Companies

Few e-comm players using complex models to bypass rules: Reliance Retail

Forum Gandhi Mumbai | Updated on March 28, 2021

Mukesh Ambani-owned Reliance Retail on Thursday, in a meeting with the Commerce Ministry, alleged that a few e-commerce players had found complex models to bypass FDI in e-Commerce rules.

This was the last leg of a series of consultations on the need to tweak the existing FDI policy for e-commerce.

According to sources, representatives on behalf of Reliance Retail said it was a well thought through plan to not allow foreign capital in the inventory-based model.

Currently, it is allowed only in a pure technical infrastructure/platform, which facilitates meeting of buyer with seller. Such a platform cannot act as a seller itself, directory or indirectly.

The representative explained that the gap between the inventory-based model and the marketplace model has been crossed by some foreign companies by way of legal creativity by exploiting either the loopholes or by creative interpretation of the policy that violates the policy in spirit.

"Such legal creativity includes creating a multi-level company structure to hide the real relationship between marketplace entity and the sellers," the source added.

During the meeting, it was also alleged that there have been connections between a few Indian as well as international eCommerce players by means of whichthe said leading players control the companies.

"The continued violation creates doubts about legal sanctity of the policy, especially in the mind of new e-commerce players, therefore it is imperative that the rules are clarified to an extent that these are not subject to such creative interpretation."

Further the representative suggested that the Government must ensure that there is a match between the letter and spirit of the policy so that it does not create any doubt, whatsoever, in the mind of any foreign marketplace company.

Reliance then suggested issuance of a new press note or amendment to the FDI policy.

These included the widening of the scope of 'Group Company' which would tighten the grip of the government and go to the root of controlling the sellers.

"The Group should include Affiliate, Associate companies and prohibit direct and indirect control, be it equity or economic," Reliance said.

The representative further pointed out that there was constant misuse of B2B e-commerce in either controlling the inventory or providing deep discounts, which, according to Reliance must be stopped.

Lastly, it mentioned that compliance with the provisions of the policy was very important, and hence the policy was fool proof.

The DPIIT has now asked for written submissions from all the industry players who attended the meeting.

Published on March 26, 2021

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