E-commerce rules have not allow foreign investment

Context

  • The Department of Industrial Policy and Promotion (DIPP) has not allowed foreign investment in the inventory-based model or multi-brand retailing by FDI rules for e-commerce.

key facts

  • These clarifications have come against the backdrop of new provisions announced by the DIPP related to FDI in e-commerce sector last month.
  • The DIPP also said that the government continued to receive complaints that certain marketplace platforms were violating the policy by influencing the price of products and indirectly engaging in the inventory-based model.
  • “An e-commerce platform operating an inventory-based model does not only violate the FDI policy on e-commerce but also circumvents the FDI policy restrictions on multi-brand retail trading,” it said.
  • Recent provisions released by the department in FDI in e-commerce sector were needed to ensure that the rules are not circumvented, the DIPP mentioned.
  • Tightening the norms for e-commerce players, the government has barred them from selling products of the companies in which they have shareholdings.
  • E-commerce companies cannot enter into agreements for the exclusive sale of products, according to the rules.

Provisions for FDI in e-commerce

  • FDI is allowed only in the business-to-business e-commerce segment and not in the business-to-consumer segment which in effect is the multi-brand retail or the inventory-based e-commerce model.
  • DIPP further has clarified that through FDI in business-to-business e-commerce, an e-commerce entity providing marketplace will not, directly or indirectly, influence the sale price of goods or services. If it does so, such renders such business would be rendered as an inventory based model.
  • The DIPP clarifies that an e-commerce platform operating an inventory based model does not only violate the FDI policy on e-commerce but also circumvents the FDI policy restrictions on multi-brand retail trading.

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