Daybreak - India's data privacy bill may infringe on your freedom of choice

Episode Date: March 8, 2023

The fourth draft of the Digital Personal Data Protection Bill is all set to be presented in the Parliament during the ongoing Budget session. While it makes a strong case for creating laws to prevent the personal information of citizens from being harvested and exploited, the Bill is playing blind to two Important factors. This in turn could end up creating a crony-capitalist economy where an individual's freedom of choice is put at risk.Tune in.

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With that, back to your episode. The government of India has been struggling to create a legal framework for digital privacy. In four years, we have seen four different drafts of the Digital Personal Data Protection Bill. The last one was released in November 22, and now it is all set to be presented in the parliament during the ongoing budget session. The latest version of this bill makes a strong case for creating laws to prevent the personal information of citizens from being harvested and exploited by foreign corporations. But there is a serious problem with it. The bill remains blind to at least two very important factors.

Number one, the freedom of the market and number two, the autonomy of users. Atish Tanqa and Shagnik Bannerjee broke it down in a recent article for the Ken, and they explained it with a great example. Imagine that you live in a house guarded by a gatekeeper. You're free to come and go as you please, but the gatekeeper observes your movements and passes on that information to outside vendors. These vendors use it to manipulate your schedule and preferences to sell you a product, influence your buying decisions or network with you.

When you learn about this collusion, you go straight to the property management team. So the team moves your residence to a walled garden. It replaces the gatekeeper with a protector who accompanies you everywhere. It is an act designed to make your privacy absolute. The protector does not let you go beyond the high walls of the garden, except when they think it's necessary. They watch everything you do, listen carefully to every word you speak. The protector becomes your only source of news, ideas, products and services.

The gatekeeper, on the other hand, operated in an open market, even if it was designed to exploit you. And that gave you a choice to ignore every offer and suggestion that came your way. But in the Waldgarden, you can only choose from the options that the protector selects for you. So what you have basically done is that you have traded an imperfect democracy for a perfect dictatorship. And that is the issue that lies at the heart of the privacy debate. And it is what may become a huge threat to individual choice, digital freedom and privacy itself. Welcome to Daybreak, a business podcast from the Kent. I'm your host, Nick Dha Sharma and I don't chase the news cycle.

Instead, thrice a week on my own. Mondays, Wednesdays and Fridays, I will come to you with one business story that is worth understanding and worth your time. Today is Wednesday, the 8th of March. The main aim of the Digital Personal Data Protection Bill is to enforce the fundamental right to privacy of Indian citizens. It was in 2017 when the Supreme Court in a landmark judgment held that the right to privacy is protected as a fundamental right under the Article's 14, 19 and 21 of the Indian Constitution. And with this at its core, the Personal Data Protection Bill has the provision of penalties ranging up to 250 crore rupees for data fiduciaries if they fail to

make safeguards to prevent personal data breaches. A data fiduciary is a person who alone or in conjunction with other people determines the purpose and means of the processing of personal data. The Personal Data Protection Bill also directs fiduciaries to take clear and informed consent of the user before collecting any personal information. The bill has been created for three main reasons. First is to counter the existing dominance and interference of the US-based tech giants like Google meta, Amazon and Apple in commercial, civil, political and press freedom. The second is to oversee the country's growing footprint of digital governance.

This includes the Information Technology Act of 2000 and the latest version of the IT Amendment Rules of 2022. The IT Act of 2000 prescribes a few safeguards against and considerable compensation for digital intermediaries. Digital intermediaries are entities that store or transmit data on behalf of other people. For example, telecom and internet service providers, online marketplaces, search engines and social media sites. The IT rules of 2022, meanwhile, are aimed to subject content on social media platforms to direct government scrutiny. This is by allowing users to appeal against the platform's decision without a legislative bias. And the third reason why the bill was created is to ensure that the exponential growth in

citizen-generated data, which is driven mainly by smartphones and sensors, is not appropriated by third parties. But like I mentioned earlier, the bill remains oblivious to the autonomy of users and the freedom of a market. To understand this problem better, we have to look at how the internet itself works. It depends on advertising for revenue and targeted advertising requires data. To find out how this bill could affect the Indian digital space, stay tuned. The total digital advertising market in India was worth over $10 billion in the year that ended in March 2022. Out of this, the ad spending by Google and Meta alone accounted for about $4.7 billion. So Google and meta together control a little less than half of India's digital ad market. So the market is

already skewed towards these big tech companies. But with the new version of the data protection bill, the future in the country may be even stalker. Adish and Shagnik say that two converging forces may speed up this development. The first is the data protection bill itself. And the second is the emergence of umbrella corporations. Umbrella corporations are large, successful, branded companies that consist of diversified parent firms that own, partner with, and manage a number of other firms of varying sizes. In India, for example, the digital and physical ambitions of Reliance Industries Limited,

the Tata Group, Amazon and Flipkart, and their affiliates and partners may very well see the emergence of umbrella corporations. Now, these corporations will create super apps, and through these super apps, they will let you into their walled gardens through one or more of three gates. These could be a telco subscription or an e-commerce platform with physical store connections or a payments app. These super apps will offer you enhanced utility, security and convenience. But the danger with them is that they are all embracing, which means that they will need access to all forms of personal data to justify the operation costs and maximize profits from advertising, sales and subscriptions.

So once you're inside this ecosystem, it will be virtually impossible for you to exit. And that is because the loss in network connections, value and savings will be harder for you to bear. So essentially, this bill seeks to protect individual. privacy by getting rid of third-party cookies and starting very strict opt-in permissions. But this in turn will make it easier for both first-party data-owning platforms and the government to concentrate personal data collection and increase the market power of these umbrella corporations. And what would this mean for smaller marketing entities and you?

I will tell you in the next segment. The emergence of these umbrella corporations with super apps and the new digital privacy law will hurt small marketers and publishers who will no longer get the same access to data as larger entities. The curbs will likely hurt any company that needs direct access to its customers to remain competitive and relevant. The potential victims could include independent publishers as well as supply and demand-side platforms, ad networks, ad exchanges, and ad servers. It could also include mature online advertisers such as food delivery apps and payment wallets

that handle program-based advertising technology. These players may be forced to join one of the umbrella corporations or they will meet their end. And if these umbrella corporations develop collaborative relationships of convenience with governments like Google and Meta have already done and among themselves as well, we will see a crony capitalist economy with captive end users. To put it simply, the current data market will soon give way to a market for privacy protection.

And in this market, if users want security, convenience and access, they will have to give up on their freedom of choice. Daybreak is produced from the Newsroom of the Ken, India's first subscriber-focused business news platform. What you're listening to is just a small sample of, of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters, subscriber-only apps and podcast extras. Head to the ken.com and click on the red subscribe button on the top of the website.

I am Snigda Sharma, your host, and today's episode was edited by my colleague Rajiv Sien.