E-Business and Start-Ups in Iran

Like almost everywhere in the developed and developing world, internet based start-ups are mushrooming in Iran. The services offered through virtual sphere and mobile applications range from online shopping stores to online food deliveries, e-bakeries, taxi and transportation applications, online bookstores and libraries, laundry applications, courier applications, e-ticketing for cinemas, theater performances, music concerts, etc.

What differentiates the Iranian e-business market from the rest of the world is that due to Iran’s special econo-political circumstances, the moguls of international e-business such as Amazon, E-Bay, and Uber have been absent from the Iranian market. This has provided small and medium-sized Iranian entrepreneurs with an opportunity to take on the mantle of e-business industry in Iran. While these entrepreneurs have taken their inspiration from their foreign counterparts, they have also developed local innovations to a surprising effect.

The post-JCPOA area provides an opportunity for international investors to somehow enter the Iranian e-business market through direct foreign investment, mergers and acquisitions, joint venture agreements and through setting-up their own start-ups in this rich market which is still in the process of development.

From the legal point of view, e-business in Iran presents certain challenges. First and foremost, as this a young and new industry, its relevant regulatory framework has not been fully developed yet. This creates a legal vacuum which necessitates falling back to general legal provisions, legal interpretations and negotiations with relevant authorities and regulatory bodies. Sometimes it is even difficult to locate the competent regulatory bodies. This is a regulatory field still in making and its final shape depends largely on negotiations, lobbying and compromises made between different stake-holders including businesses, regulatory bodies and consumers. Therefore, international businesses venturing to this field require reliable legal advisors with a deep knowledge of the Iranian legal system, an exposure to international legal and business concepts, and an ability to negotiate with the relevant regulatory bodies.

Another challenge is that there are specific regulations, especially regarding consumer protection, privacy, security and intelligence, etc. that e-businesses should be aware of. For instance, according to consumer protection regulations, all consumer goods sold online should mandatorily have a minimum of one-week return policy. This is a protection not granted to regular consumer transactions. Therefore, businesses are advised to enroll the services of expert lawyers with sufficient knowledge of the regulatory framework.

Foreign investors are often advised to find a local partner with local business knowledge. Therefore, usually, acquiring or partnering with a local e-business will be a better idea compared to starting from zero. Once more, in this field, businesses will need professional lawyers who are able to lead the negotiations with potential local partners, to draft and revise joint venture agreements, incorporation documents, shareholders’ agreements, etc. and to advise on legal issues related to running a business.

The other challenge is that new businesses sometimes face opposition from their traditional rivals and their relevant unions and associations. Start-ups will need help from expert lawyers to negotiate with the regulatory bodies, acquire the needed licenses, make sure that their business is standing on secure platforms from legal and regulatory point of view and handle the potential lawsuits.

To sum-up, venturing into e-business market in Iran is not risk-free. However, there will be no rewards without risks. Consulting with a prestigious and well-versed local law firm with sufficient international experience is a good step towards minimizing the risks and maximizing the rewards.

Respectfully submitted by Dr.Mahnaz Mehrinfar & Dr.Shahin Fadakar