27 Mar 2016

Soon a definition of Marketplace for E-commerce companies in India

Disputes between E-commerce companies and Brick & Mortar companies have been lying around since a while. Brick & Mortar companies have long complained that the e-commerce companies have been using the term “Marketplace” in order to get around the limit imposed for foreign direct investment in their firms.

Soon Government would be releasing the exact definition of "Market Place" and what constitute a market place so that the online retailers are barred from abusing the term "Market place" to infuse foreign investments into the companies.

This decision comes around due to the business model being followed by the E-commerce giants like Amazon India, Flipkart, Snapdeal etc. The concerned companies use this business model wherein they are market place provider wherein they do not sell any product to the retail customers. Instead they act as a technology enabler or a platform provider where in the retailers from all over the country can list and sell their product directly to the customers willing to buy it.

Use of this term "Marketplace" allowed the companies to infuse large amount of overseas investments into their company since current FDI policy has no rules or regulations related to Marketplace providers. This enraged the Brick & Mortar companies.

The Finance ministry along with Department of Industrial policy and promotion (DIPP) are currently in discussions for the same and would be releasing an announcement very soon.

Inclusion of E-commerce companies into the FDI framework would reduce the disputes going on between the brick & mortar companies and e-tail companies and is expected to encourage Digital Entrepreneurship in India.
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