DIPP supports e-com firms in litigation against shoe retailers

The government has supported ecommerce companies in their legal battle against the Footwear Manufacturers and Retailers Association (AIFMRA). The Department of Industrial Policy and Promotion (DIPP) favours the notion that none of the Foreign Direct Investment (FDI) rules have been violated by online retailers as professed by the group of shoe-makers. These are likely to have wider repercussion between the two parties. At present the case is being examined by the Delhi High Court, and the DIPP as one of the defendants is under purview.

Shoe retailers through their September petition had professed that the operations of more than two dozen ecommerce companies including Snapdeal, Myntra and Jabong were in violation of the consolidated Foreign Direct Investment Policy (2015), also defying the regulations laid by Foreign Exchange Management Act (FEMA).

India offers 100 percent FDI in business-to-business (B2C) ecommerce entities whereas slabs the FDI in the business-to consumer (B2C), multi-brand online segment. The previous month, DIPP acknowledged online selling by single-brand retailers given that prior permission has been secured under that category. Shoe-retailers on the other hand claim that these functional bodies are creating a facade of a 'marketplace' model by deceiving the law.

Though shoe retailers accuse ecommerce firms under money laundering rules, DIPP continues to say these ecommerce operations are in the business-to-business (B2B) space which have no FDI barriers. In addition, it is believed that the accusations are baseless considering the latest changes in the FDI policy.