E COMMERCE REGULATIONS

E COMMERCE REGULATIONS

Subject : Economy

Context: The Centre plans to issue a clarification on the foreign direct investment (FDI) policy for the e-commerce sector in the wake of investigations into some foreign players’ operations following complaints about malpractices, according to Commerce and Industry Minister PiyushGoyal.

Concept:

• The government had sought information from the online marketplaces as part of a probe into ‘certain complaints from consumers and small retailers about certain practices of e-commerce companies’.
• Stressing that e-commerce platforms could only act as a service provider, the minister warned players ‘who break the law’ that they would have to correct their business practices at the earliest.

FDI guidelines for e-Commerce

• In India 100% FDI is permitted in B2B e-commerce, however, No FDI is permitted in B2C(Inventory based ) e-commerce.
• 100% FDI under automatic route is permitted in the marketplace model of e-commerce, while FDI is not permitted in inventory based model of e-commerce.

Marketplace and Inventory-Based Model

• Marketplace based model of e-commerce means providing an information technology platform by an e-commerce entity on a digital & electronic network to act as a facilitator between the buyer and seller.
• In a marketplace model, the e-commerce firm is not allowed to directly or indirectly influence the sale price of goods or services and is required to offer a level playing field to all vendors.
• Inventory based model of e-commerce means an e-commerce activity where the inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly.