Ecommerce FDI Policy: Amazon, Flipkart Seek Extension On Feb Deadline

With 15 days left for the deadline issued by the government under changes in Foreign Direct Investment (FDI) policy for ecommerce, the leading ecommerce marketplaces, Amazon and Flipkart, have now written to the government seeking an extension to the deadline.

A media report citing sources said that Amazon has asked for time until June 1 and Flipkart has asked for six months to comply with the changes introduced in the circular.

Notified on December 26, the changes in ecommerce FDI policy targets deep discounts being offered by large online marketplaces as putting a stop to ecommerce marketplaces dealing with exclusive vendor-partners. The circular is set to come into effect from February 1, 2019.

The circular specifically targets the control marketplaces enjoy on inventory and pricing, directly or indirectly. Since then, Amazon and Flipkart have been in the spotlight as they both operate as online marketplaces partnering with large online vendors such as Cloud Retail, Appario and WS Retail.

Currently ecommerce companies purchase goods in bulk at cheap rates from manufacturers through their wholesale entities — Amazon Wholesale and Flipkart India Pvt Ltd — and sell them on the marketplaces through preferred sellers.

In the letter to the Department of Industrial Policy and Promotion (DIPP) on Tuesday, Amazon reportedly said that it would be difficult for the company to comply by February 1 as this involves extensive overhauling of its business model and systems.

The company highlighted that the Press Note 3, which was notified in 2016, had considered views of stakeholders and was therefore, given time to fulfil the necessary change. However, it alleged, that no prior consultation was held this time and the company needs time to carry out the necessary changes.

Meanwhile, the Confederation of All India Traders (CAIT), a traders body representing online sellers, had objected to any such extension of the deadline.

A Flipkart spokesperson reportedly said that it is working diligently to assess all aspects of the Flipkart business in an effort to ensure full compliance with the new rules, but believes that an extension is appropriate in order to ensure that all elements of the new Press Note are clarified and a smooth transition for marketplace participants occurs without any disruption for customers and small sellers.

DIPP had earlier clarified that the intervention had been required because of “complaints that certain marketplace platforms were violating the policy”. DIPP noted that there have been comments that the changes are against the interest of consumers and said that consumer interests are protected and promoted.

Recently, IAMAI issued a media statement supporting the circular, but requested for deferment of the implementation of Press Note 2 (2018) and suggested for a consultative process with a wide cross-section of ecommerce companies.

Addressing the media today (January 16), CAIT National President B.C.Bhartia said that the organisation has already met Commerce Minister Suresh Prabhu last week and before that they had a meeting with DIPP Secretary Ramesh Abhishek and other joint secretaries about the changes in FDI policy for ecommerce.

CAIT has also advised government to make it mandatory for the ecommerce companies to obtain compliance certificate as on March 31, 2019, those failing to receive this should be restricted to operate. Also, the organisation has said that Press Note 3 rules should also be applied for domestic players to ensure level playing field.

At the same time, they have threatened a nationwide agitation if any changes are made in the FDI policy to support the ecommerce marketplaces now.

Ahead of the new draft ecommerce policy, the overhaul caused by changes in FDI policy may make regulating the sector easier for the policymakers.

[The development was reported by ET.]