibilities of the various actors involved that a new technology mandates. For instance, the arrival of the motor car required that drivers get themselves certified (a driving licence), that new rules be formulated (drive on the left side of the road, signal before you make a turn), that drivers take out third party insurance that compensated for auto caused injuries and so on.

The arrival of eCommerce marketplaces is bewildering to many because it challenges our notion of a retail operation. Classical retailers exercise discretion on what is stored in their shops. The key expertise in classical retail lies in making these choices. In eCommerce market-places, the market operator makes no such choice. Vendors make the choice themselves. Nor does the eCommerce market-place operator decide the prices or evaluate the worth of the offered goods. All he does is provide tools for buyers to discover the price through an auction mechanism and rate the buyer's satisfaction level. These new processes allow massive scale to develop for the market as a whole while at the same time making it economic for the smallest vendor to afford to be on the market-place.

The subtle shift that happens when all these processes get into play is that the eCommerce market-place operator is a neutral provider of services. If a vendor posts an item (for example a pornographic film clip), his responsibility is to take it down as soon as this is reported (often by other users) and remove the vendor from the market-place if he repeatedly commits the same offence.

India is not the only country grappling with these issues. The European Union and the United States set up commissions of experts, who held intensive discussions with economists and technologists and lawyers and finally formulated laws for themselves which defined entities like eCommerce market-places to be "intermediaries". These intermediaries have no liability for goods and services posted on their marketplaces but have the responsibility to take down offending material when notified. What India needs to do is follow this same tried and tested regime "" a regime similar to that enacted by the European Union and has been recommended for use in India by a Committee of Experts appointed by the Government of India (full disclosure: I served on it). The Information Technology Bill, 2006, which contains these modern provisions, is the result of that work.

British lawmakers took many years to lend an ear to the pleas of the new motor car technologists. In 1896, eighteen years after the first Act a new Act abolished the requirement that a man with a red flag walk in front of a car warning horse-drawn traffic. The British motor car industry by then had lost the race to the Germans, the French and the Americans. The Information Technology Bill, 2006, must get passed by parliament as soon as possible lest the Indian eCommerce industry suffer the fate of the British car industry.

Comments welcome at ajitb@rediffmail.com