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Posted on November 8, 2021 Authored by Ritika Acharya* Image Source: Banking Exchange Digital lending platforms (“Lenders”) grew in popularity since the onset of covid because in a market where job losses and salary cuts became rampant, they provided easy access to credit. Lenders let borrowers take loans without any paperwork from the comfort of their homes, which prima facie seemed like a blessing for the cash-strapped workforce. However, testament to the adage ‘all that glitters is not gold’, some Lenders enticed borrowers into taking up loans with high interest rates. When repayment dates neared, the borrowers were bullied and humiliated if they did not repay their loans on time. Lenders were accused of using a variety of coercive tactics like ridiculing defaulters on social media, misusing their personal data by sending threats and spam messages to the borrowers’ contacts using their phone book access, breaching their privacy, charging hidden processing fees, etc. The subsequent suicide of a few harassed borrowers was the bullet that finally shot this issue to the headlines, prompting many to ask why and how this happened. A Public Interest Litigation (“PIL”) was filed in the Delhi High Court against the outrageous interest rates charged by Lenders. In light of this, this article aims to examine how the fintech industry should be regulated to prevent the recurrence of such practices. Narrow Scope of the Regulatory Framework The Reserve Bank of India (“RBI”) does not directly regulate Lenders. Lenders tie up with banks and registered non-banking financial companies (“NBFCs”) to whom the The RBI's 'Fair Practice Code,' (“Code”) is applicable. RBI released a circular (“Circular”) in June 2020, requiring these entities to ensure that the Lenders they collaborate with also follow the Code. However, the Circular does not have any guideline to cap the interest rate, regulate or control Digital Lending. This is applicable for Lenders working under NBFCs only. As a result, Lenders that are not connected with banks and NBFCs, and whose money lending sources do not come from public deposits through banks and NBFCs, are exempt from the RBI's jurisdiction. They are governed by different State-wise money lending statutes. For example, individual lending in Maharashtra is governed by the Maharashtra Money-Lending (Regulation) Act, 2014, while individual lending in Gujarat is governed by the Gujarat Money-Lenders Act, 2011. However, State money lending laws are not being implemented properly. Lenders started charging exorbitant interest rates higher than the maximum rate specified in State legislations. The absence of a uniform statute to govern Lenders means that there is no oversight of their operations. This is why a few of them were able to get away with using exploitative tactics against vulnerable borrowers. PIL in the Delhi High Court A PIL was filed in the Delhi High Court (“Delhi HC”) in the case of Dharanidhar Karimojji vs UOI, in which the petitioner highlighted the fact that Lenders operate in a regulatory vacuum of sorts, because no particular authority has been established to supervise the working of online money-lending app companies. The PIL alleged that the RBI was not controlling the exorbitant interest rate and other charges being imposed by these companies and failing to restrain them from harassing the borrowers. Even when the RBI had announced that all banks and lending institutions could allow a three-month moratorium on all term loans outstanding as of March 1, 2020, which was then extended for another three months up to August 31, 2020, a few Lenders pressed their borrowers to cough up their monthly EMIs on time. They used intimidation tactics on borrowers and threatened to file legal cases against them even during the lockdown when many businesses and jobs were impacted. The petitioner prayed that the Delhi HC issue a writ of mandamus directing the RBI to regulate the working of Lenders doing business through a mobile application or any other platform, to stop prevent them from charging exorbitant interest on loans from borrowers, to stop the harassment of borrowers from their recovery agents, to fix a ceiling limit on the rate of interest chargeable by Lenders, and lastly, to set up a grievance redressal mechanism for borrowers in every state to resolve the problems they face from Lenders or their agents within a specific time frame. The RBI argued that Lenders do not fall within the RBI’s purview, instead, it is the responsibility of the Central Government to regulate them. Refusing to let the RBI shirk responsibility for regulating Lenders, the Delhi HC directed the RBI to take regulatory action against Lenders. Subsequently, RBI Governor Shaktikanta Das said that the working group formed by RBI in January to study digital lending in the fintech sector, would soon release its first report on the prospects of digital lending and the risks posed by unregulated digital lending. Regulation – The Panacea For Predatory Tactics? In the aftermath of the Delhi HC’s directions, the digital lending industry has expressed apprehensions about being regulated by the RBI. Fintech players fear that heavy-handedness in regulating them could severely hurt the industry that has already suffered setbacks from loan defaults over the past year and a half. Digital lending has plenty of benefits. Lending platforms enable borrowers to take loans without spending too much time on loan applications. Digital loan applications eliminate geographical barriers and the need for physical movement. The availability of loan applications on smartphones gives borrowers comfort across devices and enables quick decision-making. The digital lending industry has been a boon to many. Therefore, should the entire industry bear the brunt of a few players’ maliciousness? No. Tight regulations may not be the answer. A decent middle ground between no regulations and tight regulations, could be self-regulation. A self-regulatory body could prevent predatory tactics from being deployed against borrowers. For example, the OJK Financial Services Authority of Indonesia (“OJK”) set up the Association of Fintech Lending Players (“AFPI”) and allowed it to self-regulate the digital lending industry. The AFPI published a code of conduct with a focus on consumer protection. It propagated ethical practices such as limiting data collection and preventing harassment, and has also has set a daily interest rate cap of 0.8 percent for lending platforms. Its members must receive certification for compliance with the proper debt collection techniques prescribed by the AFPI. The AFPI does a background check on lending platforms before granting them registration. In addition, it reports platforms engaging in misconduct to the OJK. India can follow a similar mechanism. A self-regulatory body that works in tandem with law enforcement agencies can be established to monitor the digital lending industry. This will help curb predatory tactics against borrowers while ensuring that the industry is not throttled by regulations. An equilibrium can be maintained between regulation and innovation. *Ritika Acharya is a Researcher at IntellecTech Law who takes a keen interest in technology law. She is also a law student at Maharashtra National Law University (MNLU) Mumbai, with a passion for reading and writing.

Posted on October 12, 2021 Authored by Melita Tessa and Vallari Dronamraju Image Source: National School of Journalism Introduction Recently, the Bombay High Court issued an interim stay on sub-rules (1) and (3) of Rule 9 of the recently issued Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 (“Rules”) vide its order dated 14 August 2021.[1] In accordance with this, the Madras High Court on 16th September 2021 issued an interim orderthat any action under Rules 3 and 7 would be subject to the outcome of the challenge of constitutional validity. The Rules, issued this year, bring under their ambit the regulation of intermediaries, online news content, and Over-The-Top (“OTT”) platforms. As the Rules seek to regulate the dissemination of content online, many of the provisions in the Rules have grave implications on the freedom of speech and expression, particularly on the freedom of the press. (Also see our article discussing the impact of the Rules on online speech and liberties) The Rules mandate that the publishers of digital and print news content must adhere to the provisions of the “Code of Ethics and Procedure and Safeguards in Relation to Digital Media” (“Code of Ethics”), under Part III. Such regulatory hurdles and content review requirements may impact free and fair journalism. On the digital content front, publishers have faced the ire of the government through the regulation of OTT platforms and regulation of social media intermediaries. At present, India holds a rank of 142 among 180 countries in the Press Freedom Index, indicating that India needs concrete regulations that will balance the interests of the freedom of digital and print new content, along with the adherence to the Constitution of India. Hence, the orders are a welcome change to the rights of publishers of print and digital content, as they provide temporary relief to the publishers in respect of the controversial Code of Ethics. This is further explored in this article. The Bombay High Court Order (“Order 1”) In this case filed by ‘The Leaflet’, the petitioners inter alia challenged Rules 9, 14 and 16, on the ground that they were arbitrary and ultra vires the Information Technology Act, 2000 (“IT Act”)– the legislation under which the extant Rules have been legislated – and Articles 14, 19 (1)(a) and 19(1)(g) of the Constitution of India. Unconstitutionality of Rule 9 Part III of the 2021 Rules provides that the Code of Ethics shall apply to two categories of persons or entities that include, (a) publishers of news and current affairs and (b) publishers of online curated content and will be administered by the of Broadcasting (“MIB”). Under the Code of Ethics, the Norms of Journalistic Conduct of the Press Council of India Act, 1978 (“PCI Act”) must be adhered to by print news publishers, and the programme code under Section 5 of the Cable Television Networks Regulation) Act, 1995 (“CTVN Act”) must be adhered to by digital media publishers. The former are the standards of conduct that each journalist/editor/publisher must maintain in the discharge of his/her duties as a member of the Press. The latter is intended to provide for a framework for regulation of programmes under cable service. That said, the court noted that the sanctions bolstering the Norms of Journalistic Conduct were “moral and not statutory”. Additionally, the PCI Act contemplates only mild reprimands for violations of the Norms of Journalistic Conduct, unlike in the Rules where non-compliance is subject to action “more rigorous” than under the PCI Act. Thus, the statutory regimes i.e., the PCI Act and the CTVN Act occupy different statutory fields, and it will be an arduous task to bring them both under the purview of the Rules. Therefore, the Court ruled prima facie, that the Code of Ethics suffered from two illegalities, i.e., firstly, imposition of an obligation on the publishers of news, current affairs content, and publishers of online curated content under a statutory regime completely alien to the IT Act, by applying the Norms of Journalistic Conduct under the PCI Act and the Programme Code under the CTVN Act. Secondly, Section 87, that authorises the Central Government to make rules under the IT Act, does not confer any power on the Central Government to frame rules inconsistent with its provisions. The IT Act itself does not seek to censor content on the internet, except to the extent authorised under Section 69A – that is, on grounds of : “[T]he interest of sovereignty and integrity of India, defence of India, security of the State, friendly relations with foreign States or public order or for preventing incitement to the commission of any cognizable offence”.