Multinational e-commerce players violating FDI rules, alleges CAIT

Few multinational e-commerce entities with heavy arsenal of funding operating in India have attempted to flout the FDI norms, said the traders’ body Confederation of All India Traders (CAIT).

Releasing a white paper document, the industry body said: “The FDI Policy is put to multifarious interpretations and e-commerce entities structure their relationship as marketplace with sellers, in such a way that they are in a position to control either seller on their platform or the inventory and also escape the scrutiny of the enforcement agencies.”

“Under the guise of such control or ownership over sellers, the issue also permeates from being a mere FDI Policy violation to also being an anti-competitive conduct.”

“The mitigating measures and strict action for enforcement of the law in letter and spirit are of paramount importance. Otherwise, the FDI Policy on e-commerce would fail in its very objective of catering to the interests of domestic manufacturers, traders, sellers, MSMEs, startups and creation of a level playing field in retail,” it mentioned in the paper.

The definition of e-commerce, clearly capturing the role of a neutral e-commerce marketplace and the MRBT store operating in electronic form is the need of hour, it suggested.

“To avoid such conflict of interest and contain market distortions, it is essential that the marketplace platform must act in a neutral manner and should not have any relation with sellers (whether by shareholding, control or otherwise, directly or indirectly) or control sellers registered on the platform as that leads to marketplace to acting as seller itself, which is essentially, inventory-based model of e-commerce.”

Further, it said neither a marketplace entity should act as an inventory-based e-commerce entity, nor should inventory-based e-commerce entities act as a marketplace entity.

Also, an e-commerce regulator should be set up and it should be commissioned to look into unfair trade practices of both end consumers as well as the intermediate consumer such as sellers on the platform, it said.

“Protection of the right to free and fair trade should be ensured for several small sellers who look forward to e-commerce platforms for their livelihood and consumers who are equally dependent on such platforms for their needs,” it said, adding that a mandatory GST registration for conducting e-commerce activities should be abolished.

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