WHETHER ANY CHANGES IN E-COMMERCE POLICY HAS

OCCURRED POST JUNE 2019 THEREBY INITIATING A CHANGEIN

THE BUSINESS STRUCTURE OF ONLNE E-COMMERCE
PLATFORMS?
 There has been no significant changes in FDI policy post June 2019 thereby affecting any
structural changes in the working of online e-commerce entities.

 Current FDI rules-

The Commerce ministry had issued a Press note 3 under the Consolidated FDI Policy
Circular 2015 in 2016 regulating the FDI norms circumscribing the e-commerce Industry.
Major norms are:

A. 100% FDI under automatic route in B2B e-commerce.

B. FDI in B2C e-commerce, on the other hand, was not permitted. It was only allowed
when:

i. Manufacturer was permitted to sell its products manufactured in India through

ecommerce.

ii. Single brand brick and mortar entity undertakes to sell through e-commerce.

iii. Indian manufacturer is permitted to sell its own single-brand products through
ecommerce retail which manufactures 70% of its products in-house and sources at
most 30% from Indian local markets.

C. FDI in inventory based model of e-commerce was strictly prohibited.

D. E-commerce entities were obligated not to permit more 25% of its sales to be affected by
one vendor or its group companies.

E. They were prohibited to, directly or indirectly, influence the sale price of goods and to
maintain a level playing field.

What is B2B E-commerce structure?

B2B, which stands for business-to-business, is a process for selling products or services to
other businesses. B2B companies have an entirely different target audience: They offer the
raw materials, finished parts, services or consultations that other businesses need to operate,
grow and profit.

Example- Xerox is a household name that makes billions providing paper and print services
to businesses.
 What is B2C E-commerce structure?

In B2C transactions, consumers select products and pay for them at the point of sales using
payment mechanisms such as credit or debit cards, checks or cash.  B2C e-commerce is a
process for selling products directly to consumers from a website. Consumers browse
product information pages on your website, select products and pay for them before delivery
at a checkout, using a credit or debit card, or other electronic payment mechanism.
Consumers enter their address details and select one of the delivery options platforms offers.

What are the restrictions on Inventory based business models?

As per the FDI rules changed in late 2018-

 The inventory of a seller or vendor will be seen as being controlled by a marketplace

if the vendor purchases more than 25 percent of its inventory from the marketplace,
or any of its group firms.
 Regulations state that e-commerce firms cannot exercise ownership over the goods
sold on their online marketplace.
 The rules bar any entity in which an e-commerce firm or its group companies have a
stake from selling on their online platform.

DO ONLINE FOOD AGGREGATORS LIKE UBER EATS, ZOMATO,

SWIGGY etc COME UNDER THE CATEGORY OF ONLINE
MARKETPLACE BUSINESS MODEL?
Food Aggregators also known as Cloud kitchens are delivery-only restaurants that have no dine-
in facility. They operate only as a food production facility (saving on dine-in infrastructure and
labour costs) which helps them to expand rapidly into newer territories. For most of these cloud
kitchens, platforms such as Zomato, Swiggy and Uber Eats (“food aggregators”) are the only
medium to receive customer orders.

Most food aggregators in India hold FDIs and are permitted to operate only as marketplaces.

Therefore Zomato, Swiggy and Uber Eats will come under the definition of Online market
places.

What role does the new consumer protection act plays?

 One of the key changes introduced in the Act is in its definition of "goods" under Section
2 (20) which has included "food" under its jurisdiction, which was not so earlier. The
definition of "food" has been borrowed from Food Safety and Standards Act, 2006. This
makes it important for food business operators to be aware of the rights of its consumers
under both the legislations and comply with its obligations.

 Another substantial change that has been introduced in the Act is the inclusion of the e-
commerce industry. "E-Commerce" has been defined under Section 2(16) of the Act as
the buying or selling goods or services over electronic network.

 Section 2(17) of the Act subsequently defines "Electronic Service Provider" to be

someone who provides technologies or processes enabling a seller to advertise and sell
their goods or services. It is inclusive of online auction sites and online market places. 

 The definition of "services" has been broadened under Section 2 (42) of the Act and
enumerates "transport" as one of the services. Thus, food aggregators involved in the
transportation of food will be said to provide services under the Act. Thus, these
provisions definitely imply that food aggregators will come under the ambit of the new
Act.