With reference to foreign-owned e-commerce firms operating in India, which of the following statements is/are correct ? 1. They can sell their own goods in addition to offering their platforms as market-places. 2. The degree to which they can own big sellers on their platforms is limited. Which of the above statements are correct?

QUESTION

Hard

Economy

Prelims 2022

With reference to foreign-owned e-commerce firms operating in India, which of the following statements is/are correct ?

They can sell their own goods in addition to offering their platforms as market-places.
The degree to which they can own big sellers on their platforms is limited.

Which of the above statements are correct?

Select an option to attempt

Explanation

Statement 1 is Incorrect: According to India's Foreign Direct Investment (FDI) policy, 100% FDI is permitted in the 'marketplace model' of e-commerce, but FDI is strictly prohibited in the 'inventory-based model'. This means foreign-owned e-commerce firms can only provide an IT platform to act as a facilitator between buyers and sellers; they cannot exercise ownership or control over the inventory and are not allowed to sell their own goods on the platform.

Statement 2 is Correct: The government has implemented regulations to prevent foreign e-commerce entities from exercising indirect control over inventory. Under Press Note 2 (2018), a vendor is deemed to be controlled by the marketplace entity if more than 25% of its purchases are from the marketplace entity or its group companies. This effectively limits the degree to which these platforms can own or control big sellers, ensuring they remain neutral marketplaces.

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