E-Commerce FDI Policy Bars Foreign Investment In Multi-Brand Retail

The Centre said the Foreign Direct Investment (FDI) policy on e-commerce does not allow foreign investments into multi-brand retail.

The Department of Industrial Policy and Promotion (DIPP), in a statement assured that FDI in allowed only in the business-to-business (B2B) e-commerce segment and not in the business-to-consumer (B2C) segment, which in effect is the multi-brand retail or the inventory-based e-commerce model.

“Certain averments suggest that Press Note 3/2016 had covertly allowed multi-brand retail trading. Such a view is completely contrary to the specific provisions of Press Note 3/2016, which unambiguously provided that FDI is not permitted in inventory-based model of e-commerce which amounts to multi-brand retail,” the statement said.

It further said as FDI is allowed only in B2B e-commerce, an e-commerce entity providing marketplace will not, directly or indirectly, influence the sale price of goods or services, which also renders such business as an inventory-based model.

The DIPP also noted that despite the regulations not allowing a e-commerce player to influence pricing of products the government continued to receive complaints that certain marketplace platforms violated the policy and indirectly engaged in inventory-based model.

“An e-commerce platform operating an inventory-based model does not only violate the FDI policy on e-commerce but also circumvents the FDI policy restrictions on multi-brand retail trading,” the statement stressed.

The Commerce Ministry in December revised the FDI policy for e-commerce players whereby it barred online retail firms like Amazon and Flipkart from selling products of companies in which they have stakes. It also prohibited e-tailers from mandating any company to sell its products exclusively on its platform only.

Meanwhile a delegation of CAIT met the Union Commerce Minister Suresh Prabhu and extended support of traders on the FDI policy.― The News Minute

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