[2] Similarly, the Programme Code under the Cable Television Network Rules were relevant, in the words of the court, to “programme[s] carried in the cable service”, but couldn’t apply to writers and publishers of content online, per se. Noting the absurdity of the outcome if the the Programme Code were to apply to online content (the editor would “necessarily be precluded from criticizing an individual in respect of his public life”), the court examines the importance of dissent and how Rule 9 would penalize writers and editors despite the restrictions of Article 19(2) not having been satisfied. Hence, it ruled that Rule 9 would be “manifestly unreasonable” and go beyond the IT Act. In addition to the above observations, the Court opined that these rules have been framed as a substantive legislation, transgressing the rule-making power available under Section 87 [KR2] of the IT Act. A subordinate legislation is intended to sub-serve the IT Act and cannot create fresh rights, obligations, and liabilities that are not traceable in the IT Act. They may be quashed if found to be unconstitutional.[3] The Bombay High Court thus issued an interim order directing a stay on the operation of Rule 9, as it was ultra vires the provisions of the IT Act by observing: “Should at least a part of Rule 9 of the 2021 Rules be not interdicted even at the interim stage, it would generate a pernicious effect. As it is, the constant fear of being hauled up for contravention of the Code of Ethics is a distinct possibility now. People would be starved of the liberty of thought and feel suffocated to exercise their right of freedom of speech and expression.” (Para 30 of Order 1[TV(J3] ) An important facet of the freedom of speech and expression is the freedom of the press which primarily consists of access to all sources of information, freedom of publication and circulation.[4] Its importance has been recognized by the Indian Judiciary in Romesh Thapar v. State of Madras,[5] wherein the Court observed that press freedom lies at the centre of all political discussion, and is thus essential for the proper functioning of the government. Furthermore, in the Shreya Singhal,[6] the Supreme Court held that discussion and advocacy of a cause, however unpopular, is within the scope of the right to freedom of speech and expression. This forms an important facet of press freedom. The Order 1 has furthered the jurisprudence developed by Indian Courts with respect to the freedom of the Indian press. Additionally, Rule 9 provides that to ensure observance and adherence to the Code of Ethics by publishers, there will be a three-tier grievance redressal structure in place, i.e., Level 1 (Self-regulation by the publishers), Level 2 (Self-Regulation by the self-regulating bodies of the publishers), Level 3 (Oversight mechanism by the Central Government). An example of why the Code of Ethics cannot be made legally enforceable can be seen in Section 3(v) of the Code, which states that “the Press shall not rely on objectionable past behaviour of a citizen to provide the background for adverse comments with reference to fresh action of that person.” This can severely limit speculation, opinion, discussion, and public discourse, thereby raising concerns regarding the validity of the Code of Ethics as observed [TV(J4] in Order 1. Rule 7, 14 and Rule 16 Rule 7 in Part II (due diligence) of the Rules, provides for the consequences in case of “Non-observance of Rules” – , wherein if an intermediary fails to observe the Rules, the provisions of Section 79 of the IT Act shall not be applicable to such intermediary and the intermediary shall be liable for punishment under any law. The Court did not order a stay on Rule 7 of the 2021 Rules, due to the absence of clear satisfaction that the petitioner was an ‘intermediary’ within Section 2(w) of the IT Act[TV(J5] . It stated that, for statutory provisions to be challenged on constitutional grounds, it is essential that the material facts are clarified and ascertained. Further, Rule 14 states that the Ministry of Electronics and Information Technology (“Meity”) must constitute an Inter-Departmental Committee consisting of representatives from the government to oversee the implementation of the Code of Ethics. The Court was of the opinion that there was no urgency to enforce a stay on Rule 14 as the inter-departmental committee was yet to be constituted. The petitioners were granted liberty to urge for this relief as and when the inter-departmental committee was constituted. Under Rule 16, if the Secretary of the Ministry of Information and Broadcasting deems it fit to block public access of any information through any computer resource in cases of, “emergency nature, for which no delay is acceptable” where it is “necessary or expedient and justifiable” to issue blocking directions, an interim measure may be issued to the persons responsible without giving an opportunity of being heard. The blocking of information under this rule, is on the grounds traceable in Section 69A of the IT Act which falls in line with the restrictions as imposed by Article 19(2) of the Constitution. The Court also noted that this rule was in pari materia with Rule 9 of the Blocking Rules of 2009, under which no grievance was faced by the petitioners. The prayer with respect to Rule 16 was thus dismissed. The Madras High Court Order[7] (“Order 2”) In the instant case filed by musician TM Krishna, Digital News Publishers Association, and journalist Mukund Padmanabhan, the petitioners challenged the Rules on similar grounds as that of Order 1, i.e., that they are ultra vires Articles 14 and 19 of the Constitution and the constitutional validity of Rules 3, 7 and 9. Firstly, in this case, the Madras High Court, upon observing that the Bombay High Court had stayed sub-section (1) and (3) of Rule 9 of the Rules, noted that there was nothing to be added in this regard and declared that the Bombay High Court’s ruling on the said Rule should be applied pan-India. Secondly, the petitioners in this case also challenged sub-clause (x) of Rule 3(1)(b) that made the provisions for grievance redressal stringent, and Rule 7 that made an intermediary liable for punishment if it failed to observe the Rules. Similar to Order 1, the petitioners also challenged Rule 9 which enforced the observance and adherence to the Code of Ethics and a self-regulated mechanism for publishers that would take away the independence of the media. In respect of the argument against Rule 3(1)(b)(x) read with Rule 7, the Court cited the Shreya Singhal judgement (paras 11-12), and observed how the intermediary, due to fear of being penalized for not complying with the Rules, may overzealously deny access to its platforms for any individual. It further noted: “Though the petitions have not been brought by hosts of website platforms, social media platforms on the website are used by one and sundry and there is a genuine apprehension, as the petitioners' suggest, that a wink or a nod from appropriate quarters may result in the platform being inaccessible to a citizen.” (Paragraph 13 of Order 2) Further, the Court opined that the exemption of liability under Section 79 of the IT Act would not apply for an intermediary if it is found to violate any guideline that the Government prescribed. It also observed that there was significant basis for the petitioners to allege the violation of Article 19(1)(a) of the Constitution owing to the coercive nature of the Rules. The Court thus issued an interim order in this regard with further hearing listed for 27th October 2021. Conclusion The Indian judiciary has consistently been a strong advocate of the constitutional right of the freedom of the press. It has acknowledged that it is the goal of the Indian Constitution to promote purposeful journalism. The said goal can be seen in Part IV of the Constitution in Article 51A(h) under Fundamental Duties. This part proposes that all Indian citizens, including ministers, elected officials and bureaucrats have the fundamental duty to develop scientific temper, humanism and the spirit of inquiry. The above-mentioned qualities cannot be developed where there is little to no press freedom in the country. Dr. B.R. Ambedkar, through his submission to the Constituent Assembly declared that no law shall violate the freedom of press freedom. He added that the only lawful limitations would be public order and morality. Though there is much to be done in terms of improving press freedom in India, the Indian courts are certainly leading us on this rewarding journey. In conclusion, the Bombay High Court and the Madras High Court, through the orders discussed in this case, have further strengthened the jurisprudence on press freedom and brought relief to the Indian Press and Media organizations as well as the general public. While the fate of the Rules remains undecided, these Orders provide some temporary relief in respect of some parts of the Rules which may have a negative effect on press and media freedom. This may pave the way for a healthy press and media industry in India. *Melita is a Researcher at IntellecTech Law and a law student at CHRIST (Deemed to be University), with a keen interest in IP and TMT law. She published her novel ‘Battle of the Spheres’ when she was 15 and is one of India’s youngest TEDx Speakers. *Vallari is an Editor at IntellecTech Law and a final year law student at the National University of Advanced Legal Studies, Kochi with a keen interest in competition law, technology law and corporate law. [1] Agij Promotion of Nineteenonea Media Pvt. Ltd. v. Union of India, WPL – 14172 of 2021 & Nikhil Mangesh Wagle v. Union of India, PILl – 14204 of 2021. [2] The IT Act, 2000, s. 69A(1). [3] Health for Millions v. Union of India, Civil Appeal No. 5912-5913/2013. [4] Union Of India v. Association For Democratic Reforms, Civil Appeal No. 7178 Of 2001 With (Writ Petition (C) No. 294 Of 2001) [5] Romesh Thapar v. State of Madras, 1950 AIR 124 [6] Shreya Singhal v. Union of India, AIR 2015 SC 1523 [7] Digital News Publishers Association v. Union of India and Others, W.P. No. 13055 and 12515 of 2021.

Image Source: Forbes On 15 September 2021, the Government issued a press release announcing various telecom reforms approved by the Union Cabinet. These reforms have been introduced in light of the struggles of the industry, especially the debt-laden telecom service providers. Pursuant to these reforms, the Department for Promotion of Industry and Internal Trade, Government of India (“DPIIT”) issued a press release on 6 October 2021 amending the Consolidated FDI Policy Circular of 2020 (“FDI Policy”) by approving FDI in this sector up to 100% without any Government approval, i.e., through the automatic route. This is applicable for telecom services, including for telecom infrastucture providers, other service providers, internet service providers, satellite communications etc. This significantly liberalises the erstwhile FDI limit of 49 % through automatic route and beyond that (up to 100%) with Government approval, in line with the Government’s objective to infuse liquidity into this sector. This certainly looks to be a promising endeavour which is likely to boost the growth of this sector and introduce emerging technologies in India.

