A few multinational e-commerce entities with a heavy arsenal of funding that are operating in India have attempted to flout the FDI norms, said the traders' body, Confederation of All India Traders (CAIT).

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Releasing a white paper document, the industry body said: "The FDI Policy is put to multifarious interpretations and e-commerce entities structure their relationship as marketplaces with sellers in such a way that they are in a position to control either the seller on their platform or the inventory, and also escape the scrutiny of the enforcement agencies."

CAIT alleged that this also amounts to anti-trust conduct. "Under the guise of such control or ownership over sellers, the issue also permeates from being a mere FDI Policy violation to also being an anti-competitive conduct," said CAIT said, adding: "The mitigating measures and strict action for enforcement of the law in letter and spirit are of paramount importance. Otherwise, the FDI Policy on e-commerce would fail in its very objective of catering to the interests of domestic manufacturers, traders, sellers, MSMEs, startups and creation of a level playing field in retail."

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The definition of e-commerce, clearly capturing the role of a neutral e-commerce marketplace and the MRBT store operating in electronic form is the need of hour, CAIT suggested.

"To avoid such conflicts of interest and contain market distortions, it is essential that the marketplace platform act in a neutral manner and not have any relation with sellers (whether by shareholding, control or otherwise, directly or indirectly) or control sellers registered on the platform as that leads to marketplace to acting as seller itself, which is essentially, inventory-based model of e-commerce."

Further, CAIT said a marketplace entity should not act as an inventory-based e-commerce entity, nor should an inventory-based e-commerce entity act as a marketplace entity. Also, an e-commerce regulator should be set up and commissioned to look into unfair trade practices of both end-consumers as well as the intermediate consumer such as sellers on the platform, it said.

"Protection of the right to free and fair trade should be ensured for several small sellers, who look forward to e-commerce platforms for their livelihood, and consumers, who are equally dependent on such platforms for their needs," it said, adding that a mandatory GST registration for conducting e-commerce activities should be abolished.