FDI Policy on E-Commerce should protect the interests of the smaller merchants: PHD Chamber

No. PR- 289

April 5, 2021

New Delhi

FDI Policy on E-Commerce should protect the interests of the smaller merchants: PHD Chamber

The PHD Chamber of Commerce and Industry has come out with a list of suggestions to be included in the FDI policy on E-commerce to protect the interest of 8 crore small merchants and the livelihood of 30 crore people dependent on them. The chamber believes that while the government has come out with a policy to protect the interest of the smaller merchants, there are still some issues that need to be addressed.

The Chamber has suggested that the foreign companies who are allowed to setup up only e-commerce marketplace platform should not have any direct or indirect control over the inventories. Therefore, the definition of group companies should be extended to include companies operating the marketplace platform itself, its group companies, its affiliates companies, its associated enterprises, its related parties, and any other person(s) controlled, directly or indirectly, by above or in which the person(s) in the companies mentioned above have any direct or indirect equity or economic participation in any manner.

The Chamber recommends that the e-commerce marketplace entity having FDI should not be allowed to control inventory, directly or indirectly, as it tantamount to prohibited multi-brand retailing by foreign companies. Therefore, the definition of marketplace based e-commerce and inventory-based model of e-commerce should be defined as an information technology platform by an e­ commerce entity on a digital & electronic network to act as a facilitator between buyer and seller.

The Chamber believes that an Inventory based model of e-commerce should mean an e-commerce activity where the inventory of any of the goods or services sold on the e-commerce platform is directly or indirectly owned or controlled by the e-commerce entity and is sold to the consumers directly. If any goods or services which are sold by the Group Companies are resold in the e-commerce platform, then such activity shall also be treated as inventory based model of e-commerce.

PHDCCI strongly believes that the permission to enter the B2B agreement should be clarified that the e-Commerce marketplace entity and its group companies cannot sell those inventories that are purported to be sold by them on its marketplace.

Further, there should be a threshold limit of buying from domestic producers and the armed pricing to be followed with respect to the domestic players. It is required to integrate the online marketplaces with the offline markets and ensure that they coexist peacefully with enough opportunities for domestic and international players in India’s booming retail e-commerce industry.

The chamber belies that E – Commerce platforms have a revenue stream through advertising and vendors with deeper pockets are able to exploit smaller vendors for front-page placement. While the algorithm for e-commerce platforms is proprietary – it allows for “preferred vendors” to gain top ranks on the front page. If there is a possibility to regulate the “advertising norms” to allow preferential treatment for small local vendors – it would level the playing field to some extent.


Media Division

PHD Chamber of Commerce and Industry