Commerce Minister Piyush Goyal urges e-commerce firms to adhere to FDI rules

Union Minister of Commerce and Industry Piyush Goyal has reiterated the need for e-commerce companies operating in India to comply fully with the country's Foreign Direct Investment (FDI) regulations. Speaking at an event in Mumbai, Goyal emphasized that the rules governing FDI in e-commerce are clear and must be respected in both letter and spirit.

“The law of the land is very clear about foreign direct investment,” Goyal said. “I have consistently highlighted that every e-commerce company should adhere to the rules. It is crucial to operate within the framework of the law without bypassing its intent.”

Goyal’s remarks come in the wake of growing scrutiny of major e-commerce platforms like Amazon and Flipkart over alleged FDI rule violations and predatory pricing practices. He recently questioned Amazon’s announcement of a $1 billion investment in India, stating that it primarily aimed to recover previous losses and did not constitute significant service to the Indian economy.

Earlier this month, the Enforcement Directorate (ED) launched investigations into "preferred vendors" associated with Amazon and Flipkart. The operation involved searches at 19 locations across cities including Delhi, Gurugram, Bengaluru, Hyderabad, and Panchkula. These searches were part of a broader inquiry into alleged breaches of FDI norms in the e-commerce sector.

Under current regulations, 100% FDI is allowed in the marketplace model of e-commerce through the automatic route. However, foreign investment is not permitted in the inventory-based model. Marketplace entities are restricted to providing a platform for third-party sellers, with rules prohibiting them from owning inventory or influencing prices directly or indirectly.

The Confederation of All India Traders (CAIT) has time and again accused e-commerce giants of violating FDI rules, adversely impacting small retailers. Additionally, the Competition Commission of India (CCI) is already investigating alleged anti-competitive practices by these companies.

Goyal’s comments underscore the government’s commitment to ensuring a fair and competitive marketplace while protecting the interests of local businesses and upholding FDI regulations.