New FDI policy on e-commerce: Amazon, Flipkart among others seek extension of 1 February deadline

E-commerce firms Amazon, Flipkart among others are likely to seek an extension of the 1 February deadline to comply with the revised policy on foreign direct investment (FDI) in online retail, issued by the commerce and industry ministry, a media report said. A source familiar with the development told The Economic Times that the companies “will need to study the latest provisions in detail and may need to bring about huge operational changes”. Tightening norms for e-commerce firms having foreign investment, the government recently barred online marketplaces like Flipkart and Amazon from selling products of companies where they hold stakes and banned exclusive marketing arrangements that could influence product price. The revised policy on foreign direct investment in online retail also said that these firms have to offer equal services or facilities to all its vendors without discrimination. The revised norms are aimed at protecting the interest of domestic players, who have to face tough competition from e-retailers having deep pockets from foreign investors, the ministry had said. [caption id=“attachment_4866701” align=“alignleft” width=“380”] Representational image. Reuters[/caption] “It is important that a broad market-driven framework be developed through a consultative process. We hope to be able to work with the government to promote fair, pro-growth policies that will continue to develop this nascent sector…," Flipkart was quoted as saying by the newspaper. The policy says a vendor will not be permitted to sell more than 25 percent of its products on an online platform of a single e-marketplace firm. “An entity having equity participation by e-commerce marketplace entity or its group companies, or having control on its inventory by e-commerce marketplace entity or its group companies, will not be permitted to sell its products on the platform run by such marketplace entity,” the commerce and industry ministry’s press note said. The new policy comes against the backdrop of several complaints being flagged by domestic traders on heavy discounts being given by e-commerce players to consumers. According to the current policy, 100 percent FDI is permitted in marketplace e-commerce activities. It is prohibited in inventory-based activities. The Department of Industrial Policy and Promotion (DIPP) on Thursday  stressed that the provisions are not against the interest of consumers, noting that only fair, competitive and transparent business practices would be beneficial for buyers. The DIPP 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. New rules will appease small traders and farmers who fear that US companies are making a backdoor entry into India’s retail market and could squeeze out small corner shops that dominate Indian retailing. The Confederation of All India Traders in a statement had said that if the order is implemented in full then malpractices, predatory pricing policies and deep discounting by e-commerce players will no longer occur. --With inputs from agencies