New FDI policy on e-commerce: Vendor cannot purchase more than 25% of products from e-tailer's group companies

There is no cap in case the vendor sells the procured goods on other e-commerce platforms which do not hold a stake in the said firm.

Press Trust of India December 28, 2018 13:39:17 IST
New FDI policy on e-commerce: Vendor cannot purchase more than 25% of products from e-tailer's group companies

New Delhi: A vendor cannot procure more than 25 percent of products from group companies of the same marketplace where they intend to sell them, sources clarified.

According to the revised guidelines for e-commerce companies having FDI, such vendors cannot make more than 25 percent of their purchases from group companies of the marketplace.

Sources said doing so would imply that the marketplace has control over such inventory, and the policy prohibits any such control by the marketplace.

New FDI policy on ecommerce Vendor cannot purchase more than 25 of products from etailers group companies

Representational image. Reuters

However, there is no cap in case the vendor sells the procured goods on other e-commerce platforms which do not hold a stake in the said firm.

This means, if a vendor procures goods from a firm ‘X' in which an e-commerce company ‘Y' holds a stake, then the vendor can procure only 25 percent from ‘X' for selling on Y's platform.

"E-commerce entity providing a marketplace will not exercise ownership or control over the inventory that is, goods purported to be sold.

"Such an ownership or control over the inventory will render the business into inventory-based model. Inventory of a vendor will be deemed to be controller by e-commerce market place entity if more than 25 percent of purchases of such vendor are from the marketplace entity or its group companies, " said the revised guidelines for FDI in e-commerce sector.

An official said that this norm will ensure that the online player will not directly or indirectly influence the price of the products.

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