Govt tightens noose around ecomm firms

In a move that will end the ecommerce monopoly and steep discount offers by marketplaces like Flipkart and Amazon, the Centre on Wednesday tightened the noose around online retailers asking them to stop any pact with firms for the exclusive sale of their products.

It also debarred them from selling products of companies in which they have a stake. Besides, an ecommerce entity will not be permitted more than 25% of the sales through its marketplace from one vendor or their group companies.

Reviewing the policy for ecommerce firms, the Ministry of Commerce and Industry cautioned that the cash back provided by the ecommerce entities to buyers shall be fair and non-discriminatory.

The new rules will come into force from February 1.

“An entity having equity participation by ecommerce marketplace entity or its group companies, or having control on its inventory by ecommerce marketplace entity or its group companies, will not be permitted to sell its products on the platform run by such marketplace entity,” states the revised ecommerce policy document.

The move will require ecommerce companies to maintain an arms-length distance from retail firms.

According to the revised policy, an ecommerce marketplace entity will not mandate any seller to sell any product exclusively on its platform only.

Ecommerce marketplace entity will be required to furnish a certificate along with a report of a statutory auditor to the Reserve Bank of India, confirming compliance of above guidelines, by September 30, of every year for the preceding financial year.

Heavy discount by ecommerce marketplace companies had almost eroded the profits of brick and mortar retailers prompting them to lodge a complaint with the government about the same.

Though most of the rules were brought in force earlier this year, none were strictly adhered to. With new guidelines, the MSMEs are expected to benefit the most.