Posted on September 23, 2021 Authored by Thrisha Rai and Vivek Basanagoudar* Image Source: The Indian Express Introduction In 2019, the ‘Delhi Vyapar Mahasangh’(“DVM”), filed a complaint under Section 19(1)(a) of The Competition Act,2002 (“Act”) against Flipkart and Amazon (“online sellers”) for indulging in practices in violation of the Act, i.e., allegations relating to anti-competitive agreements and abuse of dominance. The proceedings ahead prove to be imperative to competition law in India, especially as they concern regulation of two giant players in the e-commerce sector and their alleged anti-competitive practices. In this article, the authors aim to provide a background of the case and proceed to expand upon the four judgements pronounced by the Karnataka High Court and the Supreme Court of India. Complaint Amazon and Flipkart were accused of executing various vertical arrangements between them and their ‘preferred sellers’ on their e-commerce platforms, which in turn steers the other non-preferred sellers on the platform towards foreclosure. Reportedly, these ‘preferred sellers’ on these platforms, are in some way associated with Amazon and Flipkart. For instance, Amazon has listed Cloudtail India as a preferential seller, which is a joint venture between Amazon and Catamaran Ventures. According to the allegations in the complaint before the CCI, they have been offering deep discounts to these preferred sellers on their platform, which is detrimental to the other sellers conducting business on these platforms. In addition, several sellers complained that Flipkart and Amazon have also endowed the ‘preferred sellers’ with preferential listing and search rankings which leads to better visibility for them. Allegedly, Cloudtail India’s products were the most listed products in a search result compared to another non-preferred seller’s products. While these practices have stifled the profitability of other sellers, DVM has showed that both the companies had set up ‘Exclusive Tie-ups and Private Labels’, such as exclusive launches with smartphone companies. In essence, these private label brands were sold through their preference sellers and therefore gets a higher preference in sales. It is seen that this tactic is used by these companies in most of the product categories, especially smartphones. This compels consumers as well as the offline retailers to buy smartphones from the e-commerce platforms hence other competitors are excluded from the online market. The complaint also claimed that, selling at prices below the cost, has resulted in high entry barrier for any new entrant. Lastly, the complaint argued that the companies have the power to terminate their agreements with their non-preferred sellers unilaterally, which compels these sellers to fall in with these rules. Hence, they asserted that these practices create vertical restraints which is prohibited under Section 3(4) of the Act. DVM alleged that Flipkart and Amazon are holding a dominant position in the relevant market and are abusing their dominance in the present case by engaging and facilitating predatory pricing, which impacts the MSMEs and other retailers. Citing these observations DVM contested that both Amazon and Flipkart have an immanently anti-competitive approach, which should be investigated by the CCI. CCI-Order In view of DVM’s submissions, CCI noted that there are essentially four alleged violations: exclusive launch of mobile phones, preferred sellers on the marketplaces, deep discounting and preferential listing/promotion of private labels. In January 2020, the CCI issued its prima facie opinion noting that the exclusive launch of products “coupled with preferential treatment to a few sellers and the discounting practices create an ecosystem that may lead to an appreciable adverse effect on competition”. Also, on the issue of deep discounting, it was observed that certain products (such as smartphone brands/models) were available at significantly discounted prices and primarily sold by the ‘preferred sellers’ on such platforms. This was also found to be interconnected with the allegations of preferential listings which, in the opinion of CCI, “warrant[ed] a holistic investigation to examine how the vertical agreements operate, what are the key provisions of such agreements and what effects do they have on competition”. Therefore, CCI It has to be investigated ordered an investigation by the Director General to determine whether the practice of exclusive agreements, deep-discounting and preferential listing by Amazon and Flipkart are in fact being used to eliminate and foreclose competition in contravention of the Act. Interim Karnataka High Court Order In February 2020, the order passed by the Commission was challenged before the High Court of Karnataka (“High Court”). An interim order was passed through which the CCI’s investigation was suspended due to the lack of evidence indicating a prima facie case of exclusive agreements between the producers and the online sellers. Furthermore, an investigation into the actions of the online sellers was already being conducted by the Enforcement Directorate (“ED”) under the Foreign Exchange Management Act. The online sellers claimed that an investigation could not be initiated by the Commission until the prior investigation was concluded. CCI also failed to provide notice to the online sellers and this fact was stressed upon by Amazon. The High Court took this into account and ruled in their favour. Single Bench Karnataka High Court Order In June 2021, the Single Bench of the High Court issued its order which overturned the interim order and allowed for the CCI to go forth with its investigation. The High Court, in its ruling, opined that Section 26(1) is merely administrative in nature and therefore, there was no requirement for CCI to provide notice to the online sellers. Additionally, the limitation created by the ED’s investigation was not a valid claim due to the fact that the ED was not an e-commerce regulator. If the ED were an e-commerce regulator, then its investigation would stall that of CCI. However, since the High Court ruled otherwise, CCI was thereby permitted to continue with its investigation. The High Court relied on the cases of CCI v. Steel Authority of India[2]and CCI v. Bharti Airtel Ltd. & Ors,[3] to arrive at the above-mentioned decision. The two cases were decided by the Supreme Court and the judgements established jurisprudence which allowed the High Court to opine that Section 26(1) was merely administrative and that the investigation would not interfere with the ED’s investigation. Division Bench Karnataka High Court Order Shortly after in July, the online sellers appealed before the Division Bench of the High Court, which dismissed the appeal stating that the CCI’s investigation would not be a hindrance and the notice provided by them was in accordance with the Act. It also opined that the online sellers were resisting the investigation regardless of the fact that the investigation allowed for them to provide the CCI with evidence that could potentially absolve them and thereby end the whole matter. To further the High Court’s point, it was also noted that the online sellers were immediately ready to approach the writ courts to avoid the investigation. Supreme Court Order In August 2021, the Supreme Court of India dismissed an appeal put forth by the online sellers and stated that it would not interfere with the judgment passed by the Karnataka High Court. Conclusion It is evident from the aforementioned proceedings that the two leading e-commerce platforms in question are actively seeking to avoid or delay the investigation by the CCI. While the issue of the alleged anti-competitive practices by these platforms is yet to be determined conclusively, it is interesting to note that the e-commerce framework in India is developing to address some of these concerns by requiring marketplace e-commerce platforms to, among other things, disclose any differentiated treatment which it gives or might give between goods or services or sellers of the same category, and explanation of its search ranking parameters. This is a step towards creation of a fair digital marketplace, and it will be interesting to see how CCI’s investigation takes shape going forward. [1] Vivek is a third year law student at Jindal Global Law School. He has written several articles for IntellecTech Law in the domain of technology and antitrust laws. Thrisha Rai is a third year law student at Jindal Global Law School. Certain inputs added by Tanya Varshney, Chief Editor [2] CCI v. Steel Authority of India Ltd. & Anr., (2010) 10 SCC 744. [3] CCI v. Bharti Airtel Ltd. & Ors., (2019) 2 SCC 521.

Posted on September 14, 2021 Authored by Milind Yadav* Image Source: ISS Africa An automated facial recognition system (“AFRS”) is based on complex algorithms that capture intricate datasets of a human face and convert them into codes, which are then stored on a central storage system that can be used for remote access and cross-referencing. Despite being relatively new, this technology has observed its wide application in security and surveillance. From welfare schemes to medical treatment, this technology has found its relevance in the society. That said, with the advent of any new technology come new risks, often in the form of cyber-crimes. Interestingly, AFRS is prominently used by law enforcement agencies across the world. For instance, in the United States, the technology is used by the law enforcement agencies for mass surveillance, which reportedly promotes racial discrimination, against which Amnesty International has also raised its campaign. While the technology is also gaining popularity in the Indian enforcement regime, the lack of safeguards and dedicated regulatory framework pose risks to the civil liberty of the citizens. This article discusses the pitfalls and dangers of AFRS technology vis-à-vis the interests of society and democracy, and a ‘balanced’ approach that is the need of the hour. Status quo in India Law enforcement agencies in India have started using AFRS as pilot projects to maintain law and order. For instance, the Hyderabad Police launched “Operation Chabutra” where police randomly stopped citizens on road to collect their photographs, fingerprint, and Aadhar details without due consent. This may be a consequence of lack of adequate legislative framework to regulate the use of AFRS, specially for surveillance purposes. The officials, in this case, reportedly relied on the Prisoners Act 1920 but the said legislation allows the collection of fingerprints and photographs only for a person arrested or convicted for offences with rigorous imprisonment of at least one year and not for general law abiding citizens. Similarly, the Delhi Police has been using AFRS to identify the people involved in some recent political protests. The technology was also used in a Prime Minister-led political rally where the attendees’ faces were matched with police records. It is unclear if the data recorded during the live stream remains stored with the authorities for future use. This use of the technology is based on the Delhi High Court’s order in Sadhan Haldar v. State of NCT[1], which allowed the police to use the AFRS to find minors that were reportedly missing for a long time in the NCT region. However, the police extended its application for other surveillance purposes as well, which included screening and identifying people at the public places and peaceful demonstrations. The above-mentioned projects are just few of many officially recognised ones and it is likely that some AFRS based surveillance operations remain uncovered. The legislative framework certainly does not envisage the unrestrictive use of such technology. Despite this, the unregulated application of AFRS is in full force by relying on the provisions of the Prisoners Act, 1920 that has no rationale nexus with the intent of the enforcement agencies. Legality of AFRS and Unauthorised Surveillance Continued unregulated use of AFRS will only serve to increase the sense of distrust between the law enforcement agencies and society. Giving such advanced technology to the law enforcement agencies, who may often be politically manipulated, has the tendency to cause a chilling effect against the freedom of speech and the freedom of society at large. The use of AFRS agianst political protestors is one such evidence that the technology can be used to curb dissent, albeit indirectly. It is unclear how such use is constitutionally valid when freedom of speech and expression is protected as fundamental right under Article 21 and the Supreme Court has recognised dissent as a ‘symbol of vibrant democracy’. This is problematic also because the technology is evidently inaccurate and the accuracy range varies across technologies and demographics, according to several reports. For instance, in the United States, AFRS is being criticised for being racially biased. A 2018 MIT study found that leading facial recognition tools are significantly more prone to misidentify people of colour. Arguably similar biases may be observed in India as well due to religious, caste, and regional bias. The National Crime Records Bureau reported that Muslims, Dalits, and Adivasis make half of the prison population despite being relatively small part of the total population. Since AFRS is based on machine learning that relies on sample data for predictive decision making, wide-scale use of this technology may inevitably misidentify marginalised sections of the society. Another risk posed by AFRS is the threat to people’s privacy. For instance, Uttar Pradesh recently implemented a project where AFRS can read facial expressions of women for signs of distress and report to the nearest police station automatically without any consent mechanism. Such projects have a flagrant disregard towards privacy rights due to the lack of consent, control and knowledge over the personal data that is being collected by such agencies. Notably, the Puttaswamy[2]judgement established privacy as fundamental right which can be infringed by the state only when an action is taken that is backed by law and proportionate to serve a legitimate purpose. It is unclear how these thresholds are being met under the current use. Therefore, the use of AFRS under the current regime is not duly supported by the legislative