India to monitor foreign operators as it broadens e-commerce regulation

Amazon, Flipkart and Myntra are on the radar as the Indian government tackles violations and advances ambition of developing e-commerce law.


India plans to create a special group to monitor violations of its foreign direct investment (FDI) policy guidelines by online retail platforms such as Amazon, Flipkart and Myntra. The government is creating a separate unit comprising officials from the industry department and Enforcement Directorate to handle violations and strengthen the implementation and enforcement of FDI guidelines. The unit is a temporary solution to address misuse of the policy while the government prepares a national policy on ecommerce to improve regulation of the sector. Amazon India and Flipkart, which is being acquired by Walmart for $16 billion, have denied any wrongdoing and said they have complied with laws. They and other foreign-funded companies including Shopclues and Snapdeal operate models under which 100 per cent foreign investment is allowed to provide platforms to other retailers and vendors to conduct business. India allows 100 per cent FDI in the marketplace model of ecommerce, where online retailers provide a platform for exchange but carry no inventory, and disallows FDI in the inventory-based model. The changes are aimed at removing ambiguity around the guidelines, which retailers allege have helped marketplace operators work around restrictions.

Developing e-commerce law

The Indian government wants to broaden the definition of ecommerce to include any buying, selling, marketing, distribution and delivery of goods and services through electronic means and come out with a single legislation for ecommerce. The decision was made by an inter-ministerial group, and a sub-group has recommended marketplace operators be allowed limited inventory. The Department of Industrial Policy and Promotion, the agency responsible for FDI policy has been asked to prepare a law on domain name registration, while the ministry of electronics and information technology has been asked to fast track a national encryption policy.  Other areas under review are the scope of customs duty on digital products, inclusion of ecommerce in the government’s integrated logistics plan, protection of critical source code, mandatory registration for domestic and foreign ecommerce firms and preserving net neutrality in the proposed ecommerce law.

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