Small retailers move court over FDI violation by ecommerce firms

A group of small retailers has approached the Delhi High Court, seeking government probe into possible foreign investment violation by ecommerce companies under the Foreign Exchange Management Act, for allegedly misusing foreign funds while selling products to consumers.

India does not allow foreign direct investment (FDI) in any business-to-consumer, or B2C, ecommerce companies, so home-grown firms like Flipkart, Snapdeal operate as marketplaces providing a platform for vendors to sell good. However, retailers argue that these companies are violating FDI norms otherwise it would not be possible for them to sell goods lower than the market price.

Earlier in May, Retailers Association of India representing leading physical retailers such as Future Group, Shoppers Stop and Reliance Retail, had accused the e-commerce companies of ‘circumventing’ FDI laws by calling themselves marketplaces.

The government, on the other hand, has clarified in Parliament that it has no plans to bring in foreign direct investment (FDI) in e-commerce retail. “No such proposal is under the consideration of the government,” Commerce and industry minister Nirmala Sitharaman said in a written reply in the Rajya Sabha on whether the government plans to introduce FDI in e-commerce retail.