framework and is arguably unconstitutional. Way Forward To limit the severe damage caused by law enforcement agencies using AFRS on society, several cities in United States like San Francisco, Oakland and Somerville have chosen to ban enforcement agencies from using the technology, citing that the technology is invasive, inaccurate, and unregulated. It also promotes racial biases and invades the privacy of the individuals under the garb of public safety which is promoting an Orwellian society. [Also see here our article analysing European Union's guidelines on facial recognition technology] In a recent PIL before the Delhi High Court, the petitioners argued that three surveillance systems namely, NATGRID, NETRA, and CMs are being used without any legal authoirty. Prashant Bhushan, on behalf of petitioners, argued that the Government’s actions are not proportionate to the citizens’ right to privacy, as established by the Puttaswamy judgement. While the matter is lis pendens, it clearly reflects that the use of AFRS and other related technology has already penetrated the State surveillance mechanism and there is a need to take urgent action against such unregulated use. In the author’s opinion, a complete ban may not be the ideal solution (considering the benefits of the technology in improving the efficiency of state to maintain public safety and national security). However, considering that the technology is already widely used for unauthorised surveillance by the enforcement agencies, and a comprehensive legislative framework would take considerable time, a ban tends to be the only immediate solution to protect the privacy rights of the people. This would ensure that the AFRS is not arbitrarily used by the State against its own citizens and would also provide the much-required time to the legislation to establish a legal framework that could regulate the use of AFRS, while maintaining a balance between the legit use of technology for public safety and protecting the right to privacy against undue surveillance. A framework that India may reflect upon is the United States’ Facial Recognition Technology Warrant Act 2019, a federal bill that requires federal law enforcement to take permission from the judge before using the technology for a limited time-period. The judge allowing such use is required to report to the U.S. court administrators to track its usage. This can be used as a blueprint by the Indian legislature to regulate the use of the technology instead of entirely banning it or leaving it unregulated as long-term strategy. Another significant issue arises with the admissibility of the evidence-based on AFRS. Section 65B of the Indian Evidence Act 1972 deems ‘electronic records’[3] as document[4] and finds them admissible without any further proof. It can be inferred that results derived from AFRS may be admissible as evidence. However, this would be problematic because it solely rests on the consciousness of Courts to understand the scope of inaccuracy in the technology. Further, the issue with the evidence jurisprudence in India is that it allows admissibility of evidence even if it is collected illegally. For instance, in certain cases, Courts have refused to exclude evidence solely on the ground that it is obtained illegally. Thus, evidence obtained from unauthorised use of AFRS for surveillance could potentially be admissible before Courts. Therefore, the law needs to make sure that such use is considered not just inadmissible but also illegal to protect the civil liberty of the society. Conclusion Facial recognition technology, despite being useful in limited circumstances, can potentially give unlimited power to law enforcement agencies. Certainly, a democratic state cannot trade the privacy rights and freedoms of society under the garb of maintaining law and order, without adequate checks and balances. Such unregulated use is against the spirit of democracy and would lead to a dystopian situation as in China. India needs to completely ban the use of the technology as an immediate solution and should work on building a framework that standardises the accuracy and reliability of the system and clarifies the scope of its application. It is yet to be seen if the judicial system will seek out the protection of fundamental rights or whether the legislature will take initiative itself. [1] W.P.(CRL) 1560/2017 [2](2017) 10 SCC 1 [3] Section 65B (1) of the Indian Evidence Act, 1872 identifies “electronic record” as any information stored, recorded, or copied in optical or magnetic media produced by a computer. [4] The Interpretation Clause (Section 3) of the Indian Evidence Act, 1872 identifies “document” as any matter that is recorded on any substance by means of letters, figures, marks, or their combination. *Milind is a penultimate year undergraduate student, studying at Jindal Global Law School. Views of the author are personal and do not reflect the views of IntellecTech Law or any members associated with it.

Posted on August 27, 2021 Authored by Tanya Sampath Sharma* Image Source: The Rio Times On June 21, 2021, the Ministry of Consumer Affairs, Food, and Public Distribution (“Ministry”) proposed amendments (“Draft Amendments”) to the Consumer Protection (E-Commerce) Rules 2020 (“E-Commerce Rules”) and invited feedback from involved stakeholders. A press release by the Government clarified that the Draft Amendments were an effort to protect consumer interests against unfair and anti-competitive practices with regulatory intervention. In essence, the new legislation is simply an addendum to the teething E-Commerce Rules, to establish certain ground rules for e-commerce entities in India. What are the Rules? Under the Draft Amendments, the definition of ‘e-commerce entities’ includes: "any person who owns, operates or manages digital or electronic facility or platform for electronic commerce, including any entity engaged by such person for the purpose of fulfilment of orders placed by a user on its platform and any ‘related party’ as defined under Section 2(76) of the Companies Act, 2013, but does not include a seller offering his goods or services for sale on a marketplace e-commerce entity". The scope of this provision has been widened to include ‘related parties’ as relevant under the definition. The significance of this is fundamentally that several e-commerce entities like Amazon India and Tata Group don’t always conduct businesses directly and often use a third-party route. Amazon India holds an indirect stake in Cloudtail and Appario, two of its primary sellers, while Tata Group currently holds a joint venture with Starbucks. The provision could potentially impact their business models. Amongst the proposed compliance requirements are the appointment of a Chief Compliance Officer/Grievance Redressal Officer. Rule 5(5)(a) and (b) set forth conditions for the designation of a compliance officer and a nodal officer to ensure strict compliance with the guidelines. If that sounds familiar, it is so because this is also a newly introduced compliance requirement for ‘significant social media intermediary’ in the Information Technology (Intermediary Guidelines sand Digital Media Ethics Code) Rules 2021 (“IT Rules 2021”). A few contentious requirements in the Draft Amendments include: 1. A ban on flash sales: Rule 5(16) bans e-commerce entities from engaging in flash sales, which have been defined under Rule 2(e) as ‘a sale organised by an e-commerce entity at significantly reduced prices, high discounts, or promotions for a pre-determined period of time for select goods or with the intent of drawing a large number of customers.’ The Government clarified in a post-facto press release that the ban applied only to conventional flash sales which limit consumer choice by indulging in back-to-back sales. 2. Misleading Advertisements and Mis-selling: According to Rule 5(4) and 5(11) respectively, e-commerce entities must not engage in misleading advertising and nor must they mis-sell their product through misrepresentation. 3. Tightening the bolts on imported goods: During the sale of imported goods, the e-commerce entity must disclose certain details to the consumer such as the name of the importer and country of origin. The e-commerce entity must also take steps to ensure that the products do not disadvantage domestic sellers (Rule 5(7)). 4. Explicit consent: The Draft Amendments also require consumers to express explicit consent and affirmative action before any purchase can be legitimised. 5. Capping anti-competitive behaviour: Rule 5(17) of the Draft Amendments clearly state that dominant entities shall not be allowed to abuse their position in the market. 6. Furnishing relevant data: Similar to the IT Rules 2021, E-Commerce entities are also required to furnish lawfully authorised information when requested by the Government within 72 hours’ notice "for the purposes of verification of identity, or for the prevention, detection, investigation, or prosecution, of offences" (Rule 5(18)). Stakeholder Feedback to the Rules If it isn’t already obvious from the requirements (few of many) stated above, the Draft Amendments work towards the primary goal of tightening the noose on unfair market behaviours. It’s important to understand that they don’t stem from nowhere. The ban on flash sales, for example, is an inevitable response to Confederation of All India Traders’ (“CAIT”) previous accusations towards Amazon and Flipkart for anti-competitive practices during their flash sales by giving unmatchable discounts and flouting FDI regulations. In CAIT’s submitted feedback to the Draft Amendments, they stressed on further transparency in the operation of e-commerce entities, easy accessibility and stricter grievance redressal mechanisms, which would be key enablers to a "robust and dynamic regulatory framework". Swadeshi Jagran Manch was another organisation to provide feedback to the proposed legislation. In their submission, they welcomed the clauses that required compulsory registration of e-commerce entities and their feedback largely involved clarifications of several clauses. However, the overall response towards the Draft Amendments has been less than positive. While certain actors have lauded the decision to protect consumer interests and have offered constructive criticism, the new move doesn’t seem to be sitting well with many involved stakeholders. E-commerce giants like Tata Group, Amazon, and Flipkart have expressed discontent at the definition’s ‘related party’ clause as being too broad and potentially damaging to their fundamental business models. The Tata Group vocalised their concern that their joint venture business with Starbucks stood to be affected through this clause. A source confirmed to Economic Times that the stakeholders also believed certain clauses of the new legislation to be contradictory to FDI regulations. This criticism has not been received well by the Government thus far. In a heated speech, India’s E-Commerce Minister Piyush Goyal criticised Tata Sons for their objection towards the Draft Amendments, implying that they were selfish for doing so. The Internet and Mobile Association of India (“IAMAI”) indicated that the Draft Amendments were a ‘deterrent’ to the industry’s growth and would likely have ‘unintended negative consequences’ on consumers. In its response to the Ministry, IAMAI stated that Draft Amendments ‘fail to provide a level-playing field between Online and Offline e-commerce/retail’ and would increase compliance burdens on MSMEs and start-ups through overregulation. IndiaTech – an organisation supporting and representing India’s consumer online start-ups and investors – voiced disconcertment over the potential damage to ease of business in India, reiterating IAMAI’s stance on overregulation. India’s SME Forum was also amongst those concerned about the impact of the Draft Amendments. Representing over 86,000 MSME actors, the industry body made note of the fact that the compliance burdens set forth by the proposed legislation would unfairly impact smaller e-commerce entities and render the marketplace inaccessible to small and medium businesses. The Impact? First and foremost, the Draft Amendments have been brought into place to secure consumer experiences. While there are several parts of the Draft Amendments that may be lauded this focus, there are several distressing elements that may disturb and hinder a booming industry. According to a report by India Brand Equity Foundation, the Indian e-commerce market is set to reach a valuation of $200 billion by 2026. Overregulation may kill this growth. The Draft Amendments are also clear on their stance regarding anti-competitive behaviour. It’s hard to ignore the most recent update in competition law – the CCI probe into e-commerce giants Amazon and Flipkart for anti-competitive behaviour – as a potential trigger for the Draft Amendments. As for users, there are several parts of the Draft Amendments that are alarming. Like the IT Rules 2021, the Draft Amendments have set forth a proposition requiring e-commerce entities to assist law enforcement agencies (including by sharing data as required) within a tight timeline A clause like this could pose serious concerns, especially in a country without a comprehensive data privacy legislation. Without strict infrastructure around data protection, the destabilization of users’ sensitive and personal information is dangerous and can open itself up to severe data breaches which would, amongst other serious consequences, lead to a loss of consumer and stakeholder trust and could seriously hamper industry growth. Conclusion The fundamental problem with the Draft Amendments is that its heart might be in the right place but without serious improvement and clarification as requested by stakeholders, it can become a slippery slope of overregulation and extreme intervention. During Narendra Modi’s prime ministerial campaign, he rode the wave with an important slogan: ‘minimum government, maximum governance.’ It will be interesting to see whether the Government is able to stay true to this once an outcome is reached. *Tanya Sampath Sharma is an Editor at IntellecTech Law and a final year student at Faculty of Law, Delhi University. She harbors a strong interest towards technology, media and intellectual property laws and, when not editing or immersed in law, can be found holed up with a book.

