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03
January 2019
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FDI (The
Total Investment & Insurance Solutions)
The FDI rules for e-commerce have not allowed
foreign investment in the inventory-based model or multi-brand retailing, the
Department of Industrial Policy and Promotion (DIPP) clarified Thursday. It
also stressed that the provisions are also not against the interest of
consumers, noting that only fair, competitive and transparent business
practices would be beneficial for buyers.
These clarifications have come
against the backdrop of new provisions announced by the DIPP related to FDI in
e-commerce sector last month. "Certain averments suggest that Press Note
3/2016 had covertly allowed multi-brand retailtrading. Such a view is
completely contrary to the specific provisions of Press Note 3/2016, which
unambiguously provided that FDI is not permitted in the inventory-based model
of e-commerce which amounts to multi-brand retail," a note released by the
DIPP said. Under Press Note 3/2016, the government has enlisted provisions of
foreign direct investment (FDI) in e-commerce. 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. The
Total Investment & Insurance Solutions
"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.
These provisions are also
not against the interest of consumers, it stressed. Fair, competitive and
transparent business practices which are in compliance with the law will better
protect consumers in both short as well as medium and long-term, it outlined.
On the sale of private labels, the DIPP said that concerns have been raised
that the recent provisions have prohibited sale of private label products
through online marketplaces. "It is clarified that present policy does not
impose any restriction on the nature of products which can be sold on the
marketplace," it added. Those norms, it said, are applicable only to
entities which operate a marketplace for e-commerce. On safeguarding consumer
interest, it said there are different views on how best consumer interests are
protected and promoted.
It said that business-to-consumer e-commerce,
that is multi-brand retail through the inventory-based model, has all along
remained prohibited for FDI. Through the recent provisions, the
"government has only reiterated the policy provisions to ensure better
implementation of the policy in letter and spirit," it added. A separate
FDI policy, however, allows 51 per cent foreign investment in the multi-brand
retail trading.
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