EDITOR’S DESK
New Guidelines to Ecommerce
Companies Might Impact FDI in India
The Government of India has announced
certain changes in the foreign direct
investment (FDI) policy for e-commerce
sector which will impact leading platforms
like Amazan and Flipkart in conducting
business in the country.
According to new rules the e-commerce
companies that have received foreign
investment will not be able to offer
discounts and cash backs to customers.
The policy also bars any entity related to e-
commerce platforms from selling on that
site and imposes a limit on how much one
vendor can sell on a particular portal.
Cash backs, exclusive sales, brand
launches, preferential ser vices or
programmes such as Amazon Prime and
Flipkar t Plus could now run into
difficulties. Thus, entities like Cloudtail in
which Amazon has a stake and Flipkart's
new owner Walmart won't be able to sell
their products on the websites. New FDI
guidelines have made Amazon India’s food
retail entity. Amazon Retail India’s
(ARIPL) future uncertain as it wan’t to able
to sell its products on the Amazon’s market
place.
The Press Note 3 of 2016 had made it clear in
the very beginning that e-commerce
companies could not directly or indirectly
influence prices. The new rules will only
ensure better implementation of the e-
commerce policy under Press Note 3 of 2016
and will come into effect from February 1,
2019 as announced in the press note by
Department of Industrial Policy and
th
Promotion (DIPP) on 26 December 2018.
This has been done to mollify brick – and –
mortar retailers which had many grievances
against e-commerce sites for offering
discounts to win over customers.
The trading community had complained that
e-commerce entities were distorting market
violating the policy that disallows FDI in
business-to-consumers (B2C) e-commerce.
It only allows 100% FDI in business-to
business (B2B) e-commerce and not in 'B2C'
The new restrictions will hit prospective
100% FDI that could come in the form of
B2B. The new guidelines are discriminatory
as these apply only against e-commerce and
not on brick and mortar retailers. Unfair
trade, if any, should be dealt with by the
Competition Commission of India.
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Economic Challenger//Issue 82, January-March 2019