Regulation of Online Retailers

Speed Post News Network

New Delhi : Considering the potential of e-Commerce, Government of India plans to encourage it to contribute towards India’s proposed USD 1 trillion digital economy. However, e-Commerce companies having foreign investment can operate only a marketplace model and there are restrictions on the inventory based model of e-Commerce.

In order to clarify the same, Department for Promotion of Industry and Internal Trade (DPIIT), vide Press Note 3 of 2016, issued guidelines for FDI in e-Commerce on 29 March 29, 2016. However, allegations were made against e-Commerce companies that the marketplaces were violating the norms laid down in Press Note 3 of 2016.

With a view to clarifying the already existing policy framework, Press Note 2 of 2018 was issued by DPIIT on December 26, 2018, to provide further clarification on FDI Policy in relation to e-Commerce companies. Through the latest Press Note 2 of 2018, the Government has reiterated the policy provisions to ensure better implementation of the policy in letter and spirit.

Clause (ix) of Press Note 2 of 2018, stipulates that e-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field. Services should be provided by e-commerce marketplace entity or other entities in which e-commerce marketplace entity has direct or indirect equity participation or common control, to vendors on the platform at arm’s length and in a fair and non-discriminatory manner. Such services will include but not limited to fulfilment, logistics, warehousing, advertisement/ marketing, payments and financing. Cash back provided by group companies of marketplace entity to buyers shall be fair and non-discriminatory.

Representations have been received in DPIIT alleging that some e-commerce platforms are engaged in predatory pricing and are providing excessive discounts. The extant Foreign Direct Investment (FDI) policy on e-commerce sector, inter-alia, specifies that e-commerce marketplaces will not directly or indirectly influence the sale price of goods or services and shall maintain a  level playing field. These representations are under examination.

However, it is reported that the Competition Commission of India (CCI) has recently ordered investigation against FlipKart Internet Pvt. Ltd. and Amazon Seller Services Pvt. Ltd. in order to determine whether the alleged exclusive arrangements, deep-discounting and preferential listing are being used as an exclusionary tactic to foreclose competition under section 26(1) of Competition Act, 2002.

This information was given by Commerce and Industry Minister Piyush Goyal in a written reply in the Lok Sabha on February 5, 2020, according to a PIB release.