Posted on August 9, 2021 Authored by Vallari Dronamraju* Image Source: India TV Digital Markets and the Hotel Industry The digital market in India has been growing by leaps and bounds, specifically in the hotel industry. OYO[1] offered an important breakthrough to the traditional way of booking and has facilitated budget accommodation. Online travel agents[2] like MakeMyTrip India Pvt. Ltd. (“MMT”) and Ibibo Group Pvt. Ltd. (“Go-Ibibo”) have become an important access route to consumers, having put into place a framework that promotes transparency and platform-to-business contracts. After the merger (“MMT-Go”) between the two, there was a significant expansion in business for the growing travel industry in India, which was further accentuated by an increase in demand throughout the COVID-19 pandemic. In March 2021 (“2021 Order”), the Competition Commission of India (“CCI”) took a stern step in the regulation of the activities of MMT and OYO in FHRAI, FabHotels & Rubtub Solutions v. MMT, Go-Ibibo & OYO. OYO and MMT-Go had entered into a confidential commercial agreement (“Agreement”), which allegedly led to the denial of market access and discrimination between similarly placed players. As contended by the informant-hotels, in this Agreement MMT had agreed to give preferential treatment to OYO and its hotels on its platform and de-list every other hotel, causing detrimental effects to the informant-hotels’ business along with denial of market access. In light of the above order given by the CCI, this article will explore the implications of a vertical agreement between a budget hotel and an online hotel booking service and its impact on the relevant digital market. Tracing the trajectory: Background into the CCI’s order Case No. 14 of 2019 The ordeal of the MMT-OYO Agreement and its anti-competitive nature began in 2019, where the CCI, in its order dated 28 October 2019, CCI found that thezre exists a prima facie case for investigation under Section 4 of the Act against MMT-Go and OYO in favour of Federation of Hotel & Restaurant Associations of India (“FHRAI”). The CCI observed that the combination of MMT-Go led to dominance in the relevant market of OTAs, which empowered it to operate independently of the competitive forces prevailing. Case No. 01 of 2020 In a separate case involving similar facts and issues, Rubtub Solutions Pvt. Ltd. (“Treebo”) (involved in the business of providing franchising services to budget hotels in India) had alleged that MMT has abused its dominant position Treebo claimed that, in 2016, MMT proposed to make a significant investment in Treebo if Treebo agreed to list its hotels exclusively on MMT’s platform. If Treebo did not accept MMT’s proposal, it was allegedly threatened to be removed from MMT’s platform. It was also contended that eventually MMT agreed to list Treebo back on MMT platform subject to Treebo entering into ‘Exclusivity Agreement’ and ‘Chain Agreement’ with MMT. However, despite Treebo’s acceptance of these terms, MMT allegedly unilaterally terminated these agreements due to OYO’s agreement with MMT where MMT agreed to remove OYO’s competitors like Treebo from its platform. In this case, CCI found a prima facie case of contravention of Sections 3 and 4 of the Act. Given the similarity of issues, the CCI decided to club this matter along with Case No. 14 of 2019. The Interim Order by the CCI in 2021 The CCI, in the 2021 Order, considered the petitions of FHRAI, FabHotels, and Treebo in the aforementioned cases against MMT, Go-Ibibo, and OYO alleging that delisting of their hotels from the defendant’s portals had caused an adverse effect on their growth. The informant-hotels prayed for an interim relief of being relisted on the portals of the defendants. Interim relief awarded In this order, the CCI referred to the precedent set out in the SAIL judgement with respect to the three conditions for grant of interim relief. Under the first condition or the assessment of a ‘prima facie’ case, the CCI opined that there was nothing to suggest that MMT-Go did not enjoy the dominance in the relevant market and that the facts in the present case were more compelling than the prima facie stage. The conviction of the CCI was strengthened by the recent global shift in the distribution architecture including India, with digital distribution channels growing at an unprecedented pace. The second condition (i.e., the balance of convenience assessment) is comparative in nature and the CCI must compare the inconvenience caused to the applicant if the interim relief is refused and the inconvenience caused to the opposite party, if the relief is granted. While examining this condition, the CCI was of the opinion that MMT-Go will not be put to much inconvenience even if they have to provide access to these players on its online portals. Under the third element of the SAIL judgement, the CCI must be satisfied that the party would suffer irreparable and irretrievable damage, or if there is a definite apprehension that it would have an adverse effect on competition in the market. In this order, the CCI observed that the denial to market access to the informant-hotels was lethal to the functioning of their businesses. In the interest of free market and trade, the Commission exercised its discretion and allowed interim relief, and directed MMT-Go to allow the applicants to be listed on its online portals. The interim relief, under Section 33, was thus awarded to prevent any potential harm that could occur due to the alleged conduct. “The Commission is thus, convinced that the conduct of MMT-Go in delisting and continuing to delist franchisee service providers, specifically FabHotels and Treebo, as well as the budget hotels which were availing some logistic support from them, has affected competition in the market by denying access to an important channel of distribution through foreclosure. It is in the interest of free market and trade that injunctive orders are called for in this matter and the Commission finds it a fit case to exercise its discretion to allow interim relief in the matter, till further orders. The Commission notes that FabHotels and Treebo have primarily prayed for a relisting on the MMT-Go portals for attaining visibility. Accordingly, MMT-Go is directed to allow FabHotels and Treebo to be listed on its online portals.” - Paragraph 117 of the 2021 Order The Abuse of Dominance and Anti-Competitive Effects through the Agreement The appreciable adverse effects on competition (“AAEC”) of the exclusive Agreement under Section 19(3) of the Act, include the creation of barriers for new entrants into the market or driving out existing competitors. In the 2021 Order, the CCI reiterated the prima facie findings in the Case No. 14 of 2019 and Case No. 01 of 2020, especially given the admitted existence of MMT’s contractual commitment with OYO. The CCI in this order, also observed that MMT-Go held a dominant position, under Section 4 of the Act, in the online hotel booking market. Noting the reports published at the end of 2017, the CCI observed that OYO and MMT-Go announced a tie-up through a joint press statement that indicated a shift from an aggregation model to a franchise model, reducing operational costs and improving serviceability. Further, if FabHotels and Treebo were not viewed as competitors by OYO, there would have been no reason why OYO would ask MMT-Go to agree to such a condition. Further, establishing a denial of access indicates an anti-competitive effect/distortion in the market in which the denial has taken place, leading to a dominant position in the market. To judge the extent of the abuse of dominance by an enterprise, it is also essential to look into the share of the relevant market and the possible existence strategy aiming to exclude competitors that are as efficient as the dominant entity. It includes the market for travel and related services and booking of hotels/accommodations, which for MMT-Go includes all alternatives available with such hotels/franchising service providers and the competitive constraints. Further, the CCI was convinced that denial of access to dominant online intermediation, complete or absolute, can be lethal to the functioning of businesses that rely on these high-value intermediaries to reach the end-consumers. The CCI acknowledged that it “cannot be oblivious to the fact that an exclusivity arrangement between a dominant player and another player with a significant market power in the vertical chain can possibly allow such players to bolster their respective strengths which may not augur well for the market or other market participants”[3].The existence of such an anti-competitive practice was inferred from coincidences, which taken together, in the absence of a plausible explanation, led to the Agreement causing AAEC effect on competition in the market in the prima facie view of the CCI. In furtherance of this, the CCI directed interim relief in the 2021 Order, which was reaffirmed in June 2021, when the CCI directed MMT to relist the properties of Treebo and FabHotels on its portals, in the next month. Future Implications of the Order on the Digital Market The explosion of online commerce has changed the dynamics of consumer preferences and transactions. Large online platforms may control online distribution through strong network effects in the digital environment, and their ability to access and accumulate large amounts of data. OYO has held a significant market share in India and continues to hold a large share across the globe. In the US, it has been taking the market by a storm by entering 2021 with new hotels in Colorado, Georgia, Iowa, Mississippi, North Carolina, and Texas. Therefore, as a market regulator, it is imperative for the CCI to ensure that all stakeholders get an opportunity to compete on merits and get a fair chance to be part of digital commerce. The Agreement between MMT-Go with OYO was not in the interest of fair competition and it resulted in significant losses to other aggregators including FabHotels and Treebo. Continuation of such an exclusionary agreement could change the competition landscape tipping the markets in favour of MMT-Go and OYO, causing irreparable harm to market practices. The pandemic had also weakened the applicant's position as credible competitors in the market. Digital markets are susceptible to misuse and exploitation now more than ever, and it is imperative that the regulators keep a check on the effects these can have in a dynamic economy like India, in accordance with competition policy objectives. *Vallari Dronamraju is an Editor at IntellecTech Law and a final year law student at the National University of Advanced Legal Studies, Kochi with a keen interest in competition law, technology law and corporate law. [1] Oravel Stays Private Limited (“OYO”) is the largest hospitality company in India, and a dominant player in the market for franchising services in the digital market for budget hotels. It has grown into one of India’s most valuable private companies in the last decade, with a presence in more than 800 cities, with more than 23,000 hotels, worldwide. [2] An OTA is a travel website that specialises in assisting in online search, comparison and booking of travel products that include accommodation services. [3] Paragraph 102 of the CCI Order

Posted on August 2, 2021 Authored by Ritika Acharya* Image Source: Afternoon Voice Introduction In June 2021, numerous reports emerged about a spyware called ‘Pegasus’ being used by the Indian government (“Government”) to hack the mobile phones of over 300 journalists, human rights activists, business persons, and politicians. Developed by a private Israeli firm, the Pegasus spyware when targeting a mobile phone, has the ability to read messages, track and record calls, track user activity within apps, gather location data, access video cameras in a phone, or listen through their microphones. Besides being a grave violation of both human rights and legal rights, such surveillance has broader implications for cross-border data transfers between India and other jurisdictions. India’s data protection practices are already viewed internationally with skepticism, given that it lacks a comprehensive law protecting its citizens’ data. This article aims to analyse how the Pegasus scandal may impact the transfer of data between India and the EU, especially in light of the judgement rendered in July 2020 by the Court of Justice of the European Union (“CJEU”) in C-311/18 Data Protection Commissioner v Facebook Ireland and Maximillian Schrems (“Schrems Ruling”). Infraction of Indian Law Although it is legal for the Government to carry out interception and monitoring as per the standards laid down by Section 69 of the Information Technology Act, 2000, (“IT Act”). In no circumstance does the IT Act permit interception through the use of spyware. Rather, installing spyware on a computer or a mobile device constitutes a cybercrime under Section 43 and Section 66 of the IT Act. So far, the judicial precedents in India have upheld an individual’s right to privacy as being inclusive of the use and control over one’s mobile phone/electronic device. The Hon’ble Supreme Court in People’s Union for Civil Liberties v. UOI has concluded that any interception by means of hacking/tapping of a phone, is an infringement of Articles 14, 19, 21 of the Constitution. Unauthorized interception through spyware also violates the doctrine of proportionality set out by the KS Puttaswamy v. UOI judgement, as per which any invasion of privacy should be proportionate to the goal it seeks to achieve. Since Pegasus is not a lawful method of Government interception and no information has been released by the Government about the purpose for which it deployed the spyware. This makes the Government’s use of Pegasus arbitrary and in excess of its powers. A Summary of the Schrems Ruling In the Schrems Ruling, the