Remedying The Mischief Created By E-Commerce Entities In India

Abstract

E-commerce entities like Flipkart and Amazon have been alleged to be in violation of the laws governing foreign direct investment [‘FDI’] in India. Additionally, the business model adopted by them appears to be in contravention of the Competition Act, 2002. On 26 December 2018, the Department for Promotion of Industry and Internal Trade [‘DPIIT’] had issued Press Note 2 (2018 Series) which introduced a series of changes in the FDI norms in the e-commerce sector. (These changes have been incorporated in the FDI Policy vide Foreign Exchange Management (Transfer or Issue of Security by a Person Resident outside India) (Fifth Amendment) Regulations, 2019, dated 31 January 2019, Notification No.FEMA.20(R) (6)/2019-RB, available at, https://rbi.org.in/Scripts/BS_FemaNotifications.aspx?Id=11496 [Last accessed on: 21 April 2020].) The Press Note was purportedly introduced to protect the interest of small and medium sized enterprises in India. In this article, the author argues that the changes which are introduced by the Press Note go against the very purpose of their introduction as it leaves every stakeholder in a worse off situation by allowing easy circumvention. After highlighting the issues arising from amendments introduced by the Press Note in Part I of this article, the author delineates the anti-competitive nature of the business model of the e-commerce entities in Part II of this article. The author proposes that the appropriate method to remedy the problem surrounding the e-commerce sector would have been to make the appropriate amendments under Competition Act, 2002 rather than to opt for the FDI route. Foreign Direct Investment, Competition Law, Foreign Exchange Law, Amazon, Flipkart, e-commerce entities, private equity, anti-competitive practices, circumvention of FDI norms, India