MUMBAI: Starting February 2019, e-commerce companies with foreign investment such as Flipkart and Amazon would not be able to sell products with exclusive marketing rights, a practice that is being seen as discriminatory. The government on Wednesday issued a circular for e-commerce firms with foreign direct investments (FDI), tightening norms in an effort to bring a level playing field among listed vendors, and also to help domestic e-commerce firms.
“E-commerce marketplace entity will not mandate any seller to sell any product exclusively on its platform only,” the circular said. The new norms are seen as ending predatory pricing and indiscriminate discounts.At present, 100 per cent FDI under automatic route is permitted in marketplace model of e-commerce, where the e-tailer is not allowed to own goods to be sold on their platform. FDI is not permitted in inventory model e-commerce.
“Such an ownership or control over the inventory will render the business into inventory-based model. 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 firms,” it said.
Further, it has also made it clear that e-commerce companies under FDI cannot sell products of companies where they hold stakes. “An entity having equity participation by e-commerce marketplace entity or its group companies, having control on its inventory by e-commerce marketplace entity or its group companies, will not be permitted to sell its products on the platform run by such marketplace entity,” as per the norm.
The notification said services to entities directly or indirectly controlled by the e-tailer should be done at an arm’s length in a fair and non-discriminatory manner. Reacting to the circular, Snapdeal CEO Kunal Bahl tweeted, “Marketplaces are meant for genuine, independent sellers, many of whom are MSMEs. These changes will enable a level playing field for all sellers, helping them leverage the reach of e-commerce.”