Introduction
With the growth of marketplace e-commerce companies in India,
numerous issues have arisen in recent months surrounding their
existence and the investment of private equity in these companies.
In order to clear uncertainties on FDI in e-commerce, the
Department of Industrial Policy & Promotion
("DIPP") issued guidelines for foreign
investment in e-commerce by way of Press Note 3 of 2016, dated
March 29, 2016 ("PN3"). Apart from
prescribing certain key definitions, which were missing so far,
including e-commerce, marketplace based model of
e-commerce and inventory based model of e-commerce,
the PN3 lays down respective caps for FDI as well. According to
PN3, foreign investment is allowed up to 100% under the automatic
route (where no prior investment permission is required) in the
marketplace model while no foreign participation is permitted in
the companies working on the inventory based model.