CJEU took a detailed look at the ‘Privacy Shield’ mechanism of data transfer between US and EU. It found certain US surveillance practices such as PRISM and UPSTREAM invasive of Europeans’ privacy. The Court held that the US did not provide for an essentially equivalent, and therefore sufficient, level of data protection as guaranteed by the General Data Protection Regulation (“GDPR”) and the EU Charter of Fundamental Rights (“CFR”). The legal basis of US surveillance programmes was not limited to what was strictly necessary and would be considered a disproportionate interference with the rights to protection of data and privacy, since they did not sufficiently limit the powers conferred upon US authorities and lacked actionable rights for EU subjects against US authorities. Thus, the CJEU invalidated the Privacy Shield. EU companies had to refrain from transferring data to the US under the Privacy Shield framework as a result of the Court's decision. Companies who continue to transfer data through a legally invalid mechanism face a fine of €20 million or 4% of their global turnover, whichever is greater, as per Article 83(5)(c) GDPR. How Might Pegasus Violate the Schrems Ruling? The transfer of data from EU to India is quite common, particularly when EU companies outsource their data processing to Indian companies. If the Government uses Pegasus to spy on Indians, it could invariably end up accessing any EU subjects’ data in the possession of Indians. This is a real possibility, considering that the scope of Pegasus could be much broader than what the news reports suggest. Consider the following scenario – European company A transfers the data of EU subjects to Indian company B. The Government then deploys Pegasus to spy on the business operations of company B. In doing so, it gains unauthorized access to EU subjects’ data. The Government’s surveillance through Pegasus may not be in line with the Schrems Ruling because it would highlight the Government’s failure to safeguard EU subjects’ data and the lack of actionable rights for EU subjects against Indian authorities. Given the scarcity of information about how Pegasus has been used and exactly who all it has targeted, it is unclear whether there lies any legal remedy for Indians against the Government’s misuse of Pegasus, let alone whether EU subjects would have any legal remedy should their data be indirectly spied on. Unchecked snooping through Pegasus could also evidence that India does not maintain adequate data protection as per the GDPR standards. If this surveillance is expanded to EU subjects’ data, it would bring the Government under fire of the EU regulatory authorities. Transborder data flows are vital for India’s exports of services and the EU is one of the key markets for India’s ICT-enabled services. Currently there are no official reports of the Government tapping into EU subjects’ data through Pegasus, but the danger still persists. The Pegasus revelations might prompt the European Commission to conduct a probe into the matter in relation to surveillance of EU subjects. Hence, it is essential to put in place stronger barriers to maintain unfettered data access by the Government. Conclusion Following the revelations, activist Saket Gokhale filed an RTI query to the IT Ministry’s finance division and the computer emergency response team (CERT-IN) regarding budgetary allocation for Pegasus. Though CERT-IN stated that it had no information relevant to the query, the integrated finance division stated that the query is within its scope and that it may have information regarding the Indian government's purchase of Pegasus licenses. Writ Petitions and PILs have also been filed in the Supreme Court seeking an independent enquiry for a probe led by a serving or retired Supreme Court judge to look into allegations that Pegasus was used to spy on journalists, attorneys, government ministers, opposition lawmakers, and civil society activists, among others. The Petitioners also want the Government to reveal whether it or any of its agencies have secured licenses for Pegasus and/or have employed it in any way, either directly or indirectly, to conduct surveillance. There has been no official response yet to either the RTI or the petitions. There are inconsistent positions with Government officials having denied the allegations. The extent of spying that was done and perhaps is still being done, is unknown. It will be interesting to see how the Pegasus saga plays out. *Ritika Acharya is a Researcher at IntellecTech Law who takes a keen interest in technology law. She is also a law student at Maharashtra National Law University (MNLU) Mumbai, with a passion for reading and writing.

Posted on July 23, 2021 Authored by Melita Tessy* Image Source: Social Media Week Introduction In recent times, social media has evolved into a multipurpose platform that is not limited to just sharing content. Influencer marketing and advertising emerge as a creative approach to traditional marketing and advertising strategies. In 2020, the industry stood at USD 9.7 billion and it is expected to rise to USD 13.8 billion in 2021. On a global scale, influencer advertising is already proving more effective than traditional advertising. Nielsen’s Consumer Trust Index states that 92% of consumers trust influencer marketing over traditional advertising. This trust can be attributed to the belief of customers that influencers are authentic, engaging and relatable while traditional advertisements fail to embody these characteristics. Acknowledging the trends in influencer marketing and venturing into this uncharted territory, the Advertising and Standards Council of India (“ASCI”), a self-regulating voluntary organization for Indian advertising issued the ‘Guidelines for Influencer Advertising in Digital Media, 2021’ (“Guidelines”) in February 2021 for monitoring and regulating this contemporary practice of advertising. This article analyses the Guidelines and their effectiveness in addressing the problem of misleading influencer advertisements in India. Additionally, the author discusses the legal sanctity and enforceability of the Guidelines vis-à-vis the existing legislations and judicial precedents in this regard. Level of Reliability of Influencer Advertising? With emerging trends in influencer marketing and growth of “micro-influencers”, there is a lack of accountability which can be potentially harmful to customers who are susceptible to false and misleading claims that may be made by influencers when promoting a certain product or service. In India, the problem of misleading claims is further aggravated by the fact that 65% of the population is rural and 25% of the population suffers from illiteracy. Therefore, it is evident that a comprehensive legal framework is essential to protect the interests of Indian consumers from misleading influencer advertisements. In this background, the Guidelines (effective from 14 June 2021) take a proactive step towards consumer protection and consumer awareness and ensure transparency and accountability in influencer marketing. The ASCI has partnered with French Technology Provider Reece to monitor violations of the Guidelines using Artificial Intelligence. The Guidelines A) Defining 'Influencer' The scope of the term ‘influencer’ under the Guidelines is extremely wide since there is no minimum number of audience members prescribed for one to qualify to be an influencer. Anyone with an audience who can influence the decisions or opinions of the audience falls under the ambit of the term. Separately, in an earlier case before the Bombay High Court - Marico Limited v. Abhijit Bhansali[1] – the Court identified “social media influencers” as individuals who’ve acquired considerable followership and credibility on social media. It also noted the importance behind imposing legal responsibilities upon them to prevent the abuse of their audience’s trust. ‘Virtual influencer’ refers to a fictional computer generated person or avatar with the characteristics and features of a human. For example, certain “robots” like Lil Miquela, Shudu and Bermuda have garnered significant attention and may possibly be regarded as ‘virtual influencers’. Lastly, ‘digital media’ refers to a means of communication that can be transmitted over the internet or digital networks. This includes social media platforms, TV channels and radio stations. B) Disclosure The Guidelines mandate upfront and prominent disclosure of an advertisement in case of a ‘material connection’ even if the advertisement originates from the influencer and is not biased. ‘Material connection’ refers to the connection between an advertiser and influencer, capable of impacting the weight or credibility of the statements the influencer makes and is not limited to a monetary compensation. The idea is essentially that if an advertiser has given anything of value to the ‘influencer’ to mention or talk about its product or services (for example, giving free or discounted products in exchange for social media posts about it), the influencer will have to label such content or sponsored or advertised. For example, a sponsored Facebook post must clearly disclose its sponsored nature either through a superimposed label or through the accompanying description. This high-standard of disclosure is a game-changer because it informs the consumer that the influencer has received commercial gain for promoting a certain product or service even if such promotion is impartial. The mandate requiring the disclosure of the fictional nature of the virtual influencer is necessary to provide much-needed protection against deception to susceptible sections of the populations such as minors. The Guidelines encourage the advertiser to require influencers to follow these Guidelines, which may impact the way influencer agreements are structured going forward. This way, the advertisers cannot claim ignorance and be completely absolved of the failure of the influencer to comply with the disclosure requirement. Further, the time requirements prescribed for disclosure in different types of influencer advertisements is commendable. Likewise, the requirements for disclosure, where the need arises, through superimposition in images, in the beginning of an audio advertisement, in the text accompanying an advertisement post, etc. are laudable. The Guidelines suggest various permitted labels such as ‘Advertisement’, ‘Ad’, ‘Sponsored’, ‘Collaboration’, ‘Partnership’, ‘Employee, ‘Free gift’. Some of these may not be practically feasible. For instance, if the label ‘free gift’ is added to the title of a blog post, for example, it can become the very thing it intends to defeat by serving as clickbait. C) Due Diligence The due diligence clause advises influencers to review and satisfy themselves that the advertiser is in a position to validate the advertisement’s claims. This provision is merely advisory and not directory in nature. It also leaves much to uncertainty by not laying down a framework explaining what it means for an influencer to review and be satisfied of an advertisement’s claims. While the wide ambit of this advisory clause can be considered to be an advantage, it may also give rise to adverse effects. That is, the non-specificity of the terms ‘review’ and ‘satisfy’ can be exploited as a loophole. Interestingly, due-diligence has been explained with greater specificity in the original draft of the Guidelines, but the same has been removed from the final draft. The original draft had required influencers to do their due-diligence on performance and technical claims and had noted that evidence of due diligence is the correspondence received by the influencer from the advertiser, stating that the advertisement’s claims are capable of scientific substantiation. D) Complaints With regard to the complaints, the ASCI will send notice to brands and influencers in the event of violation of the guidelines either through a consumer complaint or by taking suo moto cognizance of the violation. Legal Sanctity of the Guidelines The ASCI is not a law-making body. Its members are subject to contractual and not statutory obligations to follow its Guidelines. Unlike many media houses and advertisers, many social media influencers and social media intermediaries are not members of the ASCI. These factors have given rise to the question of the legal viability of the Guidelines. While the above points may have their merit, the Guidelines are certainly not toothless. They find their legal validity under existing legislations, regulations as well as court decisions. One such important legislation is the Consumer Protection Act 2019 which states that it is an unfair trade practice to makes a false or misleading representation concerning the need for, or the usefulness of, any goods or services. Section 21 of this statute allows the Central Consumer Protection Authority to pass orders requiring the removal or alteration of the advertisement in question, impose penalty and award sentences in the case of false and misleading advertisements. The fine may go upto Rs. 10 Lakhs and imprisonment may extend upto 1 year for initial violations and may extend upto 3 years for subsequent violations. Additionally, under Rule 3(1)(b)(vi) of the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, where significant social media intermediaries are ‘promoting’ certain posts to increase their visibility, they have to clearly identify such information as sponsored. The larger category of ‘intermediaries’ is also mandated to require their users to refrain from knowingly and intentionally communicating any information which is patently false or misleading in nature but may reasonably be perceived as a fact. The Central Consumer Protection Authority Draft Guidelines (Prevention of Misleading Advertisements and Necessary Due Diligence for Endorsement of Advertisements), 2020 provide for due diligence and disclosure of material connection by the endorser of a product or service. It also requires actual usership and expertise in relation to the product or service if such usership or expertise is claimed in the endorsement. Furthermore, the Apex Court and the Delhi High Court have held that advertisements should not be misleading in the cases of Tata Press Ltd v. Mahanagar Telephone Nigam Ltd.,[2] and Dabur India v. Colortek Meghalaya Pvt. Ltd.[3] respectively. Conclusion The Guidelines are indeed a step in the right direction, capable of benefiting consumer experience on various online portals by curbing misleading advertisements. However, the Guidelines do suffer from a lack of clarity in certain parts. It would be a welcome move if the Guidelines are accompanied by an exhaustive list of fines and other suitable punitive actions for violations specific to the Guidelines. The threat of such measures will act as a deterrent against misleading advertisements. It is recommended further that the Guidelines be accompanied by an official report containing indications as to the mechanisms of enforceability of the Guidelines through relevant parliamentary laws, regulations, case laws and the judicial system. This would bestow greater legitimacy and reliability upon the Guidelines, while at the same time, making sure that the ASCI acts within the scope of its powers as a self-regulating voluntary organization. It is further suggested that the scope of requisite due diligence under the Guidelines must be specified with greater precision. Standards and tests for what qualifies as ‘review’ and ‘satisfaction’ of the position of the advertiser to substantiate claims must be provided. This will empower influencers to make the right decisions while choosing to work with an advertiser. It will also benefit the consumers who can be assured that the influencer’s review of the advertiser’s position has been subjected to a clear and non-arbitrary standard. The original draft of the Guidelines had also included a clause which provided for the non-application of filters to social media advertisements if such filters exaggerate the effect of the claim that the brand is making, such as making hair shinier, teeth whiter, etc. Such a provision, if brought into law, has the capacity to radically change the nature of influencer advertising and set a precedent worth following around the world. In Norway, a similar law has been passed mandating the disclosure of usage of filters and/or retouching by content creators. Despite the short-comings, it will be interesting to see how the Guidelines will change the existing nature of influencer advertising in India by contributing towards addressing the problem of misleading advertisements and by placing responsibility upon those with the power and privilege of influence. [1] 2020 (81) PTC 244 (Bom) [2] (1995) 5 SCC 139. [3] 2010 SCC OnLine Del 391 *Melita is a Researcher at IntellecTech Law and a law student at CHRIST (Deemed to be University), with a keen interest in IP and TMT law. She published her novel ‘Battle of the Spheres’ when she was 15 and is one of India’s youngest TEDx Speakers.

Posted on July 19, 2021 Authored by Vallari Dronamraju* Image Source: Built In The internet and the digital economy have raised questions on the viability of blockchain technology and the ability of sectoral regulators to address issues in digital markets. Further, the World Economic Forum has stated that 10% of the global GDP will be stored in blockchains by 2027. This indicates that blockchains will be an intricate part of financial transactions in the years to come and will require significantly higher regulatory attention. Recently, the Competition Commission of India (“CCI”) released a discussion paper stating the competition concerns arising from the development of blockchains in India that come with the evolution of cyberspace. It described the growing nature of technology and digital markets in India along with the objective of sustaining and promoting the economic concerns of several stakeholders in the market. Blockchains are a virtual chain of information in blocks of data, grouped in a sequence, that can be openly shared among its users to form an entrenched record of transactions. It maintains a decentralised, distributed, and secure record of the transactions occurring. Blockchains can help store a range of records that includes payment transactions, sales records, purchase history and are permanent. Considering the implications for competition law, it is essential to distinguish between actions by users of the blockchain, for instance, firms competing in the downstream markets, and actions by those that control the protocol of the blockchain, and actions by those that sell inputs to the blockchain i.e., developers of validation hardware/software. This article will explore the positive and negative effects of blockchains on competition in the market and will further elucidate the regulatory concerns that surround the cross-section of blockchains and anti-trust policies. Pro-Competitive Effects of Blockchains Due to the decentralised nature of blockchain, the automated processes, and simplified claims management, blockchain technology may have pro-competitive effects such as lower transaction costs, regulation of entities, easier transactions for consumers, lowering barriers to entries, etc. Blockchain technology lowers the cost of verification and can make markets more secure and efficient, thus able to expand the type of transactions that they are willing to engage in. For this, the data recorded on a blockchain must be accurate. In addition to this, smart contracts, which are agreements allowing execution of credible transactions between mutually distrusting agents, with no third parties, might provide a commitment device that will allow firms to soften price competition by self-executing under specific conditions. These may also enable small and medium enterprises to transact efficiently, reducing costs and increasing profits. Additionally, permissionless blockchains are blockchains where authorisation is not required to participate and are easier to implement along with acting as economic incentives. For a higher degree of competition, these may be used to create digital marketplaces without assigning control over both prices and access to data for a single operator. Furthermore, without the existence of a central intermediary, the digital platforms with blockchains, can turn these markets into more competitive ones. With the low entry barriers, enterprises are encouraged to develop new products and services. In markets where verification of the identity of an individual or the origin of the products is critical, blockchains may be used to create a database in a short period and at a lower cost. Anti-Competitive Effects Cryptographic protection may combat the risk of anti-competitive information exchange (for instance, price-fixing and collusion) between competitors. While blockchains may be a boon, some anti-trust concerns should be borne in mind to avoid abuse of power and exclusion of new firms and entrants. Blockchains may facilitate collusion as transactional information in the blockchain ledger may be seen by the other blockchain participants while excluding outside of this chain due to restricted access or encrypted data with pseudonyms. This information is authentic and may be shared on a real-time basis, increasing the risk of collusion. There must be adequate safeguards to ensure that the enterprises do not monitor activity and enter into collusive agreements. Given the automated nature of smart contracts, there could be a possibility of firms colluding in the market using the same blockchain, turning it into an oligopolistic enterprise’s paradise. It is also, however, possible to identify any deviation of cartel participants and smart contracts might also specify automated punishments. In terms of the Indian Competition Act, 2002 (“Act”), Section 3(4), elucidates vertical agreements between enterprises, that may include smart contracts that self-enforce tie-in, exclusive supply, and distribution agreements, refusal to deal, and minimum resale price maintenance between entities at different levels of the value chain. An agreement between a blockchain and its nodes/wallet/exchange that requires the latter to use only the blockchain application in question will prohibit the latter from participating in any other competing blockchain application. The CCI explains that this is evident in permissioned blockchains where authorisation is required to participate and the role of each member is defined. Vertical agreements in a permissioned blockchain dealing exclusively may be appealing to a blockchain application if it wishes to be the only source of data for the transaction. Furthermore, in the case of United America Corp. v. Bitmain, Inc., a federal anti-trust complaint was filed alleging a tight-knit network of individuals and organisations that manipulated the cryptocurrency market for bitcoin cash, effectively hijacked the network, centralised the market, causing a global capitalisation meltdown of more than $4 billion. However, in March 2021, the court dismissed the complaint with prejudice, holding that the plaintiff was unable to bring a valid claim against the defendants. For abuse of dominance concerns, it is first essential to determine the relevant market. One of the key factors in this regard is market power, which may be assessed based on the number of users, number of recorded transactions, number of blocks, revenue, or a combination of these can be utilised to determine the dominance of the firm. Dominance may also exist within a blockchain when a participant achieves a position of power, exerting it in the functioning of a blockchain application. The CCI’s discussion paper notes that in a market with lower barriers to entry, incumbent blockchain applications with a higher market share may be unable to unilaterally increase their price. The resulting competition among the incumbent and the new entrants would drive down the price charged. In a contrasting situation, a blockchain application with high barriers to entry could indicate higher market power. Refusal to access data can be anti-competitive if the data is an “essential facility” to the activity of the undertaking asking for access. It is also possible for dominant blockchain applications to engage in anti-competitive conduct by bundling their blockchain application with digital wallet services to induce a user to use the blockchain application when they may only intend to use the digital wallet. The need for a technical standard for interoperability may be defined by a standard-setting organisation where blockchains used by different firms can interact with one another. A dominant firm may significantly reduce its transaction fee to eliminate a competing blockchain from the market and subsequently increase its prices after the competitor exits. This predation strategy may be adopted by enterprises to gain maximum profit even in the digital marketplace. A blockchain application may be viewed as a dominant enterprise and all the participants may be viewed as collectively dominant. However, India does not recognise this yet. Way forward for regulatory bodies The lack of a consistent regulatory framework that enables businesses to innovate and develop the technology for a competitive and complex environment, in a mixed economy like India, might pose several challenges on the blockchain front. Depending on the nature of the commitments, smart contracts may remove monitoring costs for authorities that are looking into behavioural remedy packages. However, these must not be designed to enable enforcement of any collusive or anti-competitive conduct of any form. It is also imperative that they consider changes in compliance relating to any request or orders that are issued by the CCI. The CCI highlights in their discussion paper, that regulatory authorities are met with lesser than necessary evidence while investigating allegations of anti-competitive behaviour. Data procured from third parties to investigate is not verifiable from a third-party source. Therefore, it may be beneficial to collect data from blockchain applications that may facilitate an assessment of how a proposed combination of firms is likely to influence the competition. Further, the pseudonymous nature of the nodes in a public blockchain may make it difficult to determine the real-world identity of the specific nodes that have resulted in collusion. Without being able to identify the enterprises that are involved, the authorities may find it difficult to undertake necessary measures to address the competition-related issues. There also exists a lack of a medium of exchange for transactions in the blockchain mechanism, cryptocurrencies being a major player in virtual transactions. In India, the recent RBI circular on cryptocurrencies has stated that the banks and other regulated entities cautioning customers against using virtual currencies does not align with the Supreme Court order in 2020 that set aside the previously issued a ban on dealing in currencies. Regulations like these will reinforce the need for a well-rounded path of implementation for a complex connection such as anti-trust laws and blockchain technology. Blockchains are evolving technology and there is little knowledge of the impact they will have on the competitive nature of the Indian market. With the increase in updates in the digital market sphere and the blockchain mechanism, it is imperative that the implications on competition law are explored by regulatory bodies and policymakers comprehensively. *Vallari Dronamraju is an Editor at IntellecTech Law and a penultimate year law student at the National University of Advanced Legal Studies, Kochi with a keen interest in competition law, technology law and corporate law.

