Government Tightens Norms For e-Commerce Players

On December 26, 2018, the Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, Government of India ("DIPP") by its press note 2(2018 Series) ("PN 2(2018)") revised the norms applicable for foreign direct investment ("FDI") in e-commerce sector. PN 2(2018) comes into force from February 1, 2019. The recent changes come in the wake of continued protests and objections from the brick and mortar retailers and retailer associations alleging predatory pricing, malpractices and heavy discounts by e-commerce entities with foreign investments.

Earlier in 2016, the DIPP had released the norms applicable for FDI in e-commerce applicable so far by its press note 3(2016), which formed part of the consolidated foreign direct investment policy dated August 28, 2017 ("FDI Policy"). The FDI Policy permits 100% FDI in marketplace model under the automatic route, and not in inventory based model of e-commerce.