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Business News/ Opinion / Views/  Let’s aim for a business-friendly approach to online takedowns
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Let’s aim for a business-friendly approach to online takedowns

The Digital India Act must ensure transparency in bans and reduce e-business uncertainty overall

Photo: BloombergPremium
Photo: Bloomberg

The government blocked access to 232 digital applications on 6 February 2023 under Section 69A of the Information Technology Act, 2000 (IT Act), which empowers it to take down virtually anything on the internet in the interest of national security and public order. However, unlike previous instances when Chinese-origin apps were the primary targets, local e-commerce businesses conducting regulated activities were also caught in the crossfire this time round. While good sense prevailed and the ban on Indian apps was eventually revoked, the much-awaited Digital India Act (DIA) presents an opportunity to reduce such business uncertainty.

Popular digital lending apps such as Lazypay, Faircent and Kissht were taken down via the 6 February order. The ban was lifted only after these businesses proved their legal status to the ministry of electronics and IT (MeitY). These apps reportedly found out about the bans from their peer groups or internet service providers, not from government. This whole imbroglio was avoidable and the actions vastly disproportionate, given that the businesses in question are overseen by the Reserve Bank of India (RBI), which ensures that banks and non-bank finance companies (NBFCs) are responsible for all direct or indirect lending via digital applications. It does so via its December 2017 regulations governing peer-to-peer lending by NBFCs, and its September 2022 guidelines for any indirect lending by apps on behalf of banks or NBFCs. RBI exercises holistic supervision of diverse streams of online lending, via oversight on aspects like pricing, due diligence, data storage and grievance redressal.

Bans on digital apps that operate in a fully regulated lending ecosystem raise concerns about the predictability of India’s digital economy. The prospect of sudden takedowns implicates all e-commerce in regulated segments of the economy, ranging from cab aggregation to e-pharmacies. This is a legacy of the IT Act, which allows the Executive to issue directions for “blocking of public access to any information through any computer resource" via Section 69A.

Even though the IT Act is essentially meant to recognize online transactions to facilitate commerce, it predates our e-commerce boom. Digital businesses reside within their apps or on their web portals, and consumers use these not just to transact but discover products and services, interact with other consumers, lodge grievances and so on. The fact that web addresses and apps are equivalent to digital real estate for businesses was not contemplated by lawmakers earlier. Conversely, a Section 69A order against an e-commerce website or app is tantamount to a business closure notice.

Thankfully, the government seems to recognize that the two-decade old IT Act is no longer fit for it purpose. Every business needs an online identity and the internet has reshaped the distribution and consumption of most products and services. Meanwhile, we need to nuance the application of blunt instruments like takedowns through checks and balances in the interest of the digital economy. The DIA should contemplate transparent blocking procedures, and also two other important measures.

First, businesses in regulated ecosystems such as rupee lending should be identified and registered. The DIA can establish a nodal public registry of all e-commerce businesses, whether involved in lending or other consumer markets. The new law can mandate they register with MeitY, and limit the scope of blocking powers wielded over their apps or websites. For instance, no registered business should be subject to an emergency takedown without mandatory consultations with relevant sectoral regulators; so RBI would need to approve the blocking of a lending app.

A common public registry of all digital apps in regulated ecosystems can guide law enforcement. As MeitY is the line ministry for all internet applications, this would be better than the siloed sectoral efforts that have failed to take off. For instance, an RBI Working Group on Digital Lending including Lending through Online Platforms and Mobile Apps had proposed the creation of a Digital India Trust Agency (DIGITA) in 2021. Any lending app not authorized by DIGITA would be considered “unauthorised" for purposes of law enforcement.

Second, developments in technology and business models warrant regulatory agility only possible through industry participation. The DIA should enable self-regulation across all e-commerce industries, so that digital businesses can submit themselves to oversight, and obviate any heavy-handed state intervention such as takedowns.

Self-regulatory formats are already beginning to mature in India and are moving beyond enforcement of narrow government strictures. For instance, the April 2023 gaming rules issued under the IT Act enable the creation of bodies that will create standards to distinguish real money games from betting and gambling. These bodies will also create a registration mechanism, which will give certified games a form of safe-harbour from takedowns. The political will to regulate this industry resulted in this.

It took India over 40 years to shun the command-and-control ethos of a planned economy. We must eliminate vestiges of it for the country’s progress. Safe harbours for regulated activities online are necessary to realize this ideal.

Vivan Sharan & Ateesh Nandi are tech policy experts at Koan Advisory Group.

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Published: 24 Apr 2023, 11:45 PM IST
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