Thursday, 17 January 2019

Star fashion brands in an ecommerce knot

Star fashion brands in an ecommerce knotNEW DELHI: The latest amendments to the FDI policy on ecommerce could inflict collateral damage on Bollywood stars, including Saif Ali Khan, Hrithik Roshan, Deepika Padukone and Alia Bhatt, who have launched their own fashion brands.

Flipkart-owned fashion portal Myntra — or its subsidiary Jabong in the case of Bhatt — holds a stake in these celebrities’ brands, people aware of the matter told ET. The brands are mostly sold on Myntra, Jabong and Flipkart, which has been acquired by Walmart. That would run afoul of new FDI rules, which are scheduled to come into effect on February 1. 
Star fashion brands in an ecommerce knot 
“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,” says the policy announced in December. This raises uncertainty over whether brands like House of Pataudi (Khan), HRX (Roshan), All About You (Padukone) and Alia Bhatt For Jabong will be able to continue selling on the FDI-backed platforms.

Brands will have to stop selling from Feb 1Myntra did not respond to queries and neither did the actors’ representatives. Analysts said the celebrity brands will have to stop selling on Myntra and Jabong from February 1unless online store operators sell their stakes in those labels.

“An ecommerce platform that has foreign capital, it is absolutely clear that you cannot hold inventory and have stake in an inventory model,” said Devangshu Dutta, chief executive of retail consultant Third Eyesight. Flipkart, Myntra’s parent and India’s largest ecommerce enterprise, was acquired by Walmart for $16 billion last year. “It seems difficult (for the celebrity brands) with foreign capital and with the new clauses,” Dutta said. “They will have to spin it into a different company or something like that.”

Most other celebrity brands such as Salman Khan’s Being Human, Virat Kohli’s One8 and Sonam Kapoor’s Rheson will not be impacted by the new rules because they don’t have equity relationships with the ecommerce marketplaces.

A person familiar with the development said Jabong had “discontinued” selling Bhatt’s brand a while ago, but a sheath outfit bearing the label was still available on Jabong for Rs 2,999 on Wednesday.

According to company insiders, Myntra has controlling equity in HRX, coowns House of Pataudi with Khan and holds a stake in Padukone’s label. Similarly, Jabong owns a stake in Bhatt’s brand, sources said.

ET had reported in August 2016 that Myntra had acquired a controlling 51% stake for an undisclosed amount in HRX from co-owners Roshan and Exceed Entertainment, with the original promoters holding the rest.

House of Pataudi — co-owned by Myntra, Exceed Entertainment and Khan — was launched three months ago to sell ethnic wear for men and women.

CAIT favours FDI policy for ecomm covering domestic companies too

The foreign direct investment (FDI) rules for e-commerce companies should be applicable to domestic online players also, to restrict them from adopting any unethical business practices, said the Confederation of All India Traders (CAIT).

“The restrictions imposed in FDI policy in e-commerce should also be made applicable to domestic ecommerce players to ensure a level playing field and fair competition,” CAIT secretary general Praveen Khandelwal said Wednesday.

Last month, the government updated FDI rules to bar any entity related to an e-commerce platform from selling on that site, limit how much one vendor can sell there and prohibit e-tailers from giving any preferential treatment to any supplier.

The new framework will come into force on February 1 and the platforms will have to confirm compliance with the guidelines by September 30 of every year for the preceding financial year to the Reserve Bank of India.

ET reported Tuesday that Amazon and Flipkart had sought more time to comply with the policy.

The Department of Industrial Policy and Promotion (DIPP) had clarified on January 3 that the private labels of online platforms will not suffer on account of the updated rules.

The traders’ body asked the government not to give into the demands of multinational e-commerce players and American industry chambers to amend rules.

Khandelwal said the companies that do not comply with the policy should not be allowed to operate their e-commerce portals or raise funds until they have obtained a compliance certificate.

“We want the government to institute a probe into the business activities of major e-commerce players over the last two-three years. Those found violating the policy should be strongly punished,” he said.

Flipkart India gets Rs 1,431 cr in fresh capital from parent entity

Flipkart India gets Rs 1,431 cr in fresh capital from parent entity Flipkart India, the wholesale arm of the Walmart-owned ecommerce marketplace in India, has received Rs 1,431 crore in fresh capital from its Singapore-based parent entity Flipkart Private Limited. The fund infusion comes days after the Indian government made clarifications to the FDI policy for the ecommerce industry which will significantly affect firms like Flipkart and Amazon.