Image Source: BBC On July 14, 2021, the Reserve Bank of India ("RBI") issued a press release announcing that it has restricted Mastercard from on-boarding new domestic customers for issuing debt, credit or prepaid cards from July 22, 2021. RBI stated that Mastercard has been non-compliant with its directions on 'Storage of Payment System Data' (in terms of its circular dated April 6, 2018) ("Directions"). For context, these Directions require payment system providers (like Mastercard) to store data relating to 'payment systems' operated by them in a system only in India, including the full end-to-end transaction details / information collected / carried / processed as part of the message / payment instruction. Additionally, there are also certain reporting and audit requirements. In the present press release, RBI emphasized on the data localisation requirements in the Directions and took a stern step towards a major entity like Mastercard, which is the second largest credit-card issuer in India. While Mastercard is not allowed to onboard new domestic customers, RBI has clarified that its order will not impact the existing customers of Mastercard. This is a wake-up call for other payment system operators to comply with RBI's Directions and ensure that the payment system and transaction data is stored in Indian servers. See RBI's press release:

Posted on May 31, 2021 Authored by Ritika Acharya* Image Source: Wccftech Introduction In a ruling dated 4th May, 2021, the U.S. 9th Circuit Court of Appeals (“the Panel”) set in motion the idea that social media platforms can be held liable for building or enabling features that are so inherently dangerous to its users that the product is essentially defective. The ruling came after a lawsuit filed against Snap Inc. (the owner of the smartphone social media application, Snapchat) in February 2021 by the parents (“Parents”) of two boys who had died in a high-speed car accident. Snapchat allows its users to take photos or videos (colloquially known as “snaps”) and share them with other Snapchat users. This article seeks to analyze this ruling and its impact on the safe harbor exemptions against intermediary liability. Background It may be rather absurd to imagine that a ‘filter’ on social media could be fatal. However, in this case, the Parents submitted before the Panel that Snapchat encouraged their sons to drive at dangerous speeds and caused the boys’ deaths through its negligent design of its smartphone speed filter (“Speed Filter”), which let users record their real-life speed and rewarded them with “trophies, streaks, and social recognitions” for crossing the 100 miles per hour mark on the speedometer. The filter has since been taken down by Snap Inc. The Parents alleged that Landen Brown, one of the boys, had taken out his phone to document how fast they were going on the Speed Filter, which showed that the car was being driven at 123 miles per hour. Moments later, the car ran off the road and crashed into a tree, killing both boys instantly. The Parents claimed that Snap Inc. breached its duty to exercise due care in supplying products that do not present an unreasonable risk of injury or harm to the public. Snap Inc. sought to claim immunity under section 230(c)(1) of the Communication Decency Act (“CDA”), which states, “no provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” The safe harbor exemption under this provision aims to provide immunity to platforms such as social media companies from liability for third-party content. In other words, it is a protection against prosecution for something someone else has posted on the platform. Citing this provision, Snap Inc. argued that Landen’s snap was third-party content for which it was not liable under Section 230(c)(1). The United States District Court, where the suit was initially filed by the Parents, dismissed the lawsuit in light of the safe harbor exemptions. However, subsequently, an appeal was filed against the dismissal which resulted in the Panel reversing the lower court’s decision to dismiss the case and remanding the matter for further proceedings. Ruling of the Panel To determine whether Section 230(c)(1) applied to immunize Snap Inc. from the plaintiffs’ claims, the Panel applied the three-prong test set forth in Barnes v. Yahoo!, Inc. as per which Section 230(c)(1) only protects from liability – (1) a provider or user of an interactive computer service; (2) whom a plaintiff seeks to treat, under a state law cause of action, as a publisher or speaker; (3) of information provided by another information content provider. With respect to the first prong the Panel held that the parties did not dispute that Snap Inc. was a provider of an “interactive computer service”. Section 230(f)(2) of the CDA states, “interactive computer service means any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server, including specifically a service or system that provides access to the Internet and such systems operated or services offered by libraries or educational institutions.” In line with this definition, the Panel observed that the Snapchat application permits its users to share photos and videos through Snapchat’s servers and the internet. Snapchat thus necessarily enables computer access by multiple users to a computer server. Snap Inc. as the creator, owner, and operator of Snapchat, is therefore a “provider” of an interactive computer service. With respect to the second prong the Panel held that the Parents’ claim did not treat Snap Inc. as a “publisher or speaker” because the claim was founded on Snap Inc.’s design of Snapchat. The Parents’ lawsuit treated Snap Inc. as a products manufacturer rather than a “publisher or speaker of third-party information”, by accusing Snap Inc. of negligently designing their product, i.e. Snapchat, with a defect, i.e. the interplay between Snapchat’s reward system and its Speed Filter. Furthermore, the incentive system within Snapchat that encouraged its users to pursue certain unknown achievements and rewards, worked in tandem with the Speed Filter to entice young Snapchat users to drive at speeds exceeding 100 mph, making such a design unreasonable and negligent. The duty to design a reasonably safe product was fully independent of Snap, Inc.’s role in publishing third-party information. With respect to the third prong the Panel held that the Parents had not relied on “information provided by another information content provider.” The Panel noted that Snap Inc. was being sued for the predictable consequences of designing Snapchat in such a way that it allegedly encourages dangerous behaviour. Snap Inc. knew or should have known that, many of its users were drivers of, or passengers in, cars driven at speeds of 100 m.p.h. or more because they wanted to use Snapchat to capture a mobile photo or video showing them hitting 100 m.p.h. and then share the snap with their friends. Accordingly, the Panel concluded that Snap Inc. did not enjoy immunity from the suit under Section 230(c)(1) and upheld the Parents’ claim. In subsequent proceedings, the Panel will go into the merits of the case to determine whether there was a causal link between Snapchat’s Speed Filter and the car accident that resulted in the boys’ deaths. Analysis and Implications Traditionally, social media has managed to exempt itself from liability through legal safe harbour provisions. In the same vein as Section 230(c)(1) of the CDA, section 79 of the Information Technology Act, 2000 (“IT Act”) provides exemption against liability of intermediaries against any third-party information hosted by them if the intermediary does not initiate the transmission, select the receiver of the transmission and modify the information contained in the transmission. Social media entities often rely on this section to escape liability for third-party content in India. The present ruling of the Panel may change the course of how lawsuits against social media companies are adjudicated in India. It may open the door to holding social media accountable for being a product manufacturer, rather than an internet intermediary. If Snapchat is held liable for the negligent design of its Speed Filter, it may set a notable precedent of making social media liable for the features it enables or endorses on its platform. A common products liability tort could become the loophole in the safe harbor provisions that exposes social media to civil liability. To the detriment of Snap Inc., a Snapchat defeat would turn the tide of the growing number of cases against it. In the second week of May, another lawsuit was filed against Snapchat seeking to hold the company responsible for a teenager’s suicide, triggered by the bullying he had been subjected to on Yolo and LMK, two anonymous messaging integrations from Snapchat. Carson Bride, the 16-year-old had been receiving anonymous messages for months, which included sexual comments and taunts over specific incidents. He figured that the messages had to be from people he was familiar with, but the anonymity of the apps made it impossible for him to know the identity of the person(s) behind them. He was unable to reply to the taunts because the apps were designed in such a way that replies made the original message public. This made Carson refrain from replying to the messages, not wanting to risk revealing his humiliation to the world. The suit, filed by Carson’s mother, alleges that both messaging apps let users send messages anonymously, thereby facilitating cyberbullying to such a degree that the apps should be considered dangerous. Yolo has been taken off the App Store and Google Stores but LMK is still available for download on both. The Bride family has sought damages on behalf of all 92 million Snapchat users, and for the two apps to be banned from the market until they can prove they have effective safeguards in place. The Panel in the Snapchat Speed Filter case has opened up the possibility of social media being held liable if a specific integration proves dangerous, by asserting that the duty of care requires social media companies to foresee all reasonable uses and misuses of their products. Therefore, the final judgement in this case is likely to influence the outcome of the teen cyberbullying case. The judgement may also lead other social media companies like Facebook, overhauling some of its existing features like Instagram’s anonymous question sticker that is very similar to Yolo and LMK. *Ritika Acharya is a Researcher at IntellecTech Law who takes a keen interest in technology law. She is also a law student at Maharashtra National Law University (MNLU) Mumbai, with a passion for reading and writing.