Bad tidings: New FDI coverage a googly for e-commerce gamers

While the authorities announced its rejigged FDI policy for e-commerce currently, the e-trade area in u . S. A. Itself is about for an upheaval after Reliance’s statement of entering the gap. The authorities introduced its transformed FDI policy on e-commerce via Press Note (2) within the final week of December 2018 and issued a rationalization within the first week of January 2019. According to the clarification, the government has the simplest reiterated the policy provisions to make a sure better implementation of the policy in letter and spirit. A careful assessment, but, exhibits that the coverage provisions prescribed cross plenty past reiteration of the policy and significantly trade the FDI coverage on e-commerce in India.

The Press Note states that the provisions of the coverage will take impact from February 1, 2019. If this Note is simplest a reiteration of the earlier coverage, there should now not be any want for specifying a future date for the coverage taking effect. On the alternative hand, if there are provisions that have been now not there earlier however marketplace entities are actually required to fulfill, it’s miles, in reality, no mere “reiteration of the earlier coverage”.

As compared to the earlier coverage enumerated in Press Note (3) of 2016, the new Press Note locations new obligations on market entities. First, e-trade marketplaces or different entities in which e-trade marketplaces have direct or indirect fairness participation or not unusual control have to provide services (inclusive of fulfilment, logistics, warehousing, commercial/ marketing, payments, financing and so forth.) to companies on the platform at arm’s duration and in a fair and non-discriminatory manner. Second, coins-back furnished by means of group agencies of marketplace entity to shoppers will be honest and non-discriminatory. Third, an e-trade marketplace will no longer mandate any seller to promote any product completely on its platform most effective. Fourth, the e-trade marketplace can be required to provide a certificate at the side of a file of the statutory auditor to Reserve Bank of India by way of September 30 each 12 months for the previous monetary year.

The new policy also specifies criteria (now not there in advance coverage) for outlining inventory of providers as the stock of marketplace entity. The stock of a dealer could be deemed to be managed by means of e-commerce market if more than 25% of purchases of such seller are from the marketplace entity or its institution companies. It puts the liability of conforming to this provision on the market entity via RBI audit. There can be some of the implementation troubles in making sure this provision. First, how does a marketplace examine whether more than 25% of purchases of a dealer are from the market or its organization corporations? Even if that is covered as a contract circumstance by means of the marketplace region with its vendors, what if the seller changes its call and purchases the equal items beneath an exceptional name? Who will audit the vendors? Is it RBI’s or the marketplace entity’s responsibility to certify if companies are enjoyable this circumstance or no longer? RBI audit seems to be handiest for the marketplace entity and not for vendors.

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