5-Feb-2020: Regulation of Online Retailers

Considering the potential of e-Commerce, Government of India plans to encourage it to contribute towards India’s proposed USD 1 trillion digital economy. However, e-Commerce companies having foreign investment can operate only a marketplace model and there are restrictions on the inventory based model of e-Commerce. In order to clarify the same, Department for Promotion of Industry and Internal Trade (DPIIT), vide Press Note 3 of 2016, issued guidelines for FDI in e-Commerce on 29 March 2016. However, allegations were made against e-Commerce companies that the marketplaces were violating the norms laid down in Press Note 3 of 2016.

With a view to clarify the already existing policy framework, Press Note 2 of 2018 was issued by DPIIT on 26 December 2018 to provide further clarification on FDI Policy in relation to e-Commerce companies. Through the latest Press Note 2 of 2018, Government has reiterated the policy provisions to ensure better implementation of the policy in letter and spirit.

Further, Clause (ix) of Press Note 2 of 2018, stipulates that e-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field. Services should be provided by e-commerce marketplace entity or other entities in which e-commerce marketplace entity has direct or indirect equity participation or common control, to vendors on the platform at arm's length and in a fair and non-discriminatory manner. Such services will include but not limited to fulfilment, logistics, warehousing, advertisement/ marketing, payments and financing. Cash back provided by group companies of marketplace entity to buyers shall be fair and non-discriminatory. For the purposes of this clause, provision of services to any vendor on such terms which are not made available to other vendors in similar circumstances will be deemed unfair and discriminatory. Further, if any violation is reported necessary action may be taken by the competent authority.

Representations have been received in DPIIT alleging that some e-commerce platforms are engaged in predatory pricing and are providing excessive discounts. The extant Foreign Direct Investment (FDI) policy on e-commerce sector, inter-alia, specifies that e-commerce marketplaces will not directly or indirectly influence the sale price of goods or services and shall maintain a  level playing field. These representations are under examination.

However it is reported that the Competition Commission of India (CCI) has recently ordered investigation against FlipKart Internet Pvt. Ltd. and Amazon Seller Services Pvt. Ltd. in order to determine whether the alleged exclusive arrangements, deep-discounting and preferential listing are being used as an exclusionary tactic to foreclose competition under section 26(1) of Competition Act, 2002 vide Order 40 of 2019 dated 13.01.2020.

26-Dec-2018: Review of policy on Foreign Direct Investment (FDI) in e-commerce

To provide clarity to FDI policy on e-commerce sector, Para 5.2.15.2 of the Consolidated FDI Policy Circular 2017 will now read as under:

5.2.15.2 E-commerce activities

Subject to provisions of FDI Policy, e-commerce entities would engage only in Business to Business (B2B) e-commerce and not in Business to Consumer (B2C) e-commerce.

Definitions:

i)    E-commerce- E-commerce means buying and selling of goods and services including digital products over digital & electronic network.

ii)   E-commerce entity - E-commerce entity means a company incorporated under the Companies Act 1956 or the Companies Act 2013 or a foreign company covered under section 2 (42) of the Companies Act, 2013 or an office, branch or agency in India as provided in section 2 (v) (iii) of FEMA 1999, owned or controlled by a person resident outside India and conducting the e-commerce business.

iii)  Inventory based model of e-commerce- Inventory based model of e-commerce means an e-commerce activity where inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly.

iv)  Marketplace based model of e-commerce - Marketplace based model of e-commerce means providing of an information technology platform by an e-commerce entity on a digital & electronic network to act as a facilitator between buyer and seller. 

Guidelines for Foreign Direct Investment on e-commerce sector

1. 100% FDI under automatic route is permitted in marketplace model of e-commerce.
2. FDI is not permitted in inventory based model of e-commerce.

Other Conditions

1. Digital & electronic network will include network of computers, television channels and any other internet application used in automated manner such as web pages, extranets, mobiles etc.
2. Marketplace e-commerce entity will be permitted to enter into transactions with sellers registered on its platform on B2B basis.
3. E-commerce marketplace may provide support services to sellers in respect of warehousing, logistics, order fulfillment, call centre, payment collection and other services.
4. E-commerce entity providing a marketplace will not exercise ownership or control over the inventory i.e. goods purported to be sold. 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% of purchases of such vendor are from the marketplace entity or its group companies. 
5. An entity having equity participation by e-commerce marketplace entity or its group companies, or 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.
6. In marketplace model goods/services made available for sale electronically on website should clearly provide name, address and other contact details of the seller. Post sales, delivery of goods to the customers and customer satisfaction will be responsibility of the seller.
7. In marketplace model, payments for sale may be facilitated by the e-commerce entity in conformity with the guidelines of the Reserve Bank of India.
8. In marketplace model, any warrantee/ guarantee of goods and services sold will be responsibility of the seller.
9. E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field. Services should be provided by e-commerce marketplace entity or other entities in which e-commerce marketplace entity has direct or indirect equity participation or common control, to vendors on the platform at arm’s length and in a fair and non-discriminatory manner. Such services will include but not limited to fulfilment, logistics, warehousing, advertisement/ marketing, payments, financing etc. Cash back provided by group companies of marketplace entity to buyers shall be fair and non-discriminatory. For the purposes of this clause, provision of services to any vendor on such terms which are not made available to other vendors in similar circumstances will be deemed unfair and discriminatory.
10. Guidelines on cash and carry wholesale trading as given in para 5.2.15.1.2 of Consolidated FDI Policy Circular 2017 will apply on B2B e-commerce.
11. e-commerce marketplace entity will not mandate any seller to sell any product exclusively on its platform only.
12. e-commerce marketplace entity will be required to furnish a certificate along with a report of statutory auditor to Reserve Bank of India, confirming compliance of above guidelines, by 30th of September of every year for the preceding financial year.
13. Subject to the conditions of FDI policy on services sector and applicable laws/regulations, security and other conditionalities, sale of services through e-commerce will be under automatic route.

