Government to define ‘marketplace’ in FDI to ease confusion

Ecommerce companies have reason to breathe a sigh of relief. The government is planning to issue a definition of ‘marketplace’ in the foreign direct investment policy (FDI). This will hopefully bring an end to the ambiguity relating to the activities of online marketplaces.

In the recent past, physical stores have taken up arms against online commerce by terming their activities to be against the law; particularly the FDI. Their contention has been that those companies receiving investment from foreign companies are not allowed to sell directly to customers.

Tussles between retailers and etailers

Physical stores have found the footfalls to their premises coming down, and they have pinned the blame on online stores. Late last year, the All India Footwear Manufacturers & Retailers Association filed a complaint in the Delhi High Court against online marketplaces alleging FDI violation. The High Court ordered a probe.

Future Group’s Kishore Biyani appears unsure about his feelings towards online commerce. He said on an occasion that online stores are an unsustainable model and will be shutting down collectively in few months. The next report came out that he was contemplating on buying online home decor store FabFurnish, but then Future Group ran an ad campaign that clearly mocked leading online marketplaces. The ad campaign is a part of Future Group’s apparel store Brand Factory, and pokes fun at leading companies Flipkart, Amazon and Snapdeal.

Government move can soothe things

The government’s plan to clarify the legal angle will doubtlessly bring relief to online marketplaces. The clarification directs that ecommerce companies ought to be receiving incomes only from ‘fees from services provided’, and not from the sale of any goods.

The government is keen on settling things and moving ahead with the online model to encourage entrepreneurs.

A government official said, “Unnecessary confusion drives away businesses.”

Hopefully now the physical stores will leave online stores to their work and work towards healthier means to compete rather than squabble like tots in a playground.