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Photo: iStock
Photo: iStock

Rationalize regulatory overlaps to unleash our digital economy

Policy coherence will prevent confusion and provide the soft-touch regulation necessary for the growth of digital markets

Digital businesses in India are staring at the prospect of control by no less than six regulators, as the state attempts to govern new technology. An expert committee on non-personal data (NPD) was the latest to suggest the creation of an NPD Authority, a new supervisory body that will enable data sharing and enforce data requests. This is in addition to a recently notified Central Consumer Protection Authority (CCPA) whose remit would grant it oversight of digital businesses, and the current government’s proposals to create a regulator for personal data as well as e-commerce. India also has a sector- agnostic anti-trust regulator, the Competition Commission of India (CCI), and a telecom regulator that seems to see itself as a future licensor of digital applications.

Technology has catalysed fundamental changes over the last decade, resulting in new digital channels of creative expression, communication and knowledge formation. These developments have precipitated the need for new governance frameworks to guide transitions and respond to market failures. Meanwhile, digital businesses innovate to compete and survive, and consequently their functions and capabilities change rapidly. Some of the largest technology companies today didn’t exist a few decades ago, and they differ starkly from their traditional counterparts. Conventional governance frameworks are not agile enough to keep up.

India lacks a unified and cogent strategy to govern the transformational potential of digital markets, and this has resulted in confused policymaking. For instance, the proposed NPD Authority is expected to supervise data-sharing arrangements between businesses and government. Large digital businesses that collect or process data can be mandated to share it, ostensibly to foster greater competition or evidence-based policymaking. However, a similar provision appears in the Personal Data Protection Bill, 2019. Section 91(2) empowers the personal data regulator to provide “any personal data anonymised or other non-personal data". The e-commerce regulator proposed under the recent draft e-commerce policy has analogous powers, reportedly.

The principle of a level-playing field between large and small businesses is a common feature of calls for regulation. Kris Gopalakrishnan, chairman of the committee on non-personal data, has stated that “the most important thing is making this data available for many people to innovate and create new businesses". Network effects, which are digital market corollaries to economies of scale, are the main barriers to fair competition in digital markets. Like large-scale physical enterprises, data enterprises profit from their size because they can reach more consumers and business partners. However, the presence of such barriers are also subject to anti-trust assessments by the CCI, based on detailed economic and legal investigations.

Jurisdictional overlaps are seen elsewhere in regulation too. The CCPA will oversee misleading advertisements online, as well as the disclosure of personal information to third parties. In other words, the CCPA can also investigate and penalize businesses for violation of a data protection framework (Section 18 read with Section 2(47)(ix) of the Consumer Protection Act, 2019). The last publicly available draft of the National E-Commerce Policy proposes similar measures. An e-commerce regulator will naturally have to enforce such provisions.

Our executive rules that demarcate supervisory boundaries of government departments also remain ambiguous. For instance, the department for promotion of industry and internal trade is entrusted with all matters related to e-commerce, as per an amendment to the allocation of business rules in 2018. However, the administration of the Information Technology Act, 2000, which provides legal recognition to e-commerce, rests with the ministry of electronics and information technology.

If jurisdictional confusion persists, disputes are likely to follow. Illustratively, the Supreme Court had to settle a high-profile conflict between the Telecom Regulatory Authority of India and CCI in 2018. Such disputes are problematic because they erode economic value and trust in the supervisory capacity of the state. According to the Economic Survey of 2018-19, an increase in policy uncertainty could reduce investment growth in India for about five quarters. The Survey noted that “reducing economic policy uncertainty is critical because both domestic investment and foreign investment are strongly deterred by increases in domestic economic policy uncertainty". India must avoid creating any constraints on private investment and chart a clear path for a trillion- dollar digital economy.

India requires a “whole of government" approach to rule-making to address institutional challenges raised by technology. This involves increased dialogue and coherence among government bodies. Multi-stakeholder consultations and the promotion of self-regulation by the industry are equally necessary for light-touch governance that incentivizes innovation. Other good practices include regulatory impact assessments and international cooperation to address the cross-border dimensions of technology. Above all, the accountability of new institutions is critical to improve the quality of regulation. This is a necessary stepping stone on the country’s journey to becoming a digital superpower.

Vivan Sharan & Mohit Kalawatia are public policy consultants at Koan Advisory Group, New Delhi. These are the authors’ personal views.

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