TelecomLive January-2019

Inventory based B2C e-commerce www.telecomlive.com 28 Telecom LIVE January 2019 different views on how best consumer interests are protected and promoted. It is felt that fair, competitive and transparent business practices which are in compliance with law will better protect consumers in both short aswell asmediumand long term. 5. Sale of private labels : Concerns have been raised that Press Note 2/2018 prohibits sale of private label products through themarketplace. It is clarified that present policy does not impose any restriction on the nature of products which can be sold on the marketplace. 6. Press Note 2/2018 vis- à-vis other policy provisions : Press Note 2/2018 is applicable only to entities which operate a marketplace for e-commerce. FDI in other sectors continue to be governed by the specific provi- sions pertaining to them. For instance, there is no change in the FDI policy on food product retail trading, which permits 100 per cent FDI under approval route, including through e-commerce, in respect of food productsmanufac- tured and/or produced in India. marketplace platforms were violating the policy by influencing the price of products and indi- rectly engaging in inventory based model. An e-commerce platform operating an inventory based model does not only violate the FDI policy on e-commerce but also circumvents the FDI policy restrictions on multi-brand retail trading. Therefore, latest Press No t e o n FD I p o l i c y o n e - commerce sector was needed to ensure that the rules are not circumvented. 3. E-commerce policy and multi-brand retail : Certain averments suggest that Press Note 3/2016 had covertly allowed multi-brand retail trading. Such a view is completely contrary to the specific provisions of Press Note 3/2016, which unambiguously provided that FDI is not permit- ted in inventory based model of e- commerce which amounts to multi-brand retail. 4. Sa f e gua r d i ng Con- sumer Interest : It has been commented by a few that the latest Press Note is against the interest of consumers. There are 1. Stakeholder consulta- tion : FDI policy on e-commerce, first pronounced through Press Note 2 of 2000, permitted 100 per cent FDI in B2B e-commerce activities. With a view to clarify the a l ready ex i s t ing po l i cy f ramework , a f t er ext ens i ve stakeholder consultations, Press Note 3 was issued by DIPP in 2016. B2C e-commerce, that is mu l t i -brand re t a i l through inventory based model, has all along remained prohibited for FDI. Through the latest Press Note (2/2018), the government has only reiterated the policy provisions to ensure better implementation of the policy in letter and spirit. 2. Need for this interven- tion : As FDI is allowed only in B2B e-commerce, it was provided in Press Note 3/2016 that an e- commerce ent i t y prov iding marketplace will not, directly or indirectly, influence the sale price of goods or services, which also renders such business as an inventory based model. However, the government continued to receive complaints that certain para 5.2.15.1.2 of Consolidated FDI Policy Circular 2017 will apply onB2B e-commerce. xi) e-commerce marketplace entity will not mandate any seller to sell any product exclu- sively on its platformonly. xii) e-commerce marketplace entity will be required to fur- nish a certificate along with a report of statutory auditor to Reserve Bank of India, con- firming compliance of above th guidelines, by 30 of Septem- ber of every year for the pre- ceding financial year. Subject to the conditions of FDI policy on services sector and appli- cable laws / regulations, security and other conditionalities, sale of services through ecommerce will be under automatic route. 3.0 The above decision will take effect fromFeb 1, 2019. entities in which e-commerce marketplace entity has direct or indirect equity participation or common control, to vendors on the platformat arm's length and in a fair and nondiscrimi- natory manner. Such services will include but not limited to fulfilment, logistics, ware- housing, advertisement/ mar- keting, payments, financing etc. Cash back provided by group companies of market- place 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 circum- stances will be deemed unfair and discriminatory. x) Guidelines on cash and carry wholesale trading as given in vide name, address and other contact details of the seller. Post sales, delivery of goods to the customers and customer satisfaction will be responsi- bility of the seller. vii) In marketplace model, pay- ments for sale may be facili- tated by the e-commerce entity in conformity with the guidelines of the Reserve Bank of India. viii)In marketplace model, any warrantee/ guarantee of goods and services soldwill be responsibility of the seller. ix) E-commerce entities provid- ing marketplace will not directly or indirectly influence the sale price of goods or ser- vices and shall maintain level playing field. Services should be provided by e-commerce marketplace entity or other Box-C: Extract of clarifications on PN-2 of 2018