New social media rules will make competition difficult for smaller companies

Industry watchers have raised concerns that the new social media rules could raise compliance costs for players, and make it difficult for smaller companies to compete against Big Tech companies like Facebook.

The new rules distinguish between social media intermediaries and significant social media intermediaries with 50 lakh registered users as the threshold for the categorization. Significant social media intermediaries will have to follow additional due diligence, including the appointment of a chief compliance officer, nodal contact person and resident grievance officer; all three officials  should be residing in India.

Mishi Choudhary, Software Freedom Law Centre (SFLC) founder, said the rules call for an undue burden and compliance and ensure only larger players with funds and wherewithal of big legal teams are the only ones who will be left to offer services. She said this could result in increasing the barrier for entry and raising compliance costs for everyone.

Rameesh Kailasam, CEO of IndiaTech.org, had cautioned that while these rules are robust and elaborate, it may translate into a certain degree of cost and operational challenges with it. Another industry executive said some companies may choose to protect the privacy of users and challenge these rules in court.

According to government data, India has 53 crore WhatsApp users, 44.8 crore YouTube users, 41 crore Facebook users, 21 crore use Instagram, while 1.75 crore users are on microblogging platform Twitter. While players like Telegram and Signal, as per PTI, do not disclose country-specific user numbers, these platforms have seen a spike in downloads in the last few weeks on the back of concerns around WhatsApp’s privacy update that seeks to allow limited user data with Facebook and its group firms.

Industry observers noted that players like Telegram and others may not have senior officials based in India, and they will now have to take a series of steps to ensure compliance with the new norms as their business scales up and user base grows in India. And according to the amended IT rules, social media and streaming companies will be required to take down contentious content quicker, appoint grievance redressal officers and assist in investigations.

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The Intermediary Guidelines and Digital Media Ethics Code designed to curb misuse of social media platforms require players like WhatsApp, Facebook and Twitter as well as streaming services like Netflix, YouTube and Amazon Prime Video to appoint executives to coordinate with law enforcement, disclose the first originator of provocative content and remove, within 24 hours, content depicting nudity or morphed pictures of women. Any contentious content flagged by the government or legal order has to be taken down within 36 hours.