Multi-national e-commerce firms flouting FDI norms: CAIT

Confederation of All India Traders (CAIT) on Tuesday alleged that a few of the multinational e-commerce entities with a “heavy arsenal of funding” are attempting to to flout foreign direct investment norms under the guise of complex business structures.

The traders association released a white paper on Tuesday reiterating concerns about practices of deep discounting, private labels and unfair use of data to gain unfair advantage by certain e-commerce firms. It alleged that these e-commerce entities structure their relationships as marketplaces with sellers in such a way that they are in a position to control either the seller on their platform or the inventory and escape the scrutiny of the enforcement agencies.

‘Anti-competitive conduct’

“Under the guise of such control or ownership over sellers, the issue also permeates from being a mere FDI Policy violation to also being an anti-competitive conduct. The mitigating measures and strict action for enforcement of the law in letter and spirit are of paramount importance. Otherwise, the FDI policy on e-commerce would fail in its very objective of catering to the interests of domestic manufacturers, traders, sellers, MSMEs, start- ups and creation of a level playing field in retail,” the white paper by CAIT stated.

It added that since inventory-based e-commerce is nothing but operating a multi-brand retail store through the electronic means, no FDI has been allowed in such a model of e-commerce under the FDI policy. “However, to enable the proliferation of technology that can help MSMEs and kiranas, 100 per cent FDI through automatic route has been allowed to setup e-commerce marketplace platform with a caveat that any entity operating such technology platform will not own/control inventory of any seller on the platform as that will be tantamount to operation of multi-brand retail trading,” CAIT stated adding that a few multi-national e-commerce entities are flouting these rules.

Policy needs to be inclusive

Praveen Khandelwal, Secretary General, CAIT said, “We have examined in detail how the conduct of the e-commerce platforms have an effect not only on the sellers, but on other major stakeholders-manufacturers and consumers-as well. We believe it is important to ensure that e-commerce platforms remain neutral and failure to ensure fairness in conduct of e-commerce platforms will lead to a situation where only a handful of large platforms will be able to take advantage of the digital boon, while several other stakeholders would be left out. Therefore, the e-commerce policy needs to be inclusive and must ensure collective growth.”

COMMENT NOW