FDI policy compliance under Press Note 2 (2018), marketplace versus inventory model structuring, platform neutrality, vendor independence requirements and DPIIT compliance for foreign e commerce companies operating in India.
Short, direct, on the record.
No. FDI in inventory based B2C e commerce is prohibited under Press Note 2 of 2018. Foreign owned or controlled entities can only operate marketplace model platforms where third party sellers list and sell products. The foreign entity cannot own inventory, influence pricing or provide preferential treatment to affiliated sellers.
No single vendor or its group companies can account for more than 25% of the total sales on a marketplace in a financial year. This prevents the marketplace from becoming a de facto inventory model where a single affiliated vendor dominates sales. The marketplace must demonstrate genuine multi vendor participation.
The marketplace itself cannot fund seller discounts or offer cashbacks that effectively subsidise prices. Sellers can offer their own discounts. The marketplace can offer fair and non discriminatory discounts funded from its platform service fees, but cannot use group entity resources to deep discount products on the platform.
Violations can result in FEMA enforcement proceedings by the Enforcement Directorate, compounding applications (penalty up to three times the amount involved), direction to divest or restructure, show cause notices from DPIIT, and potential criminal prosecution for wilful FEMA contravention. The CCI may also examine anti competitive practices.
Share the business model, seller structure and the compliance concern for a preliminary assessment.