wordpress blog stats
Connect with us

Hi, what are you looking for?

FDI in the Ecommerce policy: Vendor neutral rules for marketplace-owned vendors

The Department of Industrial Promotion & Policy revised its guidelines on FDI in e-commerce and set out new rules for marketplaces and vendors, with relation to inventory and FDI, last week. The new guidelines will come into effect from 1 February, 2019. 

The government’s updated policy explains principles laid down in the FDI Policy 2017, which allows 100% FDI in e-commerce via the automatic route.

Here’s a look at what changes now

  1. The updated policy does not allow marketplaces to exercise control or ownership over the inventory of vendors on their platforms. For example, if a marketplace such as Amazon or Flipkart exercises ownership of control over inventory, this platform would no longer be a marketplace, but an inventory-based e-commerce business.
  2. The new policy reiterates that if a vendor sells over 25% of goods (presumably of all the goods sold on the platform) on the e-commerce marketplace, the marketplace will become an inventory based model in which FDI in not allowed. To be clear, the earlier FDI in ecommerce policy from 2017 had the same 25% cap on vendor sales, but now it places the responsibility on the marketplaces to ensure this does not happen.
  3. If a marketplace has an equity stake in a vendor/seller, or if it controls its inventory, the vendor is not permitted to sell its products on the marketplace.
  4. Warranty and guarantee of goods and services sold on marketplaces is the responsibility of the seller/vendor, and not the platform.
  5. The marketplace cannot influence prices directly or indirectly and has to offer a level-playing field all vendors/players – those controlled by marketplaces, or other vendors. Platforms will provide the same services of cashbacks, fulfillment, logistics, warehousing, advertisements, marketing, payments, finance, etc across all vendors.
  6. The new norms dictate that marketplaces cannot mandate any seller to sell any product exclusively on the marketplace.

Read a copy of new rules here.

What stakeholders said about FDI, deep discounting, anchor sellers

At MediaNama’s #NAMApolicy discussions on India’s draft National E-commerce policy held in Delhi and Bangalore in October, stakeholders and policy wonks from the industry discussed issues surrounding the then-scrapped draft policy. Note that these are paraphrased quotes.

On FDI in e-commerce

  • Inventory based model harmful for small traders – Press Note 3 allows platforms, but platforms obviously cannot hold inventory. Why would they need inventory? No price distorting discounts can be given. You come with deep pockets and billions of dollars, does that mean you can do anything you want? (Ashwani Mahajan, Swadeshi Jagran Manch)
  • Is FDI the place to regulate pricing? – The ban on influencing prices is coming from an FDI regulation. If the rationale is that consumers will be harmed from predatory pricing resulting from influencing prices, thats a different conversation. (Nehaa Chaudhari, Ikigai Law)
  • Price influencing is a competition issue rather than an FDI issue – FDI is the wrong place to regulate marketplace or anti-competitive behavior. Deep discounts by itself are not bad as long as they are not harmful for the consumer. Free market, competition, and innovation benefit the consumer. The argument that small traders cannot compete with online marketplaces because they have deep pockets is a larger structural issue, which raises questions like what are the problems small traders are facing: overhead costs, permissions, access to funding, labour laws, etc. It is not a pricing or discounting issue. (Nikhil Narendran, Trilegal)

On discounting tactics

  • Why single out e-commerce players? – Deep discounting is offered by chains like Croma and Reliance as well, why are they allowed, but e-commerce players are not? They even said there would be a sunset clause for all of this. (Winnie Shekhar, IndusLaw)
  • Discounting by large offline chains – When we talk about deep discounting offline, we’re talking about that one tiny brick-and-mortar store…. Additionally, if you’re trying to examine anti-competitive conduct in terms of deep discounting by online retailers versus the discounts offered by this one brick-and-mortar store, they are both competing in the same market. The CCI has addressed some of these issues, but there is inconsistency in how they see what constitutes a relevant market. It has either sidestepped the question or given an inconclusive answer. (Nehaa Chaudhari, Ikigai Law)
  • Apart from B2B and B2C forms of discounting, there are also cashbacks, zero-interest EMIs. But in the offline world, retailers like Vijay Sales also give zero-interest EMI. Cashbacks often come from banks. Offline retailers are looking at volumes which is why they can offer discount or zero-interest EMI. Why is it that the e-commerce companies are considered to be illegal, particularly when, in the light of Press Note 3, it’s not a violation of the regulations? (Anubha Sital, Induslaw)

Read our coverage of #NAMApolicy discussions on the draft National E-commerce Policy here.

Advertisement. Scroll to continue reading.
Written By

I cover health, policy issues such as intermediary liability, data governance, internet shutdowns, and more. Hit me up for tips.

MediaNama’s mission is to help build a digital ecosystem which is open, fair, global and competitive.



The Delhi High Court should quash the government's order to block Tanul Thakur's website in light of the Shreya Singhal verdict by the Supreme...


Releasing the policy is akin to putting the proverbial 'cart before the horse'.


The industry's growth is being weighed down by taxation and legal uncertainty.


Due to the scale of regulatory and technical challenges, transparency reporting under the IT Rules has gotten off to a rocky start.


Here are possible reasons why Indians are not generating significant IAP revenues despite our download share crossing 30%.

You May Also Like


Google has released a Google Travel Trends Report which states that branded budget hotel search queries grew 179% year over year (YOY) in India, in...


135 job openings in over 60 companies are listed at our free Digital and Mobile Job Board: If you’re looking for a job, or...


Rajesh Kumar* doesn’t have many enemies in life. But, Uber, for which he drives a cab everyday, is starting to look like one, he...


By Aroon Deep and Aditya Chunduru You’re reading it here first: Twitter has complied with government requests to censor 52 tweets that mostly criticised...

MediaNama is the premier source of information and analysis on Technology Policy in India. More about MediaNama, and contact information, here.

© 2008-2021 Mixed Bag Media Pvt. Ltd. Developed By PixelVJ

Subscribe to our daily newsletter
Your email address:*
Please enter all required fields Click to hide
Correct invalid entries Click to hide

© 2008-2021 Mixed Bag Media Pvt. Ltd. Developed By PixelVJ