India Endorses 100% Foreign Ownership of E-Com Marketplaces—With Some Strings
April 4, 2016
India has formalized rules surrounding foreign direct investment (FDI) in e-commerce businesses. In a press note from the Ministry of Commerce & Industry’s Department of Industrial Policy and Promotion, the Indian government reiterated its policy of not allowing FDI in single-brand B2C e-commerce companies, but amended its rules on foreign money for online marketplaces operating in the country, like Amazon and Flipkart.
The note officially endorses up to 100 percent FDI in e-commerce marketplaces, though with several conditions. Any one vendor cannot account more than 25 percent of the marketplace’s sales volume. And, in a move that some have characterized as protectionist, the companies operating the marketplaces cannot “directly or indirectly influence the sale price of goods.” That is, Amazon, for example, cannot offer promotions or sales. That is left up to the individual sellers. The marketplace may facilitate payments for its sellers, but, “post sales, delivery of goods to the customers and customer satisfaction will be the responsibility of the seller.”
The government’s main concern, according to published reports, is that online marketplaces mimic as closely as possible physical marketplaces like malls, where the operator has no direct interaction with consumers. Other observers say it is to protect small and midsize brick-and-mortar retailers from deep online discounts.