The government has asked online retailers to strictly comply with e-commerce guidelines following complaints by brickand-mortar rivals that they were offering hefty discounts in violation of foreign direct investment (FDI) guidelines.
A senior official of the Department of Industrial Policy and Promotion (DIPP) confirmed that the issue came up for discussion with online retailers during a recent meeting following the complaints.
It has been made clear to online companies that, as marketing platforms, they cannot extend sale discounts on their own and in the case of media ads, it should be clearly mentioned that these discounts are being offered by vendors and brand owners.
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The Confederation of All India Traders (Cait) had filed a complaint with DIPP alleging that leading e-tailers Amazon, Flipkart and Snapdeal were blatantly violating FDI norms by offering huge discounts in media ads on the sale of goods such as smartphones TVs, apparel and shoes.
The meeting was attended by DIPP secretary Ramesh Abhishek, the consumer affairs secretary and top honchos from leading online retail companies. Cait had in its compliant on August 10 said that during the past three days, these companies have given big advertisements in the media announcing sale on their platforms, which is a violation of FDI guidelines on ecommerce.
These companies are allowed to do business-tobusiness but they are doing business-to-consumer for which they are not authorised, the complaint had alleged. In March, the government had allowed 100 per cent FDI through automatic route in the marketplace format of ecommerce retailing. As per the guidelines issued by the DIPP, FDI has not been permitted in inventory-based model of e-commerce.
The guidelines also state that such entities will not directly or indirectly influence the sale price of goods and services and shall maintain a level playing field. Ciat asked the ministry to "take immediate action against these companies".
"The policy seeks to provide a level playing field. In defining the marketplace-based model of ecommerce, it states that a marketplace should be a technology platform. Based on this, marketplaces cannot anymore claim to be retailers or online stores," a senior official said.
The policy also lays down the condition that an e-commerce firm will not be permitted to sell more than 25 per cent of total sales from one vendor or its Group companies in order to prevent marketplaces from behaving like pseudo retailers and ensure that they stay true to their claim of being technology platforms.