By Vivan Sharan and Mohit Chawdhry
The Ministry of Consumer Affairs proposed amendments to the Consumer Protection (E-Commerce) Rules, 2020 in June. More recently, the Niti Aayog raised objections on specific aspects, such as the prohibition on flash sales and their inconsistency with extant Foreign Direct Investment rules. Niti Aayog’s intervention has drawn criticism from various retail trade lobbies, that want the State to protect their turf. The body also had many run-ins with line ministries. In 2019, it was involved in a dispute with the Ministry for Electronics and Information Technology over the governance of artificial intelligence (AI). The Government had to set up a committee under the Chief Scientific Adviser to resolve this dispute. This imbroglio reflected a general sense among line ministries that Niti Aayog occupies an outsized role in policy formulation. This contention merits further scrutiny, particularly in the case of digital markets.
The Niti Aayog is meant to be a new-age policy think tank, mandated to provide strategic inputs to various ministries and state governments, and established as a successor to the outdated Planning Commission. Government-affiliated think tanks which act as repositories of knowledge on policy design and implementation, are common across the developed world. For instance, the European Commission’s policy actions are guided by the European Policy Strategy Centre, which is an in-house think tank. Similarly, the German Development Institute plays a central role in developing conceptual frameworks for policy design, advising arms of government, and providing relevant training to the executive branch.
The role that such institutions are required to play necessitates that they work across traditional governance silos. This is reflected in the Allocation of Business Rules which task Niti Aayog with the evolution of a “vision of national development priorities, sectors, and strategies”, as well as the “resolution of inter-sectoral and departmental issues”, among other things. Such a dynamic and wide mandate clearly requires the body to develop interventions based on first-principles that are applicable across domains.
Niti Aayog’s objections to the E-commerce Rules, which cautioned against a muddying of regulatory jurisdictions, are based on sound first-principles. For instance, it advocates treating consumer and competition issues as distinct but connected disciplines, as is global best-practice. The Monopolies and Restrictive Trade Practices Act, which conflated consumer and competition issues, was recast into the Consumer Protection Act and the Competition Act at the start of this century. While both seek to protect consumer interest, consumer law deals with it more directly. Competition law is primarily concerned with the efficient working of markets, which indirectly relates to consumer welfare. As a result, the nature of disputes and cases under each legal framework vary and require different forms of redress. There is no reason to re-integrate these functions as the proposed Rules seek to do.
Market that rely on common technical standards and shared technology infrastructure, require a unified policy approach. This is perhaps why telegraphs, posts and telephones were put in the Union List of the Constitution. But, the Constitution still allows states to govern many industries where communications technology may be applied. Consequently, regulatory fragmentation manifests across territorial jurisdictions. For instance, since the digital technology is relatively new, centre-state allocation remains fluid. One view is that since the digital layer runs atop the telecom layer, it is naturally the subject of the Union. This view was also taken by the Law Commission in a 2018 report that suggested that the Union can devise a framework for the regulation of betting and gambling, ordinarily a state subject, as long as its online. However, there is no case to be made that the states should not have jurisdiction over key sectors like public health, despite the increasing prevalence of telemedicine and telehealth.
Even as a much-needed federal debate plays out in the digital economy, the Niti Aayog seems to recognise the pressing need to provide new markets with legal certainty. For example, online games such as fantasy sports cater to users on a pan-India basis. Yet, this class of digital services, which accounts for several hundreds of crores in exchequer revenues, is banned by states like Andhra Pradesh and Telangana, that uniformly classify all online games played for stakes as betting and gambling. This is despite several High Court rulings and a recent Supreme Court order, which protects fantasy sports formats that involve a preponderance of skill. The Niti Aayog released draft guiding principles for the uniform regulation of online sports platforms last year, an acceptance of the need for nuance. This too, became a bone of contention with various stakeholders reactively chastising the body, despite what was evidently a proactive and remedial approach.
There is innate value in the Niti Aayog’s disruptive style. It serves as a much-needed pressure valve to release the legacy governance impulses that persist in India’s new economy. This represents a logical progression away from the command and control governance models of yesteryear. It’s essential that the think-tank continues to push for a governance reboot premised on greater economic freedom and lesser state intervention.