Can e-commerce platforms share user data with AI-driven recommendation engines?

AI-driven recommendation engines are widely used by e-commerce platforms to enhance the shopping experience by suggesting products based on consumer behavior, preferences, and past purchases. These engines work by analyzing user data, which often includes personal information, browsing history, and purchase patterns. However, this raises an important legal question: Can e-commerce platforms legally share user data with these engines, and what consumer rights and privacy regulations must be followed?

In India, the Personal Data Protection Bill (PDPB) and the Consumer Protection Act, 2019, provide guidelines on data sharing, consumer rights, and privacy. This article explores the legal framework that governs data sharing with AI engines and how e-commerce platforms can comply with privacy protections.

Legal Considerations for Data Sharing with AI Engines:

Personal Data Protection:

• Under the Personal Data Protection Bill, 2019 (which is still pending enactment but is expected to become law soon), personal data refers to any information that can identify an individual, such as name, contact details, browsing history, purchase history, and even location.
• If e-commerce platforms share user data with AI-driven engines, it is important to ensure that personal data is protected and that users' privacy is respected.

Consent and Transparency:

• E-commerce platforms must obtain explicit consent from users before sharing their data with third-party AI systems. The PDPB requires platforms to seek informed consent and inform consumers about the purpose for which their data will be used.
• Transparency is crucial. Consumers must be informed of:
• What data is being collected.
• How it will be used (e.g., for AI-driven product recommendations).
• Whether their data will be shared with third-party systems (like AI engines).
• The rights they have to access, rectify, or withdraw their data at any time.

Consumer Rights Under the Consumer Protection Act, 2019:

• The Consumer Protection Act, 2019 protects consumers from unfair trade practices, including the misuse of personal data by e-commerce platforms. If a platform uses data to mislead consumers or makes false claims based on AI-driven recommendations, it could be held accountable for misrepresentation under the Act.
• If consumers feel their data rights are being violated (for example, if they were not properly informed about data sharing), they have the right to file complaints under the Act and seek redressal.

Data Sharing and Security:

• If e-commerce platforms share user data with AI-driven recommendation engines, they must ensure that data security measures are in place. The PDPB emphasizes the need for platforms to implement appropriate security safeguards to protect consumer data from breaches, hacking, or unauthorized access.
• Encryption, data anonymization, and secure data storage are some of the security practices that platforms must follow when dealing with personal data.

Data Minimization:

• E-commerce platforms should follow the principle of data minimization under the PDPB, which means they should collect and share only the data that is necessary for the purpose of personalizing recommendations.
• Platforms should avoid collecting excessive data that could pose risks to consumer privacy and should ensure that AI systems are not using sensitive data (e.g., health information, racial background) unless explicitly required and permitted by law.

Key Regulations and Guidelines:

Personal Data Protection Bill, 2019:

• The PDPB, which is expected to become law soon, will regulate how platforms collect, process, store, and share personal data. Under the Bill, consumers will have the right to:
• Consent to data collection.
• Access and correct their data.
• Withdraw consent at any time.
• The Bill also outlines the conditions under which data sharing with third parties, like AI-driven recommendation engines, is permissible, provided it aligns with the principles of data protection and consumer consent.

The General Data Protection Regulation (GDPR) (EU):

• Although not directly applicable in India, many e-commerce platforms operate globally and must comply with the General Data Protection Regulation (GDPR) of the European Union if they process data from EU-based users.
• The GDPR mandates that platforms seek explicit consent before collecting data, and it offers consumers strong rights to control how their data is used, including the right to opt-out of AI-driven recommendations.

E-Commerce Rules, 2020:

• The Consumer Protection (E-Commerce) Rules, 2020, require platforms to ensure transparency in data handling. E-commerce platforms must inform consumers about the type of data being collected, the purpose of its use, and if it will be shared with third parties (like AI engines).
• The Rules also require platforms to have clear grievance redressal mechanisms if users face issues with data privacy or misuse of personal information.

Consumer Protections and Actions:

Right to Opt-Out:

• Consumers have the right to opt-out of having their data used for personalized recommendations. This should be clearly stated in the privacy policy, and users must be able to disable the data-sharing features easily.
• Platforms must give consumers the ability to control which types of data are shared with AI engines, allowing for more personalized shopping experiences without sacrificing privacy.

Grievance Redressal:

• Consumers who feel their data is being misused or who are not adequately informed about data-sharing can file complaints with the National Consumer Helpline or approach a Consumer Forum.
• If there is a data breach or a platform uses data inappropriately, consumers can claim compensation for the violation of their privacy under the Consumer Protection Act or PDPB once it becomes law.

Right to Data Deletion:

• As per the PDPB, consumers will have the right to request deletion of their data. If users no longer want their data to be used for AI-driven recommendations, they can demand that the platform erase their data.

Example Case:

• A consumer buys a laptop from an e-commerce platform that uses an AI-driven recommendation engine to suggest products. After purchasing, the platform continues to send product recommendations based on the consumer’s browsing history, including some targeted ads. The consumer is not informed about the extent of data collection or how it is being shared with third parties. The consumer finds the advertisements invasive and wants to opt-out of the data-sharing process.

Steps Taken:

• Complaint Filed: The consumer contacts the platform's customer service, demanding that they stop using their data for recommendations and targeting ads.
• Action Taken: If the platform refuses to comply, the consumer can file a complaint with the Consumer Forum under the Consumer Protection Act for misuse of personal data.
• Outcome: The platform may be required to provide the consumer with clear information on how their data is being used, and in some cases, a compensation for breach of privacy may be awarded.

Conclusion:

• E-commerce platforms in India can share user data with AI-driven recommendation engines, but only under strict legal guidelines. Platforms must ensure consumer consent, data transparency, security, and the right to opt-out. They must also adhere to privacy laws like the Personal Data Protection Bill, 2019 and Consumer Protection Act, 2019 to protect consumers' data rights. Misuse of consumer data can result in legal action, including compensation and grievance redressal.