The government recently barred e-commerce companies like Amazon and Flipkart from selling products of companies where they hold shares. It also banned exclusive marketing arrangements that can influence the price of the products. The step was taken in order to protect the interests of homegrown companies that undergo huge pressure and competition from e-retailers having extensive financial support from foreign investors.
The commerce and industry ministry issued a revised policy on foreign direct investment in online retail, in which it said that these e-commerce giants have to offer equivalent services or amenities to all its vendors without any inequity.
A senior official of the ministry also said that "The move would entirely stop influencing prices by e-commerce players. This will also ascertain better enforcement of FDI guidelines in the e-commerce industry."
The policy clearly states that a vendor shall not be allowed to vend more than 25 percent of its goods on an online platform of a particular e-marketplace firm.
As a control mechanism, the commerce and industry ministry has introduced certain big changes in the policy. A press note by the ministry stated, “Inventory of a vendor will be deemed to be controlled by e-commerce marketplace entity if more 25 percent of purchases of such vendor is from the market entity or its group companies."
As quoted from the press note “An entity having equity participation by e-commerce marketplace entity or its group companies, or having control on its inventory by e-commerce marketplace entity or its group companies, will not be permitted to sell its products on the platform run by such marketplace entity"
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