India: Government Tightens Norms For e-Commerce Players

Last Updated: 16 January 2019
Article by Nusrat Hassan and Shweta Dwivedi

On December 26, 2018, the Department of Industrial Policy & Promotion, Ministry of Commerce & Industry, Government of India ("DIPP") by its press note 2(2018 Series) ("PN 2(2018)") revised the norms applicable for foreign direct investment ("FDI") in e-commerce sector. PN 2(2018) comes into force from February 1, 2019. The recent changes come in the wake of continued protests and objections from the brick and mortar retailers and retailer associations alleging predatory pricing, malpractices and heavy discounts by e-commerce entities with foreign investments.

Earlier in 2016, the DIPP had released the norms applicable for FDI in e-commerce applicable so far by its press note 3(2016), which formed part of the consolidated foreign direct investment policy dated August 28, 2017 ("FDI Policy"). The FDI Policy permits 100% FDI in marketplace model under the automatic route, and not in inventory based model of e-commerce.

Please see below the key changes brought out in the FDI Policy now pursuant to PN2(2018) for the e-commerce sector:

No control over inventory by the e-commerce entities:

  • E-commerce marketplace entity will not exercise ownership or control over the inventory i.e. the goods to be sold. If it does, its business would qualify as an inventory based model. The earlier norms only restricted ownership over inventory by the e-commerce entities.
  • What will qualify as control over inventory has been specified. Inventory of a vendor will be deemed to be controlled by the e-commerce entity if more than 25% of purchases of such vendor are from the e-commerce entity or its group companies.

Link Legal Insights:

DIPP has now also included control over inventory (as opposed to only ownership captured earlier) by the marketplace entity to determine if the business is an inventory based or a marketplace model. Threshold of 25% or more of purchases from one vendor is provided to avoid any ambiguity and misuse of the policy. Though it is not specified if this threshold applies on a financial year or calendar year basis. The policy change will lead to broad basing of vendors, and many marketplaces dealing exclusively or with fewer vendors may need to align their structures as well as vendor arrangements with the revised norms.

Certain vendors barred from listing on the e-commerce marketplace:

  • If a marketplace entity or its group companies have any amount of equity participation or control on inventory of an entity, then such entity will not be permitted to sell its products on the platform run by the e-commerce entity.

Link Legal Insights:

In a significant shift, any vendors/ entities (having equity participation or control over inventory by the marketplace or its group companies) will now be barred from posting on the platform. Going by this, joint ventures/ group companies of e-commerce entities can no longer be hosted on the portal. Again, this change will need the e-commerce players to re-assess their structures for compliance with the new norms.

Services to the vendors to be on fair and non-discriminatory terms:

  • The earlier norms provided that the e-commerce entities will not influence the price of goods or services, and maintain level playing field. It has now been clarified that the services provided not only by the e-commerce entities but also other entities in which it has direct or indirect equity participation or common control, to vendors on the platform will be at arm's length and in a fair and non-discriminatory manner.

    Such services will include fulfilment, logistics, warehousing, advertisement/ marketing, payments, financing etc. Cash backs provided by group companies to vendors will be fair and non-discriminatory. It has been clarified that provision of services to any vendor on such terms which are not made available to other vendors in similar circumstances will be deemed unfair and discriminatory.

Services to the vendors to be on fair and non-discriminatory terms:

DIPP has brought in group companies of marketplace entities as well within the ambit of revised norms on fair pricing. Innovative structures were being floated, which defeated the implementation of the earlier norms in the spirit of the law. The move is to curb predatory pricing, deep discounts and cash backs, promotional sales and malpractices alleged by the offline retailers. This will set level playing field for the offline players, and incentivise them to use the platforms. On the other hand, consumers may take a hit as deep discounts and promotional offers are likely to be curtailed. The e-commerce players will definitely find their hands tight and this will impact business efficiencies and synergies for them. The vendor arrangements will need to be re-evaluated for compliance with the new norms on pricing.

No exclusivity mandate to sellers

The e-commerce marketplace cannot mandate any seller to sell any product exclusively to its platform only.

Link Legal Insights:

Exclusive vendor arrangements/ tie-ups will no longer be permitted between the e-commerce platforms and its vendors. All existing contracts will need to be reviewed and modified before the deadline of February 1, 2019.

Annual Reporting to the Reserve Bank of India (RBI) by September 30 every year

All e-commerce entities will be required to furnish a certificate along with a report of statutory auditor to the RBI, confirming compliance with the norms, by September 30 of every year for the preceding financial year.

Link Legal Insights:

Annual reporting with the RBI is a welcome move. One would need to wait and watch for the measures taken by the RBI or DIPP in case of non-compliances with the norms. Though, a separate regulator for the e-commerce sector is now a pressing necessity and awaited in the much anticipated e-commerce policy under formulation by the Government.

Overall, the new norms have received a big cheer from the offline retailers as well as smaller e-commerce players, who faced a stiff competition from the big players giving deep discounts and lucrative offers. The key players in this segment are more likely to be impacted, and will need to re-evaluate and align their structures to comply with the new norms. The consumers may not be very pleased given that the exclusive deals, deep discounts and offers may not remain as lucrative going forward.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Dhaval Vussonji & Associates
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Dhaval Vussonji & Associates
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions