New Delhi: The department of economic affairs under the finance ministry has raised concern that it may not be possible to stop online firms from influencing product prices on their platforms.
In March, the government had allowed 100 per cent FDI through automatic route in the marketplace format of e-commerce retailing. However, guidelines stated that e-commerce companies which receive FDI like Flipkart, Amazon and Snapdeal among many others will not directly or indirectly influence the sale price of goods on their platform. It is only the sellers on these platforms which can give discounts or sale and not the e-commerce companies.
FDI is not permitted in inventory-based model of e-commerce. During the meeting of NITI Aayog CEO Amitabh Kant last week on e-commerce, the department of economic affairs representative raised the point that e-commerce players store goods of vendors in their godowns and hence they may influence the prices of the products by giving discounts and commissions to the buyers.
The department also stated that the present norms create artificial difference between marketplace and inventory-based models. It argued that though the idea is to create a level playing field for mom and pop shops, it may not be possible to ensure its implementation.
The government has set up a committee on e-commerce headed by the NITI Aayog CEO Amitabh Kant to look into all issues, including foreign direct investment norms, pertaining to the e-commerce industry.
Last month, wholesale retailers had complained to DIPP that e-commerce companies operating on marketplace model, were still offering discounts against FDI rules.
However, e-commerce companies told DIPP that they are not giving discounts and it is the vendors whose products are coming on their platform are giving it.
The issue of offering discounts by marketplace online players has for long remain a bone of contention between e- commerce companies and brick and mortar stores.
As FDI is barred in e-commerce retail, firms with foreign investment like Flipkart, Amazon and Snapdeal had adopted a marketplace model where they do not own the inventory but act as a facilitator between seller and buyer for a fee.
These firms act more as a platform which is used by other small traders to sell their products.
