Brick and mortar firms unite to oppose FDI violations by e-tailers

Hindustan Times | ByNachiket Kelkar, Mumbai

Apr 12, 2016 09:18 PM IST

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Despite recent government clarifications on foreign direct investment (FDI) in e-commerce and the definition of a marketplace model, online companies continue to flout rules, organised retailers have said.

Despite recent government clarifications on foreign direct investment (FDI) in e-commerce and the definition of a marketplace model, online companies continue to flout rules, organised retailers have said. Large players including Future Group, Aditya Birla Retail and Shoppers’ Stop, have joined hands and may ven take the legal route.

The Internet and Mobile Association of India, a lobby group founded by online portals, wants the government to allow 100% FDI in inventory-based B2C (business-to-consumer) e-commerce activities.(Representative image)

According to a recent government notification, FDI is not allowed in inventory-based e-commerce model, and marketplaces cannot offer heavy discounts or influence prices to lure buyers.

“Even though the law clearly states that it is applicable from the date of the issue of the clarification, almost two weeks back, e-commerce companies are following the same practices. You are saying you are a marketplace but call yourself a dukaan, offer discounts, food e-tailers talk of inventory-based model…there are lot of issues, how is the law going to be implemented?” said BS Nagesh, chairman, Retailers Association of India (RAI).

The Internet and Mobile Association of India, a lobby group founded by online portals, wants the government to allow 100% FDI in inventory-based B2C (business-to-consumer) e-commerce activities.

The retailers have petitioned commerce minister Nirmala Sitharaman, urging her to take action against those who violate the FDI rules.

“If you look at all the players as a marketplace, I don’t think anyone is adhering to any of the clarifications, which have been made. This is a serious concern and it is high time it is implemented as only announcement of a policy doesn’t make any sense,” said Kishore Biyani, CEO, Future Group.

The Delhi High Court had last November ordered the Enforcement Directorate to investigate whether e-tailers were flouting rules. RAI is awaiting that report, which is expected in the next four weeks, after which it will plan its legal recourse.

“If things don’t change by then, we will go back to court…We are not going to sit back and wait for it” said Nagesh, who is also the non-executive vice-chairman of Shoppers Stop.