The Indian government has released a review of policy on the Foreign Direct Investment (FDI) in e-commerce.
E-commerce companies operating in a marketplace manner, e.g. selling items to consumers on behalf of another business, are impacted by the FDI. Whereas, e-commerce companies on an inventory-based model, which is a company selling its products directly to customers, are not affected by the legislation.
There are 12 conditions outlined by the document, with a decision on the proposed changes set to be made by 1 February 2019.
One of the biggest changes outlined is that marketplace e-commerce platforms, like Flipkart and Amazon, are not allowed to have ownership or control over the items sold on the platform. This is due to the operations of the business change from a marketplace model to an inventory model.
A company is marked as an e-commerce marketplace entity if more than 25 per cent of the goods sold on the platform are from the marketplace side or 3rd party companies.
Another big development is that an e-commerce marketplace is not permitted to sell products from companies that it has an equity stake within.
Some of the other proposed alterations include, a marketplace cannot directly or indirectly influence the price of goods sold, they will not mandate a seller to exclusively sell a product on its platform and warrantees of goods are the responsibility of the seller.
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