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India to Amazon: Hand Over Your Data

Retailers and other major tech players have long sought to break the barriers of entry to India and its more than 1.3 billion people, but recent policy by the country’s government may force Amazon and Walmart-owned Flipkart to hand over some of their most-closely guarded information if they want to operate in the market.

The Indian government is appointing an e-commerce regulator to ensure online sales remain competitive across the country, Bloomberg reported. A 15-page policy draft was prepared by the Ministry of Commerce’s Department for Promotion of Industry & Internal Trade, the report said, though the ministry has not confirmed the policy.

The major kicker to the proposed policy change is that it would mandate government access to online companies’ source codes and algorithms, which the ministry says would help combat “digitally induced biases” by competitors. Amazon, most notably, has held a major advantage in the e-commerce marketplace due to its ability to leverage algorithms to deliver product recommendations and optimize delivery routes.

The draft policy also said e-commerce platforms would be required to provide consumers with seller details, including phone numbers, customer complaint contacts, emails and addresses. For imported goods, the country of origin and value of work done in India should be clearly specified, the policy said.

As of October 2018, Flipkart was the largest online retailer in India, with 31.9 percent market share, followed by Amazon at 31.2 percent, according to Forrester. But the third-highest retailer, fashion company Myntra, only commanded 4.7 percent market share.

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With so much potential revenue at stake, it’s clear the government is trying to minimize the chance of a select few companies dominating the growing market going forward. Over the next two years, India’s e-commerce sector is expected to be worth nearly $72 billion dollars, according to eMarketer. The India Brand Equity Foundation (IBEF) has an even more bullish prediction, forecasting that e-commerce will surge to $200 billion by 2026.

Upon appointment, India’s e-commerce regulator also would be in charge of ensuring shoppers have broad access to information resources. The policy draft noted a tendency among leading companies to exercise control over most of the information repository.

“It is in the interest of the Indian consumer and the local ecosystem that there are more service providers” and that “the network effects do not lead to creation of digital monopolies misusing their dominant market position,” the draft reportedly says.

The draft also asks if companies are using “explainable AI” (XAI)—a type of artificial intelligence that makes solutions and methods understandable for humans. Additionally, it leaves open the question of which e-commerce platforms would have to keep information on local Indian servers or if they would be able to hold that data on their own soil.

If this mandate goes into effect, e-commerce companies would be required to make data available to the government within 72 hours, which could include information related to national security and taxation, the report said.

India has already shown it is willing to go to bat for its own startups, recently banning 59 Chinese mobile apps including TikTok, WeChat and CamScanner amid security concerns.

The potential policy changes come as Western nations are looking into the impact of technology leaders such as Amazon and Facebook on competition in their respective industries. U.S. officials have been cracking down on Big Tech conglomerates, with the U.S. Justice Department, Federal Trade Commission (FTC) and Congress investigating Amazon, Apple, Facebook and Google for antitrust violations since July of last year.

In May, Amazon CEO Jeff Bezos was called to testify in Congress by the House Judiciary Committee after Democratic lawmakers said they suspected the online giant of lying to Congress about the use of customer data to launch competing brands and products. The committee threatened to subpoena his testimony if Bezos failed to comply.

Bezos has since agreed to the antitrust hearing and will testify in late July alongside Big Tech’s top CEOs including Facebook’s Mark Zuckerberg, Google’s Sundar Pichai and Apple’s Tim Cook.

Regulators at the European Union are similarly targeting Amazon’s practice of using data collected from its third-party sellers and are reportedly seeking Bezos to answer to antitrust allegations as well. The European Commission is also reportedly looking into practices at Apple and Facebook.