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Last Updated : Jun 25, 2019 03:50 PM IST | Source: Moneycontrol.com

Piyush Goyal throws the rule book at e-tailers: Follow or else...  

Goyal said that the companies shouldn't go hunting for lawyers to find loopholes in the Press Note 2, which was issued in December.

Priyanka Sahay @priyankasahay

Commerce and Industry minister Piyush Goyal has criticised companies who were circumventing the foreign direct investment rules in the online commerce space.

Goyal said that the companies shouldn't go hunting for lawyers to find loopholes in the Press Note 2, which was issued in December.

The meeting, that lasted for over three hours, saw in attendance CEOs and senior executives of over a dozen companies, including leading e-commerce firms such as Amazon, Flipkart, Snapdeal, Shopclues, MakeMyTrip, Zomato, Swiggy, Urbanclap and IndiaMart among others.

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This seems to be the first meeting where the minister had invited both domestic and foreign etailers under the same umbrella after taking charge of the ministry.

"The minister was in a combative mode. He told the companies to set themselves right if they were in the wrong," said a source privy to the discussion, adding that he made the companies agree that Press Note 2 which was issued in December was not a policy change but the same policy which was launched in 2016, with clarifications.

According to another source, the minister was vocal about the fact that the aim is to ensure that e-commerce does not impact small and medium enterprises in India. He added that the minister has given the companies a week's time to submit reports on their business practices.

Following multiple instances wherein the 2016 Press Note 3 was flouted by the e-commerce companies, the government, in December, introduced Press Note 2. The aim was to make it more difficult for the e-tailers to use their nearly endless stream of foreign capital to fund high discount and have exclusive tie-ups with brands, stressing upon the need for a level-playing field. On the face of it, the rules seemed to be a death knell for e-commerce companies. who were circumventing Press Note 3 by means of tie- ups or having stakes in third party entities.

However within a few months, the companies smartly made changes in their organisational structure to adhere to the norms without disrupting their business model.

Amazon for instance, briefly offloaded the two sellers, Cloudtail and Appario, from its platform immediately after the revised foreign direct investment (FDI) guidelines for the e-commerce companies kicked in on February 1.

However, Cloudtail was brought back on the platform following a rejig in its structuring.

According to reports, Narayana Murthy's Catamaran Ventures raised its stake in Cloudtail's parent company Prione Business Services. The move reduced Amazon Asia's stake in Cloudtail to 24 percent from the earlier 49 percent, with Catamaran Ventures’ stake rising to 76 percent from 51 percent earlier.

Following this, Cloudtail ceased to be an Amazon group company, making it compliant with the rules.

Flipkart too recently was learnt to be in a legal dispute with smartwatch maker GOQii which claimed that it suffered huge losses due to deep discounts offered on the e-commerce platform. GOQii had sent a legal notice to Flipkart for the same following which Flipkart had temporarily withdrawn GOQii products from its platform.

In an earlier interaction with Moneycontrol, Vishal Gondal, founder and chief executive of GOQii had stated that merchants do not have millions of dollars to fund discounts and it is done by deep-pocketed companies.



Interestingly, the meeting took place immediately before the scheduled visit of US Secretary of State Michael Pompeo. The visit is expected to focus on resolving "trade frictions".
First Published on Jun 25, 2019 02:05 pm
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