E-Paper
FDI norms for e-commerce cos to add to compliance burden
Certain practices of e-commerce companies are under investigation because of complaints from consumers and small retailers, with the government considering whether or not it should issue clarifications to ensure that the e-commerce sector works in the “true spirit of the law”, Piyush Goyal said.
The Centre’s latest indication on revising and providing further clarifications to foreign direct investment (FDI) rules for e-commerce firms is expected to cause further uncertainty, pushing the latter to review their holding structures for seller entities in which they have an indirect stake.
Certain practices of e-commerce companies are under investigation because of complaints from consumers and small retailers, with the government considering whether or not it should issue clarifications to ensure that the e-commerce sector works in the “true spirit of the law”, commerce and industry minister Piyush Goyal said on Tuesday.
E-commerce platforms can only be service providers, Goyal said. There won’t be major changes to the FDI norms, he said. The matter, which is being discussed for more than a year, has again come into focus after several complaints from brick-and-mortar retailers and the Confederation of All India Traders (CAIT) to the government.
In 2018, the government changed FDI rules for e-commerce to ensure that firms do not offer products from sellers in which they have direct stakes. Now, the government plans to issue clarifications to also include sellers in which e-commerce companies have an indirect stake in, according to three people who were present at the discussions with the government. “We have seen e-commerce marketplaces preferring their own sellers over others. For instance, the bulk of Amazon’s sales is predominated by its two biggest sellers. These sellers control the inventory and they also give deep discounts,” said a CAIT spokesperson.
“All we have asked for is that the definition of group company should be changed so that there is no control of inventory and there is no preferential seller treatment. This is to ensure a level playing field for all suppliers on e-commerce platforms,” the spokesperson said.
Analysts said that foreign-owned e-commerce companies have created several seller entities to bypass the government’s notification around direct ownership and have been selling their inventory on their marketplaces. In January, US lobby group US-India Business Council (USIBC), which represents Walmart and Amazon, had written to the Indian government urging it to not make any more changes to e-commerce investment rules.
