Tightening up standards for e-commerce firms with foreign investments, the Ministry of Commerce and Industry has barred e-commerce websites like Flipkart and Amazon from selling products of companies where they hold stakes and also banned exclusive marketing arrangements that could influence product price. The move, which will come into effect from February 1, 2019, comes against the backdrop of several complaints being flagged by domestic traders on heavy discounts being given by e-commerce players to consumers.
The revised policy on foreign direct investment in online retail, issued by the commerce and industry ministry, stated 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 move would completely prevent influencing prices by e-commerce players. This will also ensure better enforcement of FDI guidelines in e-commerce companies.
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. Inventory of a vendor will be deemed to be controlled by e-commerce marketplace entity if more than 25 per cent of purchases of such vendor are from the marketplace entity or its group companies. As per the current policy, the government has permitted 100 percent FDI in the market place e-commerce activities while FDI is prohibited for inventory-based activities.