edtech protection data sector education consumer personal

De(Coding) The Indian EdTech SectorTo print this article, all you need is to be registered or login onMondaq.com.The National Educational Policy 2020 (Policy) has been touted as abreakthrough in the Indian education sector. The key objective of this Policy– utilizing information and communication technologies in education systems toprovide new and innovative forms of support to teachers and students – is insync with the underlying factors responsible for the present boom in India’seducation technology (EdTech) sector.This sector is typically characterized by attractive attributes such as highscalability, robust cash flows and high-growth business models. The same isevidenced through the proactive mobilization of resources that various EdTechfirms have undertaken through acquisitions and investments from both domesticand international markets, despite the grim state of the world economy. TheIndian EdTech sector reportedly raised USD 1.5 billion in first nine months of2020 as compared to USD 409 million in 2019 with Byjus, Unacademy, Vedantu,Interview Bit Academy leading from the front and strengthening India’s claimto be the second-largest market for E-learning after the USA.In this upbeat background, the authorities regulating the Indian educationsector have the imperative responsibility to guard against hurdles faced bystakeholders of the EdTech sector in order to maximize the underlying value ofthe sector, as a whole. The analysis of the regulatory landscape includes butis not limited to the wide range of regulations that must be complied with byan entity operating in the Indian EdTech sector.The first aspect includes the cobweb of regulations that seemingly envelopethe EdTech industry in India. Although 100% FDI is permitted through theautomatic route in education sector, the EdTech sector correlates more to’E-Commerce activities’, defined under the consolidated FDI Policy of India2017 (FDI Policy). According to paragraph 5.2.15.2.2 of the FDI policy,’e-commerce’ refers to buying and selling of goods and services, includingdigital products, over a digital & electronic network and is further dividedinto an inventory-based model and marketplace-based model of e-commerce.Though 100% FDI is allowed under the automatic route for marketplace-basede-commerce businesses, the Government of India has been reluctant to allow thesame for an inventory-based model of e-commerce in order to safeguard thesmaller business outfits.If the Ed-tech companies themselves provide educational services through theirplatforms, they are likely to fall under inventory-based e-commerce, where FDIis prohibited. This is bound to adversely impact the EdTech sector. Given thatthe online platform providers in EdTech have increasingly played the role ofcontent providers and curators in recent times, a caveat-based approachallowing FDI for EdTech under the automatic route even for inventory-basedmodel is essential. Should this approach be effectively implemented, othersectors where domestic market remains a large source of employment, such asoperating corner stores and other small-time trading, will continue to beprotected.Additionally, the scope and applicability of the new Consumer Protection(E-Commerce) Rules, 2020 (E-Commerce Rules) is considered wide enough to coverall goods and services bought or sold over digital or electronic network.Owing to the elements of profit making and commercialization in exchange for aconsideration paid for such services, the EdTech firms would potentially besubjected to the E-Commerce Rules. Though the objective of the E-CommerceRules is to regulate the conventional e-tail businesses, broad-basedapplication of an ‘e-commerce entity’ could inadvertently include the EdTechsector as well. As a result, some of the key compliances that EdTech firmscould be subjected to under the E-Commerce Rules range from expansiveinformation disclosures to additional and cumbersome obligations relating tomarketing, service providers and warranties.Another major regulatory issue that impacts the EdTech industry pertains to alack of clarity in data protection obligations and liabilities. Currently, theInformation Technology Act, 2000 read with the Information Technology(Reasonable Security Practices and Procedures and Sensitive Personal Data orinformation) Rules, 2011 regulates the use of personal data. However, itprovides a very narrow definition of sensitive personal data with no specificrule for the usage of personal data of consumers, these being children in thecase of EdTech sector. In an attempt to address the same, the Personal DataProtection Bill was introduced in 2019 (Bill) to provide data protection anddiscuss the role of entities that handle data, especially data relating tochildren. Considering that the volume of personal data being exchanged isrising exponentially, with the current lack of adequate governance, it is timethat the law catches up with the technology to ensure that individual dataprivacy and protection is not left at the discretion of private companies. Inthe background of Vedantu’s recent data breach that exposed personal detailssuch as emails and IP addresses of children and their parents, it isimperative that the Bill is promulgated into law expeditiously to removeregulatory setbacks and ensure a modern data regime in India. This will, inturn, boost investor sentiment and thereby maintain a sustainable flow ofinvestment in the EdTech sector that has witnessed improved internetconnectivity and widespread adoption of digital payment options in recenttimes.The incorporation of unconventional and wholesome changes in the educationsector propagated by the Policy, along with other enabling factors – such ashi-speed internet infrastructure in the country and penetration of smartdevices amongst the population – will provide a massive boost to this sectorand present a significant opportunity for companies, more so in light of thegrowing number of traditional schools and colleges that are opening theirdoors to the notion of online education amidst a global pandemic. In what canbe construed as a direct result of promulgating the Policy, Byjus has acquiredWhite HatJr, a Mumbai based firm rendering coding lessons, for a reported feeof USD 300 million in August 2020.EdTech has the amazing potential of removing traditional barriers to educationand allowing each student to operate independently while still being a part ofthe collective. While the shift to EdTech will require additionalconsideration of aspects pertaining to cyber-behavior such as bullying,monitoring content, ensuring protection of students from cyberattacks orphishing scams, screening of instructors, etc., the mantle of ushering in thisnew dawn would require additional legal and policy interventions to pave thepath for the growth of this sector in India.The content of this article is intended to provide a general guide to thesubject matter. Specialist advice should be sought about your specificcircumstances.POPULAR ARTICLES ON: Consumer Protection from IndiaConsumer Protection Act, 2019: Key TakeawaysVGC Law FirmThe Consumer Protection Act, 1986 is repealed after three decades and replacedby the Consumer Protection Act, 2019. The Consumer Protection Act, 2019 hasbeen enacted with a view…Consumer Protection (E-Commerce) Rules, 2020TrilegalThe E-Commerce Rules provide a framework to regulate the marketing, sale andpurchase of goods and services online pursuant to which all e-commerceentities, including B2B