The government is unlikely to extend the February 1 deadline for e-tailers like Amazon and Flipkart to comply with the latest changes to the foreign direct investment (FDI) guidelines announced in late December.
Amazon has asked the government to extend the deadline by four months and Flipkart, too, reportedly wants more time to adapt to the new rules.
While an official source told FE a decision on the request will be made soon, another source said the government is cautious, given offline traders’ threat to step up agitations if any relaxation is granted to e-tailers. As such, the government is perceived to have been lax in implementing FDI rules (especially the restriction on discounts offered by e-tailers) strictly for so long.
The December 26 guidelines bar online marketplaces with foreign investments from selling products of the companies where they hold stakes or control inventory and also ban exclusive marketing arrangements. It said the inventory of a vendor (except food retail) will be “deemed to be controlled by an e-commerce marketplace if more than 25 percent of purchases of such vendor are from the marketplace entity or its group companies”. An earlier rule stipulated that more than a fourth of an e-tailer’s sales couldn’t come from a single vendor. Since the government effectively doesn’t allow FDI in multi-brand retail, it has sought to squeeze any scope for a back-door entry for this via online marketplaces.
The new norms mean Amazon, which has an investment in Cloudtail, can’t sell the latter’s products on its platform, and RetailNet can’t sell on Flipkart. So, these companies will need to restructure their operations and just over a month (since December 26) isn’t enough time to do this, analysts say.
An Amazon spokesperson said: “As we seek clarity, we have written to the government, requesting an extension of four months. With over 4 lakh sellers and hundreds of thousands of transactions happening daily on the Amazon India Marketplace, we need adequate time to understand the details of the policy.” She added that Amazon remains committed to being compliant to all local laws.
The brick-and-mortar stores have long accused the e-commerce firms of violating the FDI rules, which specifically bar these e-tailers from influencing the pricing of products sold on their platforms (directly or indirectly) through any means, including discounts. The e-tailers, however, have claimed that they always comply with the rules.
Asking the government to defer the implementation of the new norms, the Internet and Mobile Association of India has said it is not possible for online marketplaces to monitor all sales from any vendor, given that a vendor is free to sell their products on multiple platforms, both online and offline.―Financial Express