ANNOUNCEMENT 29 Mar 2016In March 2016, the government of India announced changed rules for foreign investors.
NUMBER OF INTERVENTIONS
Press Note No 3 (2016 series)
On 29 March 2016, the Department of Industrial Policy and Promotion through Press Note No.3 clarified and published guidelines thereby allowing 100% FDI in e-commerce through what is called a "marketplace model". In the marketplace model of e-commerce, only an IT platform is provided by the e-commerce company, which merely acts as a facilitator between the buyer and the seller. The inventory e-commerce model, on the other hand, is where the e-commerce company also owns the inventory of goods and services it sells to consumers directly. FDI is not permitted in the inventory model of e-commerce.
Certain conditions have been set for such marketplace e-commerce companies to operate such as that they may provide support services to sellers on their platform such as warehousing, logistics, order fulfilment, call centre and payment collection, that they may not permit more than 25% of sales through one vendor or one of their group companies, that all waranty and guarantee is to be provided by the seller and not the e-commerce company and that such companies cannot directly or indirectly influence the sale price of the goods or services.
This Press Note is significant because its brings clarity into the policy regarding foreign investments for e-commerce retailers that sell multiple brands, since existing policy does not allow FDI in multi-brand retail companies. This measure separates retail trade form an e-commerce entity acting as a non-inventory owning online marketplace.