According to documents filed with the Registrar of Companies (RoC), Flipkart’s parent entity was issued 4.86 lakh shares in Flipkart India on January 7 at a price of Rs 29,400 per share. The documents, which were reviewed by ET, were sourced from financial data platform

Flipkart India purchases goods in bulk from manufacturers and sells them to preferred sellers. This model has come under the scanner post the recent changes in FDI regulations for ecommerce companies, as per Press Note 2 issued on December 26, last year. The Department of Industrial Policy and Promotion (DIPP), put out a clarification for the FDI policy for ecommerce, disallowing players such as Amazon and Flipkart from selling products from vendors in which they directly or indirectly have any stake. The marketplaces have until February 1 to comply with the new rules, for which they’ve sought an extension, as reported earlier.

Flipkart had invested Rs 2,190 crore in Flipkart India in December last year, making the new investment highly unusual as the company has previously spaced out its fund infusions in its Indian subsidiaries. Together, the two investments bring the total investment in Flipkart India to over Rs 3,600 crore, or approximately half a billion dollars.The investme Flipkart India gets Rs 1,431 cr in fresh capital from parent entitynt will be the third large fund infusion into Flipkart after Walmart closed to deal to acquire 77% stake in the homegrown etailer for $16 billion in August last year. Flipkart Internet, the marketplace entity of the company had received over Rs 3,400 crore in September last year, ahead of its massive Big Billion Days festive sale.

Wednesday, 16 January 2019

CCI dismisses Snapdeal's complaint against KAFF on minimum resale price

CCI dismisses Snapdeal's complaint against KAFF on minimum resale priceNEW DELHI: The Competition Commission of India Tuesday dismissed e-commerce platform Snapdeal's complaint alleging unfair business practices against KAFFAppliances with regard to the imposition of minimum resale price maintenance (RPM).

The fair trade regulator dismissed the complaint by Jasper Infotech Pvt Ltd, which owns and operates e-commerce platform Snapdeal, as the "conduct of KAFF did not demonstrate any adverse effect on the competition".

The complaint was filed by Jasper in 2014 after it alleged that KAFF was attempting to impose a price restriction on the online platform to make sales at a minimum price and threatened to ban online sales if such prices were not maintained.

Following this, the commission had directed its investigation arm, director general, to investigate whether the minimum resale price imposed by KAFF on its dealers contravened the Competition Act.

The director general submitted the main investigation report and consequently the supplementary investigation report to ascertain whether KAFF imposed price restriction.

In a 28-page order, CCI said based on both the reports, the commission did not find any evidence of adverse effect on competition.

Further, the presence of a large number of dealers who were competing with each other suggests a fair degree of intra-brand competition, Competition Commission Of India (CCI) noted.

Accordingly, CCI dismissed the complaint as it found no contravention of Section 3 of the Act.

Section 3 pertains to anti-abusive agreements.

Ecomm firms lobbying hard, govt should probe their biz: CAIT

Ecomm firms lobbying hard, govt should probe their biz: CAITNew Delhi: Traders’ body Confederation of All India Traders (CAIT) urged the government not to accede to any demand by large e-commerce players or US associations for changes or delayed implementation of the updates FDI norms for ecommerce.

It also demanded that the government should make it mandatory for the ecommerce companies to obtain a compliance certificate as on March 3, 2019 and the companies that do not have the certificate should be restricted to operate their ecommerce portal any more.

“The companies should not be allowed to raise funds until compliance certificate is obtained. Already companies have circumvented law by converting marketplace to an open market for B2C business which is against the FDI policy and its letter and spirit,” Praveen Khandelwal, secretary general, CAIT, said.

The group also reiterated its earlier demand that the FDI norms related to ecommerce companies should be implemented on domestic online players also to restrict them from adopting any unethical business practices.

He further added that in utter violation of Press Note 3 of 2016 – which articulated the FDI norms for ecommerce - major ecommerce players started operating in the B2C space and building multiple tiers of companies with the possible intention of circumventing the regulations.

“It was clear from modus operandi that these market places were probably hoping that these infringements would be ignored once the operations become the norm. A deep analysis of behavioural economics of these individual entities clearly suggest that the FDI direction v/s the cash burn was extremely unusual behaviour and is only conducted to camouflage the intent of the policy and the government,” he said.

Tightening norms for ecommerce firms having foreign investment, the government barred online marketplaces such as Flipkart and Amazon from selling products of companies where they hold stakes and banned exclusive marketing arrangements that could influence product price. 

The confederation has earlier written to commerce minister Suresh Prabhu to bring out t a comprehensive e-commerce policy be brought about at the earliest, and underlined the need for an effective regulator, that is “armed with enforcement and adjudicatory powers to enforce e-commerce policy”.