| The Big Story: India’s proposed intermediary liability rules could transform the Internet as we know it
 (By Ranajit Dam) What started as a simmering feud with Twitter over the farmer protests is now threatening to boil over, and technology companies might need to rethink what they’re doing in the kitchen. India turned up the heat last week after announcing the Intermediary Guidelines and Digital Media Ethics Code, a legally enforceable set of rules that, among other things, tightens regulatory scrutiny of social media platforms that have five million users in the country. Critics have been quick to denounce it as anti-democratic and unconstitutional; and say they could pose a threat to freedom of expression. Reuters points out that it is part of a broader trend of tech scrutiny globally, while the rules could be emulated by other countries such as the US, the UK and Australia, according to the Economic Times.
With some 700 million Internet users, India is easily the largest market for both Facebook and its messenger service, WhatsApp, but the allure of this mammoth young tech-savvy (and mobile-savvy) population might be dimmed somewhat when companies begin to assess the compliance burden associated with these rules. As Nikhil Narendran, a TMT partner at Trilegal, explains, large technology companies will need to engage Indian citizens to act as compliance officer, grievance officer and nodal contact person. “These nodal contact persons should now be involved in 24x7 coordination with law enforcement officers,” he says. “This significantly increases their compliance costs for operations. Since most of the social companies are operating from outside India, having employees in India locally responsible may also raise questions on tax efficacy.” Adds Aman Rastogi, senior associate at Ikigai Law: “Finding and retaining people for these high-pressure positions will be a practical challenge for companies.”
Also, they will need to implement measures to identify the originator of a measure, which might require changes to technology architecture. “The impact of this rule on end-to-end encryption technologies implemented by digital companies would have to be seen,” says Narendran. “They are also asked to now implement voluntary verification of users through mobile numbers… and [are subject to] the requirement to take down certain content within 24 hours. This increases compliance cost.”
As a result, larger companies might begin to rethink their strategies in India. “Tech companies would be well advised to tread with caution in their interactions with the Indian government,” says Rastogi. “The possibility of personal liability for senior management personnel will come as a jolt and companies will take a hard look at compliance before rolling out new products in India. India is a large market but going forward companies will need to factor in high compliance costs and regulatory risks into their analyses.”
Eventually, the Internet, as viewed from India, could end up looking like a very different place. Says Narendran: “Since the definition of social media intermediary is wide and such a classification comes with several onerous compliances, it will likely dissuade companies from providing online interactions amongst its users, especially if they have more than five million users in India.”
What else is happening: - The Supreme Court of India has ruled in favour of the assessee taxpayers in a 20-year-old software royalty tax case, and BloombergQuint says the victory will impact companies such as Samsung Electronics, IBM India, Hewlett Packard India and many more.
- Speaking of judgements, the UK Supreme Court recently ruled that Uber drivers were to be considered workers and not freelance contractors, prompting the Indian Express to ask if the judgement will impact gig economy workers in India.
- On the topic of employment, People Matters breaks down the Code of Wages Bill, 2019, set to come into effect from Apr. 1, and says it will “undoubtedly be a boon” for both workers and employers.
- Should payment gateways be subject to India’s Anti-Money Laundering Law, questions BloombergQuint.
- And finally, get the latest on the L&L Partners saga.
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