The above decision will take effect from 01 February, 2019.

7-Jan-2020: Centre approves Rs 5,908 crore to seven states for calamity damage relief

The Centre approved the release of Rs 5,908.56 crore to seven states, including Uttar Pradesh, Karnataka and Assam, as assistance for the damage caused due to various calamities last year.

The Home Ministry said, the decision was taken at a meeting of a high-level committee (HLC), chaired by Union Home Minister Amit Shah. The HLC approved additional central assistance of Rs 5908.56 crore to seven states from the National Disaster Response Fund (NDRF) of which Rs 616.63 crore will be given to Assam, Rs 284.93 crore to Himachal Pradesh, Rs 1869.85 crore to Karnataka, Rs 1749.73 crore to Madhya Pradesh, Rs 956.93 crore to Maharashtra, Rs 63.32 to Tripura and Rs 367.17 crore to Uttar Pradesh for floods or landslides or cloudburst during the 2019 southwest monsoon.

Earlier, the central government has released an interim financial assistance of Rs 3,200 crore to four states -- Rs 1,200 crore to Karnataka, Rs 1,000 crore to Madhya Pradesh, Rs 600 crore to Maharashtra and Rs 400 crore to Bihar.

During 2019-20, the government has released Rs 8,068.33 crore to 27 states as central share from the State Disaster Response Fund (SDRF).

The central government under Prime Minister Narendra Modi has been providing full support to states by providing timely logistics and financial resources to supplement efforts of the state governments to deal with the situation effectively in the wake of natural calamities.

4-Oct-2019: Centre approves additional financial assistance of Rs.1813.75 crore from National Disaster Response Fund (NDRF) to the State of Karnataka and Bihar

Union Minister for Home Affairs, Shri Amit Shah has reviewed the ongoing rescue and relief work of all the flood affected States. Keeping in view the severity of flood situation and the fund positions in the State Disaster Response Fund (SDRF) account of the States of Bihar and Karnataka, the Home Minister has approved advance release of Rs.400 crore to the State of Bihar and Rs.1200 crore to the State of Karnataka from National Disaster Response Fund (NDRF) ‘on account basis’. He has further approved the advance release of 2nd installment of Centre's share of SDRF amounting to Rs.213.75 crore to the State of Bihar for the year 2019-20.

The States of Karnataka and Bihar have apprised of the paucity of funds in the SDRF account, resulting in delay in providing relief assistance to the affected people and requested for release of advance additional financial assistance from NDRF. The State of Bihar has also requested for advance release of the second installment of centre’s share of SDRF for the year 2019-20.

During the South West Monsoon, 2019, 13 States have been affected from unprecedented floods/landslide. In pursuance of a significant decision taken by the Union Home Minister in the High Level Committee (HLC) meeting held on 19th August, 2019, even before receipt of Memorandum from the concerned State Government for seeking additional financial assistance from NDRF, Ministry of Home Affairs constituted Inter Ministerial Central Teams (IMCTs) for 13 States. IMCTs have so far visited 12 States and based on the interim memorandum submitted by States, interim reports have been submitted by IMCTs in respect of Bihar and Karnataka.

The Central Government has been providing full support to the State Governments by mobilizing/providing timely logistics and financial resources to supplement efforts of the State Governments to deal with the situation effectively in the wake of floods/ landslides. The logistics support provided includes adequate number of teams of National Disaster Response Force, Indian Air Force and Coast Guard helicopters, Army columns, Navy & Coast Guard personnel along with necessary rescue equipment.

Government of India supplements the effort of the State Government by providing assistance for relief of immediate nature through SDRF and per established procedure. A SDRF has been constituted for each State. The Central Government contributes 75% for General Category States and 90% for North-Eastern and Hilly States of the SDRF allocation each year. The first charge of relief expenditure is on SDRF and in the cases of calamities of severe nature, it is supplemented from NDRF as per established procedure.