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Centre tightens selling norms for e-commerce firms
Why is it in the news ?
- The Ministry of Commerce and Industry said e-commerce companies would be barred from selling products sourced from firms in which they have stake in or control over.
- This is a clarification issued by the Ministry of Commerce regarding the Consolidated FDI Policy Circular 2017.
Concept
- The term 'electronic commerce' is understood to mean the production, distribution, marketing, sale or delivery of goods and services by electronic means.
- There are two important types of e-commerce model :
1. Marketplace based model of e-commerce means providing an information technology platform by an e-commerce entity on a digital & electronic network to act as a facilitator between the buyer and seller.
- Currently 100% FDI is allowed under this model.
2. Inventory based model of e-commerce means an e-commerce activity where inventory of goods and services is owned by e-commerce entity and is sold to the consumers directly.
- Currently India does not allow FDI under this model.
More in the news
- As per new norms, e-commerce entity providing a marketplace will not exercise ownership or control over goods purported to be sold.
- Such an ownership or control over the inventory will render the business into inventory-based model.
- Inventory of a vendor will be deemed to be controlled by e-commerce marketplace entity if more than 25% of purchases of such vendor are from the marketplace entity or its group companies.
- The decision to introduce the new norms follows complaints by small traders, who contend that deep discountsoffered by the likes of Amazon and Flipkart are driving them out of business.
Source
The Hindu, LiveMint