INTRODUCTION
The emerging segment of technology-based solutions has witnessed considerable demand globally and with the mammoth size of the Indian economy along with the ever-growing demand of its consumers, the Indian market has been the centre of opportunities for companies engaged in the business of Education Technology ("Ed-Tech Company(ies)"). Ed-Tech Companies are the organizations that, with the help of technology driven model, work on providing digitalized learning experience to students and working professionals.
The Ed-Tech Companies generate revenue by charging customers for the products and services offered by them. This works through various sub-models such as providing free services for a part of services thereof, and then subsequently charging a fee for further services or premium features and upgrades (freemium model). They also generate revenue by charging the consumers on each use or session (pay per-use model). Some Ed-Tech Companies are focused on providing a platform for creators and sellers of educational content by acting merely as an intermediary and generate their revenue through commission or by charging a transaction fee. Otherwise, some famous Ed-Tech Companies use their reputation build in the market through advertising to charge their consumers a subscription fee from the initial phases itself (subscription model). Therefore, choosing the right business model and targeting the correct core audience or customers is the most important initial step for any Ed-Tech Company looking to build a base in Indian market. The Ed-Tech Companies may attract customers in the beginning with heavy marketing, however, such companies face immense challenges in retaining their consumers while growing consistently by onboarding new consumers. In order to tackle this problem, some Ed-Tech Companies base their revenue model on advertising wherein the learning on the platform is free however the companies generate their revenue by advertising the products of different brands.
APPLICABLE LAWS ON ED-TECH COMPANIES
The Ed-Tech Companies from the very initial stages have to comply with some general obligations laid down under different laws of the country in which the entity is based. Failure to comply with such obligations laid down under such laws would attract penalty depending upon the provisions prescribed in that particular statute of which any provision has been breached. The Ed-tech Companies based in India, amongst other laws, have to comply with the e-commerce and labour laws, data protection laws as well as the advertisement guidelines. Some of the applicable laws and compliances have been listed below:
(i) Data Protection Laws
The increasing use of technology driven solutions have raised issues relating to sale of Sensitive Personal Data or Information (defined hereinafter) for commercial use and marketing, which the Ed-Tech Companies have obtained during the use of learning applications by the consumers, or the information given by the users at the time of signing-up. Personal Information has been defined under the 'The Information Technology (Reasonable Security Practices and Procedures And Sensitive Personal Data Or Information) Rules, 2011' ("SPDI Rules") which means any information that relates to a natural person, which, either directly or indirectly, in combination with other information available is capable of identifying such person. Further the SPDI rules define Sensitive Personal information as passwords; financial information such as Bank account or credit card or debit card or other payment instrument details; physical, physiological and mental health condition; sexual orientation; medical records and history; Biometric information or any detail relating to the above clauses as provided to body corporate for providing the relevant service. Information Technology Act, 2000 ("IT Act") prescribes that in any case of breach of Sensitive Personal Data or Information by a body corporate, such body corporate would be liable to pay the damages by way of compensation to the person affected. Sensitive Personal Information may be transferred to another body corporate but with the prior consent of the person concerned and by ensuring that the other body corporate ensures the same level of data protection which should be adhered to as per the IT Act and SPDI Rules.
The Indian Government in 2023 has notified the Digital Personal Data Protection Act, 2023 ("DPDPA, 2023"), which will eventually replace the SPDI Rules (once it is brought in force).
(ii) E-commerce and Consumer Protection Laws
The framework governing the consumer protection and e-commerce mainly consists of Consumer Protection Act, 2019 ("CPA, 2019") (which replaced the "Consumer Protection Act, 1986") and the Consumer Protection (E-commerce) Rules, 2020 ("Rules"). The rules apply to all goods and services bought or sold over digital or electronic network including digital products. The Rules further define an e-commerce entity as "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, but does not include a seller offering his goods or services for sale on a marketplace e-commerce entity".
In respect of any disputes in respect of any goods purchased or services availed by a consumer, the CPA, 2019 provides for a three tier Consumer Disputes Redressal Agencies whose jurisdiction are based on prescribed as per monetary value of the complaint. The mandatory compliances as per CPA, 2019 read with the Consumer Protection (E-commerce) Rules, 2020 need to be complied with, failing which the merchant/seller shall be liable to penalty as per the provisions of the Consumer.
(iii) Guidelines issued by the Advertising Standard Council of India (ASCI) ("Guidelines")
These Guidelines aim to uphold the integrity of advertising content circulated by Ed-Tech Companies, thereby safeguarding the interests of students, professionals, and other stakeholders. The Guidelines covers various aspects including but not limited to the authenticity of educational claims made in advertisements; the transparency of pricing and refund policies; and the accurate portrayal of outcomes achievable through educational programs. Moreover, the Guidelines emphasize the importance of substantiating any claims regarding success rates, job placements, or learning outcomes with credible evidence to prevent misleading advertisements. By adhering to these Guidelines, Ed-Tech Companies can adopt greater trust and credibility among their target audience while promoting transparency and accountability in the rapidly evolving landscape of online education.
SIFNIFICANCE OF WATERTIGHT CONTRACTS
The Ed-Tech Companies in the course of their business come in contact with multiple entities for different kinds of transactions. These Ed-Tech Companies are bound to enter into exhaustive arrangements with a set of terms and conditions governing their transaction with various third parties. To keep the contract watertight, the terms of contract need to govern the pre-transaction conditions, post-transaction conditions and the set of obligations for the parties during the transaction. For instance, the contract may be between an Ed-Tech Company and a university for the university to sell short duration or long duration online courses that are within the guidelines of concerned government agencies. While the terms and conditions in a contract primarily govern the monetary obligations of the respective parties, the parties to the contract shall also outline the instances that would be considered as events of default and the consequences that will follow the events of default. The contract, amongst other imperative aspects, shall stipulate a dispute resolution mechanism in case a dispute arises between the parties related to the transaction. The mechanism can include alternative dispute resolution mechanisms such as negotiations, mediations, and arbitration and the same shall be drafted carefully in order to protect the interests of the parties and avoid ambiguity.
ROLE OF LAWYERS AND CONCLUSION
In the last few years, India has witnessed an exponential increase in the number of Ed-Tech Companies. It is imperative that these Ed-Tech Companies are made aware of the laws that are applicable on them and the compliances that are mandated for these Ed-Tech Companies (based on whether it is a multi-national company or a start-up, its market value and organizational structure along with the number of the employees working therein).
Lawyers could help Ed-Tech Companies in complying with the mandatory legal compliances and additionally assist them with mergers and acquisitions, marketing practices, contract negotiations, licensing requirements, employment solutions and dispute resolution. Lawyers also play an important role in managing collaborations with various educational institutions and other regulatory bodies.
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