Ecommerce Marketplaces Can Only Sell Third-Party Products Under Proposed Policy

With the upcoming ecommerce policy, the department for promotion of industry and internal trade (DPIIT) is seeking to bring a proper distinction between the marketplace model and the inventory-based model. Moreover, the policy is also likely to ensure that ecommerce marketplaces are only allowed to sell third-party products on their platforms.

The conflict of interest that arises due to the e-marketplace entities’ control of vendors’ inventory would be addressed in the proposed policy, DPIIT has informed the Parliamentary Standing Committee on Commerce, a Business Standard report said.

The committee suggested that there needs to be clear definition of the two models- inventory-led and marketplace, to address competition-related issues including deep discounting, lack of platform neutrality, misuse of data by platforms, and nontransparent search ranking. 

Under the inventory-based model, inventory of goods and services is owned by the ecommerce entity itself and is sold to the consumers directly. On the other hand, marketplace model means providing a digital  platform to act as a facilitator between buyer and seller.

In the case of ecommerce marketplace, the committee suggested that these entities should not sell any of its own goods and host only third party sellers on the platform.

“The ecommerce entity should be the only seller on such an ecommerce store platform and there should not be any third-party seller on such ecommerce store platform,” the standing committee said tabled in the Rajya Sabha.

If an ecommerce company wants to run both the models, they should use distinct branding for each of the platforms, the committee suggested.

The draft ecommerce rules released last year suggested that ecommerce firms should ensure that none of their “related parties and associated enterprises” are listed as sellers on their shopping websites, and no related entity should sell goods to an online seller operating on the same platform. 

Recently, the committee recommended that ecommerce marketplaces should be held responsible for issues related to the delivery of sub-standard counterfeit products and services and should act as the intermediary between the customers and sellers.

Currently valued at $100 Bn, India’s ecommerce market is projected to surpass $400 Bn market size by 2030, growing at a compound annual growth rate of 19% during 2022-2030, an Inc42 report stated.