Govt Wants To Control Algorithms Of Flipkart, Amazon; No Partiality For Any Seller Will Be Allowed

The Indian government is drafting a new e-commerce policy and Amazon and Flipkart would be in even more trouble as a result of the policy. India’s latest e-commerce policy draft includes provisions that could aid local startups while also imposing government oversight on transparency in terms of operation in India.

The strategy has been in the works for at least two years, in response to demands to reduce the supremacy of global tech behemoths such as Amazon.com Inc., Alphabet Inc.’s Google, and Facebook Inc. With half a billion users and rising, India’s booming digital economy is seeing fierce competition in everything from online shopping to digital payments. 

 A Reuters report said that the draft e-commerce policy would ensure that e-retail platforms in India will have to ensure that all sellers on the platform are treated equally and should not use algorithms to give partial treatment to any seller.

“E-commerce operators must ensure equal treatment of all sellers/vendors registered on their platforms and not adopt algorithms which result in prioritizing select vendors/sellers,” says the new policy as per Reuters.

The Indian e-commerce policy

The Department for Promotion of Industry and Internal Trade is also holding consultations with different departments from March 17-19, 2021 to finalise the strategy, according to sources.

In February 2019, a draft of the national e-commerce policy was introduced, and in November 2019, another draught on consumer rights in e-commerce was introduced. Multiple rounds of deliberation have already taken place on the policy.

The draft rules would also grant the government access to the source codes and algorithms of online businesses, which the ministry believes would help protect customers from “digitally mediated biases” by competitors. The draught also mentions determining whether e-commerce companies use “explainable AI,” which refers to artificial intelligence. 

Importantly, the limitations that are applied to Flipkart and Amazon can now extend to their affiliates and related parties as well. It also states that they will update it regularly to ensure that the organisations are adhering to the correct frameworks. 

Experts View

In the draft, the government has said marketplaces cannot be “partial” to any of its sellers. Flipkart recently instructed its chosen sellers to purchase goods directly from manufacturers, as opposed to the previous model of selling products to them through Flipkart’s wholesale division.

“The fact that this will happen was writing on the wall. These issues were hammered in the heads of the companies all these years. They were very clear from day one so there shouldn’t be a negative impact from the investment point of view. It just brings the much-needed clarity on the existing rules,” said Atul Pandey, partner at law firm Khaitan & Co.

“The draft e-commerce policy purports to provide further clarity on both these issues by clarifying further as to how sellers need to be treated equally and ensuring that all sellers have a level playing field, as well as providing clarity on the specific obligations of the e-commerce entity. This would provide further confidence to foreign investors to invest in the burgeoning e-commerce space in India,” he said.